<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CORNERSTONE PROPERTIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Scehdule 14A.
/ / $500 per each party of the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CORNERSTONE PROPERTIES INC.
126 EAST 56TH STREET
NEW YORK, NEW YORK 10022
April 17, 1998
Dear Stockholder:
The Annual Meeting of Stockholders of Cornerstone Properties Inc., a Nevada
corporation (the "Company"), will be held on Wednesday, May 20, 1998, at 2:00
p.m. (local time) at the Four Seasons Hotel New York, 57 East 57th Street, New
York, NY 10022, for the purposes identified below. Your Board of Directors urges
you to please complete, date and sign your voting instructions and proxy and
return them in the enclosed envelope no later than May 15, 1998.
At the Annual Meeting, stockholders will vote upon the following proposals:
1. Election of eleven directors by the holders of the Common Stock for
the ensuing year.
2. Approval of the Company's 1998 Long-Term Incentive Compensation
Plan.
3. Approval of an amendment of the Company's Restated Articles of
Incorporation to increase the authorized Preferred Stock from
15,000,000 shares to 65,000,000 shares.
4. Ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the fiscal year 1998.
5. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
YOUR BOARD STRONGLY URGES YOU TO VOTE IN FAVOR OF ALL OF THE PROPOSALS ON
YOUR PROXY CARD.
Sincerely,
<TABLE>
<S> <C>
[LOGO] [LOGO]
John S. Moody Rodney C. Dimock
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF OPERATING OFFICER
</TABLE>
THE COMPANY IS SUBJECT TO UNITED STATES SECURITIES LAWS RELATING TO THE
SOLICITATION OF PROXIES FROM ITS COMMON STOCKHOLDERS.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT........................................................................ 1
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)............................................................... 2
Information Concerning Nominees...................................................... 2
Board of Directors Committees, Meetings and Remuneration............................. 4
OFFICERS............................................................................... 5
EXECUTIVE COMPENSATION................................................................. 6
Summary Compensation Table........................................................... 6
Option Grants in Last Fiscal Year.................................................... 6
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.... 8
Retention Agreements................................................................. 8
Supplemental Pension Benefit......................................................... 9
Report of the Compensation Committee................................................. 9
Stockholder Return Graph............................................................. 11
CERTAIN TRANSACTIONS................................................................... 12
PGGM and DIHC........................................................................ 12
Hines Interests Limited Partnership.................................................. 12
Deutsche Bank AG..................................................................... 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................... 14
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934................... 16
APPROVAL OF THE COMPANY'S 1998 LONG-TERM INCENTIVE PLAN
(Item 2 on the Proxy Card)........................................................... 16
APPROVAL OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(Item 3 on Proxy Card)............................................................... 20
SELECTION OF AUDITORS
(Item 4 on Proxy Card)............................................................... 21
OTHER MATTERS
(Item 5 on Proxy Card)............................................................... 21
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC.
126 EAST 56TH STREET
NEW YORK, NEW YORK 10022
PROXY STATEMENT
ANNUAL MEETING--MAY 20, 1998
INTRODUCTION. The Board of Directors of the Company is soliciting proxies
from the holders of the Company's outstanding shares of Common Stock, without
par value, for voting at its Annual Meeting of Stockholders (the "Annual
Meeting"), which is to be held on Wednesday, May 20, 1998, at 2:00 p.m. (local
time) at the Four Seasons Hotel New York, 57 East 57th. Street, New York, New
York, 10022. This Proxy Statement and related form of proxy are first being
mailed to the stockholders on or about April 17, 1998.
THE BOARD OF DIRECTORS URGES YOU TO PLEASE COMPLETE, DATE AND SIGN YOUR
VOTING INSTRUCTIONS AND PROXY AND RETURN THEM IN THE ENCLOSED ENVELOPE NO LATER
THAN MAY 15, 1998. For holders of Common Stock in Germany: in the event the bank
holding your Common Stock has not provided you with a return envelope, please
return your proxy directly to your depository bank.
SOLICITATION OF PROXIES. Solicitation will be by mail, which may be
supplemented by telephone or other personal contact, to be made without special
compensation by regular officers or other representatives of the Company or
Boston EquiServe, Inc., the Company's transfer agent. The Company will reimburse
banks and other custodians, nominees and agents of the stockholders for the
costs incurred in obtaining from their principals authorization to execute a
Proxy Card. The entire cost of solicitation will be borne by the Company. If a
stockholder has not received a copy of the Proxy Statement, the Company, upon
request, will furnish such stockholder a copy free of charge, as soon as
practicable.
REVOCABILITY OF PROXIES. You may revoke your proxy at any time prior to the
vote at the Annual Meeting by (a) notifying the Secretary of the Company in
writing prior to the start of the Annual Meeting, (b) signing and dating a later
proxy and returning the new proxy in time to be counted for the Annual Meeting
or (c) by attending the Annual Meeting and voting contrary to the submitted
proxy at the time the votes are requested. Any written notice revoking a proxy
should be sent to Cornerstone Properties Inc., 126 East 56th Street, New York,
New York 10022, Attn: Thomas P. Loftus, Secretary.
VOTING SECURITIES. Only stockholders of record at the close of business on
April 17, 1998 will be entitled to notice of and to vote at the meeting. On the
record date set forth above, 98,015,196 shares of Common Stock of the Company
were issued and outstanding, entitled to one vote per share on matters submitted
to the stockholders at the meeting.
QUORUM; APPRAISAL RIGHTS. Under the Bylaws of the Company, twenty percent
of the outstanding shares of Common Stock entitled to vote, whether represented
in person or in proxy, shall constitute a quorum at the Annual Meeting. Proxies
marked "abstain" and broker non-votes will be considered present at the meeting
for quorum purposes, but will not be counted for the purpose of determining the
number of votes cast with respect to any matter. However, abstentions and broker
non-votes will have the effect of a "no" vote if the vote required is a majority
of the shares outstanding and entitled to be voted. Under the General
Corporation Law of Nevada, stockholders are not entitled to any dissenters'
rights of appraisal in respect of any of the proposals to be voted upon at the
Annual Meeting.
1
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
At the Annual Meeting of Stockholders, a board of eleven directors will be
elected, each to hold office from the date of election until the next Annual
Meeting of Stockholders and until his successor shall have been elected and
qualified. Each current director of the Company is nominated for election,
except for Mr. Davis and Mr. Rauenhorst, who are not standing for reelection.
All of the nominees, except Messrs. Dimock, Mellinger, Stapleton, van den Bos
and van der Vlist, were elected by the stockholders at the 1997 Annual Meeting.
The eleven persons listed in the table below have been nominated by the Board of
Directors for election by the Common Stockholders. UNLESS INSTRUCTED OTHERWISE,
THE ENCLOSED PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF ALL OF SUCH
NOMINEES.
The Board of Directors has no reason to believe that any of these nominees
will not be available, but in the event that a vacancy among the original
nominees occurs prior to the meeting or any of the nominees named should for any
reason be unable to serve, the proxy will be voted for a substitute nominee or
nominees designated by the Board of Directors and for the remaining nominees
named below.
The table below sets forth the names, principal occupations during the last
five years, positions, if any, held at the Company, and ages and length of
continuous service as a director, of the nominees for election.
INFORMATION CONCERNING NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
DIRECTORS/NOMINEES(1) THE LAST FIVE YEARS(2) AGE DIRECTOR SINCE
- ---------------------------- ----------------------------------------- --- -----------------
<S> <C> <C> <C>
Cecil D. Conlee(3).......... Chairman of CGR Advisors and The Conlee 61 1996
Company (real estate investments),
Atlanta, Georgia.
Rodney C. Dimock(4)......... President and Chief Operating Officer of 51 --
the Company since February 1998;
Executive Vice President and Chief
Operating Officer of the Company from
October 1995 to February 1998.
President of Aetna Realty Investors
from April 1991 to October 1995.
Blake Eagle................. Chairman, since January 1994, of the MIT 64 1995
Center for Real Estate, Cambridge,
Massachusetts; Senior Real Estate
Consultant from January 1992 to
December 1993 and President of Real
Estate Consulting from 1985 to December
1991 of the Frank Russell Company,
Tacoma, Washington.
Dr. Karl-Ludwig Hermann..... Independent financial consultant, 63 1981
Greenwich, Connecticut.
Hans C. Mautner............. Chairman and Chief Executive Officer of 60 1992
Corporate Property Investors (real
estate investments), New York City.
Dr. Lutz Mellinger(5)....... Managing Director of Deutsche Bank AG. 56 1997
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
DIRECTORS/NOMINEES(1) THE LAST FIVE YEARS(2) AGE DIRECTOR SINCE
- ---------------------------- ----------------------------------------- --- -----------------
<S> <C> <C> <C>
John S. Moody............... Chairman and Chief Executive Officer of 49 1991
the Company since November 1997;
President and Chief Executive Officer
of the Company from June 1991 to
February 1998; President and Chief
Executive Officer from April 1991 to
July 1995 of Deutsche Bank Realty
Advisors, Inc., New York City.
Craig R. Stapleton(4)....... President of Marsh & McLennan Real Estate 53 --
Advisors, Inc., New York, New York.
Michael J.G. Topham......... Executive Vice President of Hines 50 1995
Interests Limited Partnership (real
estate investment and management),
Houston, Texas.
Dick van den Bos(6)......... Director of Property Investment for 57 1997
Stichting Pensioenfonds Voor de
Gezondheid Geestelijke en
Maatschappelijke Belangen ("PGGM").
Jan van der Vlist(6)........ Deputy Director of Real Estate 43 1997
Investments for PGGM.
</TABLE>
- ------------------------
(1) Information not of record with the Company is based upon the information
furnished to the Company by said persons.
(2) Except as otherwise indicated, each of the individuals listed has been
engaged in the principal occupation set forth opposite his name or has held
a similar position with the same company for more than the last five years.
(3) At the 1997 Annual Meeting of stockholders, Mr. Conlee was elected as
director to the Board by Hexalon Real Estate, Inc., pursuant to its rights
as the owner of all outstanding shares of the Company's 8% Cumulative
Convertible Preferred Stock, Series A (the "8% Preferred Stock"). On July
25, 1997, all of the outstanding shares of 8% Preferred Stock were converted
into shares of Common Stock, and hence at this year's Annual Meeting, Mr.
Conlee is standing for reelection by all holders of Common Stock.
(4) If elected, will commence serving as a director immediately after the Annual
Meeting.
(5) Dr. Mellinger was appointed by the Board of Directors at its meeting held on
November 26, 1997 to fill one of three vacancies created from the
resignations of Dr. Rolf--E. Breuer and Berthold T. Wetteskind and by the
Board's decision to increase the number of directors comprising the Board by
one for a total of eleven directors.
(6) Appointed by the Board of Directors at its meeting held on November 26,
1997, as a nominee of PGGM pursuant to its rights under the Loan Purchase
Agreement dated as of August 18, 1997 in connection with the DIHC
Acquisition, to fill one of three vacancies created from the resignations of
Dr. Rolf--E. Breuer and Berthold T. Wetteskind and by the Board's decision
to increase the number of directors comprising the Board by one for a total
of eleven directors. See "Certain Transaction-- PGGM and DIHC."
Mr. Conlee is also a director of each of Oxford Industries and Central
Parking Systems; Mr. Eagle is also a director of Storage Trust Realty; Mr.
Mautner is also a director of Julius Baer Investment Management and of eight
funds managed by Dreyfus Service Corporation; Mr. Moody is also a director of
3
<PAGE>
Meridian Industrial Trust; and Mr. Stapleton is also a director of each of
Allegheny Properties, Inc., Cendant Corp., Vacu Dry, Inc. and T.B. Woods.
See "Certain Transactions" below for information regarding transactions
between the Company and entities associated with certain directors and nominees.
BOARD OF DIRECTORS, COMMITTEES, MEETINGS AND REMUNERATION
The Board of Directors met nine times during 1997. In 1997, each director of
the Company, other than Mr. Moody, received an annual retainer fee of $10,000,
paid in cash, and an annual cash fee of $5,000 for service on a Board standing
committee. Messrs. Mellinger, van den Bos and van der Vlist joined the Board on
November 26, 1997 and received no compensation for 1997. The Company either
reimburses each director for his expenses incurred in attending any meeting of
the Board or a committee thereof or pays such expenses directly. If a member of
the Board of Directors travels to inspect a property proposed to be acquired by
the Company, such director is reimbursed for his travel expenses.
The Board of Directors has a standing Administrative Committee comprised of
Messrs. van den Bos, Mautner and Moody. To the extent permitted by law, the
Administrative Committee may take action with the same force and effect as if
the entire Board of Directors had acted in such situation where time is of the
essence and it would be impractical and not in the best interests of the Company
to convene a meeting of the entire Board of Directors.
The Board of Directors has a standing Audit Committee, chaired by Mr. Eagle
with Messrs. Hermann and Mellinger as its other members. The Audit Committee,
which met once in 1997, recommends an independent auditor for the Company, meets
with the independent auditor to review the annual statements and accounts and
the scope of the audit of the Company and reviews the internal controls and
financial structure of the Company.
The Board of Directors has a standing Compensation Committee, chaired by Mr.
Mautner with Messrs. Hermann and Topham as its other members. The Compensation
Committee met twice in 1997. Its primary function is to review and make
recommendations to the Board of Directors with respect to the compensation of
each of the principal corporate officers.
The Board of Directors has a standing Board Affairs Committee, chaired by
Mr. Mautner with Messrs. Eagle, Topham and van den Bos as its other members. The
Board Affairs Committee met once during 1997. Its primary function is to review
all persons recommended to serve on the Board of Directors and to make
recommendations to the Board regarding those persons and to review and make
other recommendations to the Board as to the composition, organization, work,
compensation and affairs of the Board and its committees. The Committee will
consider persons recommended for membership on the Board when suggested in good
faith by a stockholder (with the consent of the nominee).
The Board of Directors has a standing Investment Committee, chaired by Mr.
Rauenhorst, who is not standing for reelection. Its other members are Messrs.
Conlee, Davis (who is not standing for reelection), Moody and van der Vlist. The
Investment Committee met once in 1997. It reviews potential investments for the
Company.
4
<PAGE>
\
OFFICERS
The officers of the Company are elected by the Board of Directors to serve
at the pleasure of the Board or until their successors are elected and
qualified. The table below sets forth for each officer of the Company the name,
principal occupations during the last five years, age and length of continuous
service as an officer of the Company. The individuals listed below are all
executive officers of the Company.
<TABLE>
<CAPTION>
OFFICERS PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS AGE
- ------------------------------ ---------------------------------------------------------------------------- ---
<S> <C> <C>
John S. Moody................. Chairman and Chief Executive Officer of the Company since November 1997. 49
President and Chief Executive Officer of the Company from June 1991 to
February 1998. President and Chief Executive Officer of Deutsche Bank
Realty Advisors, Inc. from April 1991 to July 1995.
Rodney C. Dimock.............. President and Chief Operating Officer of the Company since February 1998. 51
Executive Vice President and Chief Operating Officer of the Company from
October 1995 to February 1998. President of Aetna Realty Investors from
April 1991 to October 1995.
Barry J. McGowan.............. Chief Investment Officer of the Company since March 1998. President, 39
Northeast Region from February 1995 to November 1997, Senior Vice
President from April 1994 to February 1995, Vice President from January
1993 to April 1994 of Koll Bren Realty Advisors.
Kevin P. Mahoney.............. Chief Financial Officer of the Company since February 1998. Vice President 37
and Treasurer of the Company from September 1992 to February 1998. Vice
President from December 1993 to July 1995 and Assistant Vice President
from July 1991 to December 1993 of Deutsche Bank Realty Advisors, Inc.
Thomas P. Loftus.............. Chief Administrative Officer of the Company since February 1998. Vice 39
President and Controller of the Company since June 1992 and Secretary of
the Company since June 1993. Director-Fund Administration from December
1993 to July 1995, Vice President-Fund Administration from June 1992 to
December 1993, and Vice President-Controller from April 1991 to June 1992
of Deutsche Bank Realty Advisors, Inc.
Scott M. Dalrymple............ Vice President of the Company since July 1991. Vice President from December 39
1993 to July 1995 and Assistant Vice President from July 1991 to December
1993 of Deutsche Bank Realty Advisors, Inc.
Karin G. Maas................. Vice President of the Company since February 1998. Vice President from March 34
1993 to October 1997 and Assistant Vice President from November 1992 to
March 1993 of Deutsche Morgan Grenfell.
Thomas A. Nye................. Vice President of the Company since July 1995. Vice President from December 33
1993 to July 1995 and Assistant Vice President from July 1991 to December
1993 of Deutsche Bank Realty Advisors, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
OFFICERS PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS AGE
- ------------------------------ ---------------------------------------------------------------------------- ---
<S> <C> <C>
Francis H. Shields, Jr........ Vice President of the Company since December 1996. Assistant Vice President 33
of the Company from March 1994 to December 1996. Assistant Vice President
of Deutsche Bank Realty Advisors, Inc. from March 1994 to July 1995. Asset
Manager from May 1992 to March 1994 at the Edward S. Gordon Company.
Peter S. Smichenko............ Vice President of the Company since November 1997. Assistant Vice President 34
of O'Connor Realty Advisors from May 1995 to October 1997. Property
Manager for Hines Interests Limited Partnership from August 1987 to June
1993.
Robert T. Sorrentino.......... Vice President of the Company since October 1997. Executive Vice President 44
and Chief Financial Officer of DIHC Management Corp. since 1991.
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company at the end of 1997 (the "Named
Officers"), for the past three years. Prior to July 1, 1995, the Company was
managed pursuant to an advisory agreement with Deutsche Bank Realty Advisors,
Inc. and paid no compensation to its officers, who were compensated by Deutsche
Bank Realty Advisors, Inc. for services to the Company, including the payment of
bonuses.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM AWARDS
-------------------------------------
ANNUAL COMPENSATION(1) RESTRICTED SECURITIES
------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) OPTIONS(#) COMPENSATION(4)
- ------------------------------ --------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John S. Moody,................ 1997 $ 350,000 $ 350,000 $ 579,000 325,000 $ 24,935
Chairman and Chief 1996 350,000 300,000 -- -- 24,659
Executive Officer 1995 175,000 100,000 825,000 300,000 17,010
Rodney C. Dimock,............. 1997 275,000 225,000 247,000 160,000 24,720
President and Chief 1996 275,000 200,000 -- -- 21,525
Operating Officer 1995(2) 57,291 100,000 600,000 150,000 15,000
Kevin P. Mahoney,............. 1997 110,000 115,000 167,000 78,000 11,355
Chief Financial Officer 1996 95,000 100,000 -- -- 11,251
1995 48,000 50,000 198,000 75,000 6,601
Thomas P. Loftus,............. 1997 130,000 75,000 98,000 78,000 12,680
Chief Administrative 1996 125,000 55,000 -- -- 12,571
Officer 1995 62,500 35,000 258,000 75,000 8,612
Scott M. Dalrymple,........... 1997 110,000 90,000 167,000 78,000 12,592
Vice President 1996 95,000 75,000 -- -- 12,447
1995 48,000 45,000 198,000 75,000 7,374
</TABLE>
- ------------------------
(1) See the lead-in paragraph to the Table.
(2) Mr. Dimock commenced employment with the Company on October 16, 1995.
(3) Dollar value calculated by multiplying the closing market price on the New
York Stock Exchange with respect to year 1997 and on the Frankfurt Stock
Exchange with respect to years 1995 and 1996 on the
6
<PAGE>
date of grant by the number of shares awarded. The aggregate number of
restricted shares held and their value as of December 31, 1997 were as
follows: Mr. Moody--93,000 shares/$1,784,437; Mr. Dimock--57,000
shares/$1,093,687; Mr. Mahoney--24,000 shares/$460,500; Mr. Loftus--24,000
shares/$460,500; and Mr. Dalrymple--24,000 shares/$460,500. The 1995 awards
fully vested with respect to 13.333% on June 30, 1996 and 1997, and will
fully vest with respect to 13.333% on June 30, 1998 and 1999, and with
respect to 46.668% on June 30, 2000. The 1997 awards fully vest with respect
to 13.333% on June 30, 1998, 1999, 2000, and 2001, and with respect to
46.668% on June 30, 2002. Regular dividends are paid on restricted stock.
(4) "All Other Compensation" includes Company contributions of $4,000 for each
of the Named Officers to the Company's 401(k) Retirement Plan and
contributions to the Company's Profit Sharing Plan on behalf of the named
individuals in the following amounts for 1997: Mr. Moody--$16,500; Mr.
Dimock--$16,500; Mr. Mahoney--$6,213; Mr. Loftus--$7,314; and
Mr.Dalrymple--$7,314. It also includes premiums paid by the Company for life
insurance for the benefit of the named individuals in the following amounts:
Mr. Moody--$4,435; Mr. Dimock--$4,220; Mr. Mahoney-- $1,142; Mr.
Loftus--$1,366; and Mr. Dalrymple--$1,278.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER RATES OF STOCK PRICE
OF SECURITIES APPRECIATION FOR OPTION
UNDERLYING % OF TOTAL OPTIONS EXERCISE OR TERM(1)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(2) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------ ------------- ----------------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John S. Moody................. 325,000 34.2% $ 14.50 3/17/2007 $ 5,443,750 $ 11,462,750
Rodney C. Dimock.............. 160,000 16.8 14.50 3/17/2007 2,680,000 5,643,200
Kevin P. Mahoney.............. 78,000 8.2 14.50 3/17/2007 1,306,500 2,751,060
Thomas P. Loftus.............. 78,000 8.2 14.50 3/17/2007 1,306,500 2,751,060
Scott M. Dalrymple............ 78,000 8.2 14.50 3/17/2007 1,306,500 2,751,060
</TABLE>
- ------------------------
(1) Such values are calculated based on the requirements promulgated by the
Securities and Exchange Commission and are not intended to forecast future
stock appreciation of the Common Stock. There can be no assurance that such
values will be achieved.
(2) Such options vest in increments of 33 1/3% on each of the first three
anniversaries of the date of grant.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED MONEY OPTIONS AT FY-END
ON EXERCISES REALIZED OPTIONS AT FY-END (#) ($)(1)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------- --------------- ----------- ----------------------- -----------------------------
<S> <C> <C> <C> <C>
John S. Moody............. 0 $ 0 200,000/425,000 $ 977,500/$2,481,000
Rodney C. Dimock.......... 10,500 37,538 89,500/210,000 437,500/1,177,500
Kevin P. Mahoney.......... 0 0 50,000/103,000 244,500/605,000
Thoms P. Loftus........... 0 0 50,000/103,000 244,500/605,000
Scott M. Dalrymple........ 0 0 50,000/103,000 244,500/605,000
</TABLE>
- ------------------------
(1) Market value of stock on the New York Stock Exchange at year-end less option
price.
RETENTION AGREEMENTS
The Company has entered into retention agreements with twelve officers,
including each of Messrs. Moody, Dimock, Mahoney, Loftus and Dalrymple, to
address the terms and conditions of their employment in the event of a change in
control. "Change in control" is generally said to occur when (i) any person
becomes the owner of 25% or more of the Company's voting securities; (ii)
directors who constitute the Board at the beginning of any two-year period, and
any new directors whose election or nomination for election was approved by a
vote of at least three-quarters of the directors then in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved, cease to constitute a majority; (iii) a
merger, consolidation or reorganization in which the Company's voting securities
do not continue to represent at least 50% of the surviving entity; or (iv) a
reorganization, liquidation, or sale of all or substantially all of the
Company's assets.
In the event of termination of employment by the Company without cause, or
by the employee for good reason, within two years following a change in control,
the Company will make a lump sum payment of (i) the pro rata portion of the
annual bonus for the year termination occurred, calculated on the basis of the
target bonus and on the assumption that all performance goals have been or will
be achieved, and (ii) three times annual compensation in the case of Messrs.
Moody and Dimock and two times annual compensation in the case of all other
officers. Annual compensation is generally defined as highest annual bonus plus
the higher of the salary in effect immediately prior to termination or change in
control.
An officer may be terminated for "cause" if he is convicted of a felony,
reveals confidential information about the Company or refuses to substantially
perform his duties. An officer can terminate for "good reason" if the Company
reduces his salary or benefits, relocates his office more than 25 miles from the
present location, detrimentally alters his title or position, fails to get a
successor to agree to assume the obligations under the retention agreement or
materially breaches any provision of the agreement.
In addition, the officer and his eligible dependents will continue to be
eligible to participate during the benefit continuation period in the medical,
dental, health, life and other welfare benefit plans and arrangements applicable
to him immediately prior to his termination of employment, on the same terms and
conditions in effect immediately prior to such termination. "Benefit
continuation period" means the period beginning on the day of termination and
ending on the earlier to occur of (i) the third anniversary of the date of
termination in the case of Messrs. Moody and Dimock and the second anniversary
of the date of termination in the case of all other officers and (ii) the date
that the officer is eligible and elects coverage under the plans of a subsequent
employer which provide substantially equivalent or greater benefits to the
officer and his dependents.
If the payments to an officer under the retention agreement constitute
"parachute payments" (as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code")), and the officer
8
<PAGE>
would receive more value after taxes if the payments to be made to the officer
were capped at three times the "base amount" less $1.00, then the payments to
the officer will be reduced to that amount.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and to agree to perform
its obligations under the retention agreements in the same manner and to the
same extent that the Company would be required to perform such obligations if no
such succession had taken place.
SUPPLEMENTAL PENSION BENEFIT
The Company has entered into a contract with Mr. Moody whereby amounts are
accrued under an unfunded arrangement to pay Mr. Moody a supplemental pension.
Under the contract, his supplemental pension account was established with a
credit of $250,000 as of July 1, 1995, and the Company is obligated to credit
the account in the amount of $60,000 each subsequent July 1 during the
continuance of Mr. Moody's employment. The account is also credited with any
deemed income, gains or losses which would be attributable to a corresponding
investment of an equal cash amount in such investment as the Company, taking
into account Mr. Moody's views, shall deem the account to be invested. In
general, unless his employment is terminated by the Company for cause (as
defined), Mr. Moody will receive in a lump sum the total amount credited to his
supplemental pension account when he retires or his employment otherwise ceases.
In the event Mr. Moody's employment is terminated by the Company other than for
cause, or if he resigns for good reason (as defined), in either case following a
change in control (as defined), the Company is obligated to credit his
supplemental pension account with an amount equal to $60,000 times the number of
years (and fractions) remaining between his age on the date his employment
ceases and age 60.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company is
responsible for administering officers' compensation and makes recommendations
to the Board in connection therewith. All the members of the Compensation
Committee are independent, nonemployee directors who are not eligible to
participate in the programs which the Compensation Committee oversees.
EXECUTIVE COMPENSATION COMPONENTS
In early 1995, in anticipation of becoming self-administered on July 1, the
Company engaged Coopers & Lybrand L.L.P. to make recommendations with respect to
compensation. The resulting Coopers & Lybrand L.L.P. study recommended the
continuation of a short-term incentive compensation program for officers in the
form of cash bonuses and a long-term incentive program in the form of restricted
stock and stock option grants. The Compensation Committee agreed with these
recommendations and proposed, and the Board of Directors adopted, programs to
implement them.
As to short-term compensation, the Compensation Committee continues to
believe that a large part of officers' compensation should consist of annual
bonuses based on Company performance relative to predetermined goals and
individual performance relative to predetermined objectives. Under the bonus
program as adopted, a target bonus pool is established each year. Each officer's
share of the pool is fixed based on his/her level of responsibility, his/her
performance relative to the pre-established objectives and the Chairman's
evaluation of the officer's performance. As a result of this process, target
bonus levels for individuals may range from 30% to 60% of base salary, with the
weighted average for all officers being 48%.
The target pool will be awarded if the Company meets the pre-set goals. For
lesser, but still acceptable performance, less than the target will be awarded.
For outstanding performance, more than the target will be awarded. As in effect
for 1997, the most important factors in evaluating performance are funds from
9
<PAGE>
operations per share and subjective Board assessment, each weighted at 34%. The
other two factors are share price performance measured against the NAREIT office
building universe and total return as measured against the NACREIF office
building universe, both weighted at 16%. The Chairman and CEO of the Company
participates in the bonus program on the same basis as other officers. In
awarding bonuses for 1997, the Compensation Committee took into account, among
other things, the successful completion of the Company's initial public offering
in the United States and listing on the New York Stock Exchange, the successful
completion of the DIHC Acquisition, thereby doubling the size of the Company,
the success of the Company in increasing earnings, and the making of other new
investments, all while keeping staff size and overhead down.
As to long-term compensation, the Compensation Committee recommended, and
the Board of Directors approved (subject to stockholder approval), the Incentive
Plan in February 1998. Prior to such time, the Compensation Committee had
approved individual grants of options and restricted stock to certain of the
Company's officers. The Incentive Plan will permit the Compensation Committee to
grant a wide array of stock-based awards in order to achieve its objectives of
attracting and retaining officers and key employees and of creating stockholder
value. Such stock-based awards include, without limitation, nonqualified and
incentive stock options, stock appreciation rights, and restricted stock and
performance units.
In 1998, the Compensation Committee also recommended, and the Board of
Directors also approved, the retention agreements described in this Proxy
Statement. Such agreements are designed to provide security to the Company's
officers in the event of an actual or potential change in control so that they
will not be distracted to the detriment of the Company and its stockholders.
The Compensation Committee believes that, in general, executive
compensation--base salaries plus annual incentive for meeting targets--should be
aimed at the 70th percentile of peer companies as provided by professional
compensation consultants. Company performance does not affect base salaries
appreciably.
COMPLIANCE WITH SECTION 162(m) OF THE CODE
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to the CEO and the four other
most highly compensated executive officers unless certain conditions are
satisfied. The Company's Incentive Plan (see below) is designed to comply with
the requirements of Section 162(m). Accordingly, options, stock appreciation
rights and performance awards granted thereunder will generally be fully
deductible by the Company. The Company does not presently anticipate that
compensation paid to the Named Officers will exceed the limit on deductible
compensation.
Submitted by the Compensation
Committee of the Board of Directors.
Mr. H.C. Mautner, Chairman
Dr. K.L. Hermann
Mr. M.J.G. Topham
10
<PAGE>
STOCKHOLDER RETURN GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its Common Stock (assuming reinvestment
of distributions at date of payment into Common Stock of the Company) with the
cumulative total return on the published Standard & Poor's 500 Stock Index and
the cumulative total return on the published NAREIT All Equity Index over the
preceding five-year period. The following graph is presented pursuant to
Securities and Exchange Commission rules.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG CORNERSTONE PROPERTIES INC., S&P 500 INDEX AND
THE NAREIT ALL EQUITY INDEX THROUGH DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
Cornerstone 100 158 153 161 179 224
S&P 500 Index 100 110 111 153 188 251
NAREIT All Equity Index 100 119 120 141 192 228
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- ---------
Cornerstone Common Stock.......................................... $ 100 $ 158 $ 153 $ 161 $ 179 $ 224
S&P 500 Index..................................................... 100 110 111 153 188 251
NAREIT All Equity Index........................................... 100 119 120 141 192 228
</TABLE>
Assumes $100 invested on December 31, 1992 in Cornerstone Common Stock, S&P 500
Index and NAREIT All Equity Index. Amounts are rounded to the nearest dollar.
- ------------------------
* Total return assumes reinvestment of dividends and distributions.
11
<PAGE>
CERTAIN TRANSACTIONS
PGGM AND DIHC
After receiving stockholder approval on October 27, 1997, the Company
acquired (the "DIHC Acquisition") interests in nine Class A office properties
comprising approximately 4.5 million rentable square feet in Alexandria,
Virginia (3 properties), Atlanta (2 properties), Boston (2 properties),
Charlotte and Washington, D.C., as well as an undeveloped parcel of land in
Chicago (collectively, the "DIHC Properties"). The DIHC Acquisition was effected
by the Company purchasing all of the outstanding stock of those direct and
indirect subsidiaries of Dutch Institutional Holding Company, Inc. ("DIHC") that
owned interests in the DIHC Properties, together with certain loans to such
subsidiaries held by PGGM. DIHC is a wholly-owned subsidiary of PGGM. As
consideration for the DIHC Acquisition, PGGM and DIHC together received
approximately $1.06 billion, consisting of 34,185,500 shares of Common Stock,
approximately $260 million in cash and $250 million in promissory notes. As of
April 17, 1998, the shares of Common Stock of PGGM and DIHC constituted
approximately 35% of the Company's outstanding Common Stock. See "Security
Ownership of Certain Beneficial Owners and Management" below.
In connection with the DIHC Acquisition, the Company and PGGM entered into
that certain Loan Purchase Agreement, dated as of August 18, 1997, which
provided, among other things, that upon the request of PGGM, at the first
meeting of the Board following the DIHC Acquisition, the number of directors
comprising the Board would be increased and two individuals nominated by PGGM
would be appointed by the Board to fill such vacancies. The first Board meeting
following the DIHC Acquisition was held on November 26, 1997. Due to the
resignations of Dr. Rolf--E. Breuer and Berthold T. Wetteskind, there were two
vacancies in the then ten member Board of Directors. At the meeting the Board
resolved to increase the number of directors which comprised the Board by one
for a total of 11 directors. To fill two of the three vacancies, the Board
appointed two individuals nominated by PGGM: Dick van den Bos and Jan van der
Vlist to the Board. In addition, the registration rights and voting agreement
among the Company, DIHC and PGGM provides that as long as PGGM and DIHC and
their affiliates own in the aggregate 5% or more of the issued and outstanding
shares of Common Stock, the Company will take all action necessary to ensure
that two members of the Company's Board are individuals designated by PGGM.
HINES INTERESTS LIMITED PARTNERSHIP
Through an affiliate, Hines Interests Limited Partnership ("HILP"), of which
Mr. Topham is an executive vice president, held a 49% managing general
partnership interest and a 1% limited partnership interest in the limited
partnership which owns Norwest Center in Minneapolis, Minnesota. The Company,
through a subsidiary, holds a 50% general partnership interest in such limited
partnership. HILP has a management agreement with such partnership with an
initial term expiring December 31, 2001, pursuant to which HILP was paid
approximately $1,032,000 in 1997. It was also paid approximately $1,142,000 by
this limited partnership for other services rendered during 1997.
HILP has a management agreement for One Norwest Center in Denver, Colorado
which expires December 31, 2005, pursuant to which HILP was paid a management
fee of approximately $616,000 for 1997. HILP was also paid approximately
$1,034,000 by the Company for other services rendered to this property during
1997.
HILP has a management agreement for 125 Summer Street in Boston with an
initial term expiring December 31, 1999, pursuant to which it was paid a
management fee of approximately $475,000 in 1997. HILP was also paid
approximately $520,000 by the Company for other services rendered to this
property during 1997.
HILP has a management agreement for One Lincoln Centre in Oakbrook Terrace,
Illinois, which is cancelable with 30 days' notice, and was paid a management
fee of approximately $230,000 in 1997
12
<PAGE>
pursuant to this agreement. HILP was also paid approximately $337,000 by the
Company for other services rendered to this property during 1997.
An affiliate of HILP held an 8.5% interest in the joint venture that owns
Two Twenty Two Berkeley in Boston, Massachusetts. The Company, through an
affiliate, acquired the remaining 91.5% interest in this joint venture on
October 26, 1997. HILP has a management and leasing agreement with such joint
venture with an expiration date of April 13, 2064, pursuant to which HILP was
paid approximately $108,000 for the period from October 26, 1997 to December 31,
1997. HILP was also paid approximately $69,000 by the joint venture for other
services rendered to this property during such period.
An affiliate of HILP held an 8.5% interest in the joint venture that owns
Five Hundred Boylston in Boston, Massachusetts. The Company, through an
affiliate, acquired the remaining 91.5% interest in this joint venture on
October 26, 1997. HILP has a management and leasing agreement with such joint
venture with an expiration date in May 2061, pursuant to which HILP was paid
approximately $180,000 for the period from October 26, 1997 to December 31,
1997. HILP was also paid approximately $116,000 by the joint venture for other
services rendered to this property during such period.
In addition, HILP and its affiliates manage and own properties in the
Minneapolis, Denver, Boston, Oakbrook Terrace and New York markets which compete
with the Company's properties.
An affiliate of HILP owns 349,650 shares of the Company's Common Stock and
holds a $12,926,000 note which is convertible into 903,916 shares of Common
Stock at $14.30 per share. During 1997, the Company incurred approximately
$791,000 in interest expense on this convertible note.
DEUTSCHE BANK AG
The Company had a $32,500,000 term loan with Deutsche Bank AG London. This
loan was repaid in full in March 1997.
Deutsche Bank holds $50,000,000 of non-voting 7% Cumulative Preferred Stock
of the Company convertible into Common Stock commencing in the year 2000 at a
conversion price of $16.50 per share. During 1997, the Company incurred
$3,500,000 of dividends payable on this Cumulative Preferred Stock.
Dr. Mellinger is a Managing Director of Deutsche Bank.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to persons known by
the Company to be the beneficial owner of 5% or more of the Common Stock of the
Company.
COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------
<S> <C> <C>
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
- ---------------------------------------------------------------------------------------- ------------ -------------
PGGM(1)................................................................................. 27,458,750 28.0%
P.O. Box 117
3700 AC Zeist
The Netherlands
DIHC.................................................................................... 6,726,750 6.9%
200 Galleria Parkway NW
Suite 2000
Atlanta, GA 30339
New York State Teachers' Retirement System.............................................. 6,896,550 7.0%
10 Corporate Woods Drive
Albany, NY 12211-2395
</TABLE>
- ------------------------
(1) As the sole stockholder of DIHC, PGGM may be deemed to beneficially own the
shares held beneficially and of record by DIHC. Accordingly, PGGM may be
deemed to own, in the aggregate, 34,185,500 Shares, representing 34.9% of
the outstanding shares of Common Stock.
Following are the shares of the Company's Common Stock beneficially owned as
of April 17, 1998 by all directors and nominees, by each of the named executive
officers, and by the directors and executive officers as a group. Except as
footnoted, each named individual has sole voting and investment power over the
shares listed by that individual's name. As of April 17, 1998, no nominee for
director beneficially owned more than 1.0% of the outstanding shares of the
Company's Common Stock. All 22 directors and
14
<PAGE>
executive officers as a group beneficially owned approximately 1.3% of the
outstanding shares of Common Stock at April 17, 1998.
<TABLE>
<CAPTION>
NAME SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Cecil D. Conlee...................................................................................... --
George A. Davis (not standing for reelection)........................................................ --
Blake Eagle.......................................................................................... 10,349(1)
Dr. Karl-Ludwig Hermann.............................................................................. 10,000(2)
Hans C. Mautner...................................................................................... 45,194(1)
Dr. Lutz Mellinger................................................................................... --
John S. Moody........................................................................................ 412,306(3)
Gerald Rauenhorst (not standing for reelection)...................................................... 10,349(1)
Craig R. Stapleton................................................................................... 92,900
Dick van den Bos..................................................................................... --
Jan van der Vlist.................................................................................... --
Michael J.G. Topham.................................................................................. 10,349(1)
Scott M. Dalrymple................................................................................... 101,300(4)
Rodney C. Dimock..................................................................................... 221,565(5)
Thomas P. Loftus..................................................................................... 101,000(4)
Kevin P. Mahoney..................................................................................... 100,300(4)
Thomas A. Nye........................................................................................ 102,800(4)
Francis H. Shields, Jr............................................................................... 74,789(6)
Barry J. McGowan..................................................................................... 19,178(7)
Karin G. Maas........................................................................................ 12,500(8)
Robert T. Sorrentino................................................................................. 12,500(8)
Peter S. Smichenko................................................................................... 250
All directors and executive officers as a group (22 persons)......................................... 1,337,629
</TABLE>
- ------------------------
(1) Includes 349 restricted shares received as director compensation and 10,000
shares subject to options exercisable within 60 days.
(2) Includes 10,000 shares subject to options exercisable within 60 days.
(3) Includes 93,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 308,333 shares subject to options
exercisable within 60 days.
(4) Includes 24,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 76,000 shares subject to options
exercisable within 60 days.
(5) Includes 57,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 142,833 shares subject to options
exercisable within 60 days.
(6) Includes 21,622 restricted shares awarded to him in his capacity as an
executive officer of the Company and 52,667 shares subject to options
exercisable within 60 days.
(7) Includes 19,178 restricted shares awarded to him in his capacity as an
executive officer of the Company.
(8) Includes 12,500 restricted shares awarded to him/her in his/her capacity as
an executive officer of the Company.
15
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Executive officers, directors and
greater than ten percent beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations from the Company's
executive officers, directors and greater than ten percent beneficial owners,
such persons complied with all Section 16(a) filing requirements in 1997.
APPROVAL OF THE COMPANY'S 1998 LONG-TERM INCENTIVE PLAN
(ITEM 2 ON PROXY CARD)
The stockholders are being asked to approve the "Cornerstone Properties Inc.
1998 Long-Term Incentive Plan" (the "Incentive Plan"). The Board adopted the
Incentive Plan, effective as of February 4, 1998, subject to stockholder
approval of the Incentive Plan at the Annual Meeting.
In connection with the approval of the Incentive Plan, the stockholders are
also being asked to approve each of the performance goals listed under the
Incentive Plan pursuant to which the Compensation Committee may make payments
which meet the requirements for "qualified performance-based compensation" under
Section 162(m) of the Code.
Approval of the Incentive Plan and the performance goals at the Annual
Meeting requires an affirmative vote of the majority of shares represented in
person or by proxy at the meeting and entitled to vote on the subject matter.
The complete text of the Incentive Plan is attached to this Proxy Statement
as Exhibit A. The following is a summary of the key terms of the Incentive Plan,
which is qualified in its entirety by reference to the text of the Incentive
Plan.
GENERAL TERMS. The Incentive Plan is an omnibus equity-based incentive plan
that provides for awards in the form of stock awards, restricted stock units,
stock options, stock appreciation rights, performance units, dividend
equivalents and other awards to eligible individuals. The Incentive Plan also
allows the Compensation Committee to grant annual and long-term performance
awards that meet the criteria for "qualified performance-based compensation"
under Section 162(m) of the Code. Only officers and key employees, consultants
and advisers to the Company or any of its subsidiaries (including key
individuals who have accepted an offer of employment with any of them) are
eligible to receive awards under the Incentive Plan. The Company currently
estimates that approximately 12 individuals are eligible to participate in the
Incentive Plan.
The Company's ability to issue shares of Common Stock under the Incentive
Plan is subject to a number of limits set forth in the Incentive Plan. No more
than 3,000,000 shares of Common Stock may be issued under the Incentive Plan
(increased by the number of shares tendered or withheld in connection with the
payment or settlement of an award or for tax purposes under the Incentive Plan).
In order to satisfy the requirements of Section 162(m) of the Code, no eligible
individual may receive under the Incentive Plan in any calendar year options or
stock appreciation rights covering more than 1,000,000 shares. The limits
described above are subject to adjustment by the Compensation Committee in the
event of a merger, consolidation, stock dividend, stock split or other event
affecting the Common Stock. On April 3, 1998, the closing price of the Company's
Common Stock on the New York Stock Exchange was $18.0625.
16
<PAGE>
The Compensation Committee administers the Incentive Plan and has the
authority to select the participants, and determine the type, number and other
terms and conditions of the awards. The Compensation Committee may prescribe
award documents, establish rules and regulations for the administration of the
Incentive Plan, construe and interpret the Incentive Plan and the award
documents and make all other decisions or interpretations as the Compensation
Committee may deem necessary.
Awards under the Incentive Plan may be granted singly or in combination or
tandem with any other award. The terms and conditions of each award will be set
forth in an award document approved by the Compensation Committee at or after
the time of grant of the award. At or after the time of grant of an award, the
Compensation Committee may determine the vesting, exercisability, payment and
other restrictions that apply to the award. The Compensation Committee will also
have authority, at or after the time of grant, to determine the effect, if any,
that an employee's termination of employment or a change in control of the
Company will have on the vesting and exercisability of an award.
The Incentive Plan contemplates the following types of awards:
STOCK OPTIONS. Stock options may be either nonqualified stock options or
incentive stock options within the meaning of Section 422 of the Code. The term
of a stock option may not be longer than ten years, and the exercise price of an
option may not be less than the fair market value of a share of Common Stock at
the time of grant. The exercise price of a stock option may be paid in cash or
previously owned stock or both. The Incentive Plan also allows the Compensation
Committee to grant a so-called "reload option" in connection with the exercise
of an option through the tender of previously owned shares of Common Stock. In
order to comply with the provisions of the Code, the Incentive Plan does not
allow for the grant of incentive stock options of more than 3,000,000 shares of
Common Stock.
STOCK APPRECIATION RIGHTS. Each stock appreciation right entitles a
participant to receive the excess, if any, of the fair market value of a share
of Common Stock on the date of exercise over the fair market value of a share of
Common Stock on the date of grant. At the discretion of the Compensation
Committee, payments to an employee upon exercise of a stock appreciation right
may be made in cash, shares of Common Stock or both. The Compensation Committee
may grant stock appreciation rights alone or together with stock options. If a
stock appreciation right is granted in tandem with a stock option, the stock
appreciation right may not be exercised prior to, or later than, the time the
related option could be exercised.
STOCK AWARDS. Stock awards generally consist of one or more shares of
Common Stock granted to a participant for no consideration or sold to a
participant for a stated amount. Stock awards may be subject to restrictions on
transfer and to vesting conditions, as the Compensation Committee may determine.
RESTRICTED STOCK UNITS. Each restricted stock unit represents the right of
a participant to receive the value of one share of Common Stock at a payment
date specified in connection with the grant of the unit, subject to the terms
and conditions established by the Compensation Committee. When these terms and
conditions are satisfied, restricted stock units will be payable, at the
discretion of the Compensation Committee, in cash, shares of Common Stock or
both.
PERFORMANCE UNITS. Performance units may be granted as fixed or variable
share- or dollar-denominated units, subject to conditions of vesting and time of
payment as the Compensation Committee may determine. Performance units will be
payable, at the discretion of the Compensation Committee, in cash, shares of
Common Stock or both.
DIVIDEND EQUIVALENTS. Each dividend equivalent granted under the Incentive
Plan generally entitles a participant to receive the value of any dividends paid
in respect of a share of Common Stock. Dividend equivalents may be settled
through the payment of cash, Common Stock, other property or any combination
thereof and may be awarded on a free-standing basis or in connection with
another award.
17
<PAGE>
OTHER AWARDS. The Incentive Plan authorizes the Compensation Committee to
fashion other types of equity and non-equity based awards and gives the
Compensation Committee broad discretion to specify the terms and provisions of
such other awards. Other awards may be based upon performance goals, the value
of a share of Common Stock, the value of other securities of the Company, or
other criteria that the Compensation Committee specifies. Other awards may
consist solely of cash bonuses or supplemental cash payments to a participant to
permit the participant to pay some or all of the tax liability incurred in
connection with the vesting, exercise, payment or settlement of an award.
PERFORMANCE AWARDS. The Incentive Plan permits the Compensation Committee
to establish one or more performance periods and to provide for performance
payments to participants upon the achievement of the targets for one or more
performance goals applicable to the performance period. A performance period may
be for such duration as the Compensation Committee may specify, and the
Incentive Plan allows the Compensation Committee to establish concurrent or
overlapping performance periods. Performance payments are intended to qualify as
"qualified performance-based compensation" for purposes of Section 162(m) of the
Code and to be fully deductible for federal income tax purposes by the Company.
Payments in respect of a performance period may be made only upon the
achievement of the targets for one or more of the following performance goals:
funds from operations per share, funds from operations, earnings per share, net
income, net operating income, pretax profits, pretax operating income, revenue
growth, return on sales, return on equity, return on assets managed, return on
investment, increase in the Fair Market Value of a share of Common Stock, total
return to stockholders, cash flow, or economic value added. A performance goal
may be measured on a periodic, annual or cumulative basis and may be established
on a corporate-wide basis or established with respect to one or more operating
units, divisions, subsidiaries, acquired businesses, minority investments,
partnerships or joint ventures. Performance goals may be calculated without
regard to changes in accounting rules that occur during a performance period.
Following the completion of a performance period, the Incentive Plan
requires the Compensation Committee to certify that the applicable performance
targets have been achieved and to determine the amount of the performance
payment to be made to a participant for the performance period. The Plan allows
the Compensation Committee to exercise discretion to reduce (but not increase)
the amount of the performance payment for a performance period.
Performance payments may be paid in cash, Common Stock, awards under the
Incentive Plan or in other property. The Compensation Committee may also permit
a participant to defer receipt of a performance payment or may require the
mandatory deferral of some or all of a performance payment. Where a performance
payment is made in the form of Common Stock that is subject to transfer or other
restrictions, the Incentive Plan permits, but does not require, the Compensation
Committee to apply a discount not in excess of 25% to the fair market value of a
share of Common Stock to determine the number of shares of Common Stock that
will be delivered to the participant as part of the performance payment.
The maximum value of a performance payment that may be made to a participant
for any performance period of twelve months is $2,000,000. If the payment for a
twelve month period is expressed as a percentage of the participant's base
salary, it may not be greater than 300% of the participant's annual base salary
in effect at the start of the performance period. If a performance period is
greater than or less than twelve months, the dollar or salary limit will be
determined by multiplying the applicable twelve-month limit by a fraction, the
numerator of which is the number of whole and partial months in the performance
period and the denominator of which is twelve.
The Board or the Compensation Committee may, at any time, terminate or, from
time to time, amend, modify or suspend the Incentive Plan. However, no amendment
may increase the limits set forth in the Incentive Plan, allow for grants of
options at an exercise price less than Fair Market Value at the time
18
<PAGE>
of grant or amend the Incentive Plan in any manner which would permit a
reduction in the exercise price of options, without stockholder approval.
New Plan Benefits
As of the date of this Proxy Statement, the only awards which have been made
or determined by the Company under the Incentive Plan, all of which were made
subject to stockholder approval of the Incentive Plan, are set forth in the
table below.
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
- -------------------------------------------------------------------------- ------------------
<S> <C>
John S. Moody ............................................................ 150,000
Chairman and Chief Executive Officer
Rodney C. Dimock ......................................................... 100,000
President and Chief Operating Officer
Kevin P. Mahoney ......................................................... 75,000
Chief Financial Officer
Thomas P. Loftus ......................................................... 45,000
Chief Administrative Officer
Scott M. Dalrymple ....................................................... 45,000
Vice President
Executive Officer Group................................................... 575,000
Non-Executive Director Group.............................................. 0
Non-Executive Officer Employee Group...................................... 20,000
</TABLE>
Federal Income Tax Consequences
The federal income tax consequences of the grant and exercise of an option
are summarized below. The summary is not intended to be complete and is not
intended as tax advice to any person.
NONQUALIFIED STOCK OPTIONS. The grant of a nonqualified stock option has no
immediate federal income tax effect; the employee will not recognize taxable
income and the Company will not receive a tax deduction. When the employee
exercises the option, the employee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock on the date of
exercise over the exercise price, and the Company will generally receive a tax
deduction equal to the amount of income recognized. Nonqualified stock options
granted under the Incentive Plan are intended to qualify as
qualified-performance-based compensation for purposes of Section 162(m) of the
Code.
INCENTIVE STOCK OPTIONS. When an employee is granted an incentive stock
option, or when the employee exercises the option, the employee will generally
not recognize taxable income (except for purposes of the alternative minimum
tax) and the Company will not receive a tax deduction. If the employee holds the
shares of Common Stock for at least two years from the date of grant and one
year from the date of exercise, any gain or loss upon a subsequent disposition
of the shares will be treated as long-term capital gain or loss.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE INCENTIVE PLAN.
19
<PAGE>
APPROVAL OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
(ITEM 3 ON PROXY CARD)
At the Annual Meeting, stockholders will also be asked to approve an
amendment to the Company's Restated Articles of Incorporation to increase the
number of authorized shares of Preferred Stock to 65,000,000 shares having such
preferences, limitations and relative rights as may be determined by the Board
(the "Amendment"). The form of the Amendment is attached hereto as Exhibit B.
Presently, the Company is authorized to issue 15,000,000 shares of Preferred
Stock, of which (i) 3,030,303 shares of 7% Cumulative Convertible Preferred
Stock, with no par value, are authorized, issued and outstanding and (ii)
344,828 shares of 8% Cumulative Preferred Stock, with no par value, are
authorized, but none are issued and outstanding.
The Amendment will increase the Company's financial flexibility. The Board
believes that the complexity of modern business financing and acquisition
transactions requires greater flexibility in the Company's capital structure
than currently exists. The Preferred Stock will be available for issuance from
time to time as determined by the Board for any proper corporate purpose. Such
purposes could include, without limitation, issuances in public or private sales
for cash as a means of obtaining capital for use in the Company's business and
operations, issuance as part or all of the consideration required to be paid by
the Company for acquisitions of other businesses or properties, and issuances
under employee benefit plans. The Company does not presently have any plans,
agreements, understandings or arrangements that will or could result in the
issuance of any Preferred Stock.
It is not possible to state the actual effect of the authorization of the
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the respective rights of the holders of one or more series of
Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT.
20
<PAGE>
SELECTION OF AUDITORS
(ITEM 4 ON PROXY CARD)
The Audit Committee has recommended and the Board of Directors has selected
Coopers & Lybrand L.L.P. as independent auditors for the Company for the fiscal
year ending December 31, 1998. This selection is being presented to the
stockholders for ratification, although the Board of Directors may terminate the
appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors
without the approval of the stockholders of the Company. The Company has been
advised that the representatives of Coopers & Lybrand L.L.P. are expected to be
present at the Annual Meeting, will have the opportunity to make a statement and
will be available to respond to appropriate questions.
OTHER MATTERS
(ITEM 5 ON PROXY CARD)
The Board of Directors does not currently intend to present any matter for
action at the Annual Meeting other than the matters described in this Proxy
Statement and does not know of any other matter to be brought before the
meeting. If any other matter should properly come before the meeting, the
persons named in the enclosed proxy will vote in regard thereto according to
their discretion, unless otherwise directed in the proxy.
* * *
Proposals of stockholders of the Company must be received by the Secretary
of the Company at its principal office not later than December 18, 1998 in order
to be included in the Company's proxy materials for the 1999 Annual Meeting of
Stockholders.
UPON WRITTEN REQUEST TO CORNERSTONE PROPERTIES INC., 126 EAST 56TH STREET,
NEW YORK, NEW YORK 10022, ATTENTION: MS. KARIN MAAS, VICE PRESIDENT--INVESTOR
RELATIONS, ANY STOCKHOLDER MAY OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1997.
April 17, 1998
21
<PAGE>
EXHIBIT A
CORNERSTONE PROPERTIES INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSES. The purposes of the Plan are to advance the interests of the
Company and its stockholders by attracting and retaining officers and key
employees and to reward officers and key employees for contributing to the
success of the Company and the creation of stockholder value. The Plan permits
the Committee to make Awards which constitute "qualified performance-based
compensation" for purposes of Section 162(m) of the Code.
2. DEFINITIONS AND RULES OF CONSTRUCTION.
(a) DEFINITIONS. For purposes of the Plan, the following capitalized
words shall have the meanings set forth below:
"AWARD" means a Stock Award, RSU, Option, SAR, Dividend Equivalent,
Other Award, Performance Award or any combination of the foregoing.
"AWARD DOCUMENT" means an agreement, certificate or other type or
form of document or documentation approved by the Committee which sets
forth the terms and conditions of an Award. An Award Document may be in
written, electronic or other media, may be limited to a notation on the
books and records of the Company and, unless the Committee requires
otherwise, need not be signed by a representative of the Company or a
Participant.
"BENEFICIARY" means the person designated in writing by the
Participant to exercise or to receive an Award or payments or other
amounts in respect thereof in the event of the Participant's death or, if
no such person has been designated in writing by the Participant prior to
the date of death, the Participant's estate. No Beneficiary designation
under the Plan shall be effective unless it is in writing and is received
by the Company prior to the date of death of the applicable Participant.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rulings and regulations promulgated thereunder.
"COMMITTEE" means the Compensation Committee of the Board, or such
other committee of the Board as may be designated by the Board to
administer the Plan.
"COMMON STOCK" means the common stock, no par value per share, of the
Company.
"COMPANIES" means the Company and each Subsidiary.
"COMPANY" means Cornerstone Properties Inc., a Nevada corporation.
"DEFERRED COMPENSATION ACCOUNT" means the account established on the
books and records of the Company to record the amount of deferred
compensation payable under the Plan to a Participant.
"DIVIDEND EQUIVALENT" means a right granted in accordance with
Section 12 to receive a payment in cash, shares of Common Stock or other
property equal in value to the dividends declared and paid on a specified
number of shares of Common Stock. A Dividend Equivalent may constitute a
free-standing Award or may be granted in connection with another type of
Award.
"EFFECTIVE DATE" means February 4, 1998.
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<PAGE>
"ELIGIBLE INDIVIDUAL" means an individual described in Section 4(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and the rulings and regulations promulgated
thereunder.
"FAIR MARKET VALUE" means, with respect to a share of Common Stock,
the fair market value thereof as of the relevant date of determination,
as determined in accordance with a valuation methodology approved by the
Committee. In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common
Stock shall equal the closing price of a share of Common Stock on the New
York Stock Exchange, or such other national securities exchange as may be
designated by the Committee.
"GAAP" means U.S. Generally Accepted Accounting Principles.
"INCENTIVE STOCK OPTION" means an Option which meets the requirements
of Section 422 of the Code.
"NONQUALIFIED STOCK OPTION" means any Option which is not an
Incentive Stock Option.
"OPTION" means an Option granted under Section 9 of the Plan,
including an Incentive Stock Option and a Nonqualified Stock Option.
"OTHER AWARD" means an Award granted under the Plan in accordance
with Section 13.
"PARTICIPANT" means an Eligible Individual who holds an outstanding
Award under the Plan.
"PERFORMANCE AWARD" means the right of a Participant to receive a
specified amount following the completion of a Performance Period based
upon performance in respect of one or more of the Performance Goals
applicable to such period.
"PERFORMANCE GOAL" means any of the following: funds from operations,
funds from operations per share, earnings per share, net income, net
operating income, pretax profits, pretax operating income, revenue
growth, return on sales, return on equity, return on assets managed,
return on investment, increase in the Fair Market Value of a share of
Common Stock, total return to stockholders, cash flow or economic value
added. A Performance Goal may be measured over a Performance Period on a
periodic, annual, cumulative or average basis and may be established on a
corporate-wide basis or established with respect to one or more operating
units, divisions, Subsidiaries, acquired businesses, minority
investments, partnerships or joint ventures. To the extent that there is
a change in GAAP during a Performance Period, the Committee may calculate
any Performance Goal with or without regard to such change.
"PERFORMANCE PERIOD" means a period of time designated by the
Committee over which one or more Performance Goals are measured.
"PERFORMANCE UNIT" means an Award granted pursuant to Section 11.
"PLAN" means this Cornerstone Properties Inc. 1998 Long-Term
Incentive Plan, as the same may be amended from time to time.
"RESTORATION OPTION" means an Option that is awarded upon the
exercise of an Option earlier awarded under the Plan or any other plan of
the Company (an "UNDERLYING OPTION") for which the exercise price is paid
in whole or in part by tendering shares of Common Stock previously owned
by the Participant, where such Restoration Option (i) covers a number of
shares of Common Stock no greater than the number of previously owned
shares tendered in payment of the exercise price of the Underlying Option
plus the number of shares withheld to pay taxes arising upon such
exercise, (ii) the expiration date of the Restoration Option is no later
than the expiration date of the Underlying Option and (iii) the exercise
price per share of the
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<PAGE>
Restoration Option is no less than the Fair Market Value per share of
Common Stock on the date of exercise of the Underlying Option.
"RESTRICTED SHARES" means shares of Common Stock subject to a Stock
Award that have not vested or remain subject to forfeiture, transfer or
other restrictions in accordance with Section 7 and the applicable Award
Document.
"RSU" means a restricted stock unit award granted in accordance with
Section 8.
"SAR" means a stock appreciation right or limited stock appreciation
right granted in accordance with Section 10.
"STOCK AWARD" means a grant of shares of Common Stock in accordance
with Section 7.
"SUBSIDIARY" means (i) a corporation or other entity with respect to
which the Company, directly or indirectly, has the power, whether through
the ownership of voting securities, by contract or otherwise, to elect at
least a majority of the members of such corporation's board of directors
or analogous governing body, or (ii) any other corporation or other
entity in which the Company, directly or indirectly, has an equity or
similar interest and which the Committee designates as a Subsidiary for
purposes of the Plan. For purposes of determining eligibility for the
grant of Incentive Stock Options under the Plan, the term "Subsidiary"
shall be defined in the manner required by Section 424(f) of the Code.
"SUBSTITUTE AWARD" means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or
other entity in connection with a corporate transaction, such as a
merger, combination, consolidation or acquisition of property or stock.
"TARGET" means the target performance objective set by the Committee
for a Performance Goal.
"TARGET PAYMENT" means the amount payable to a Participant for a
Performance Period upon the achievement of one of more Targets set by the
Committee for that period.
(b) RULES OF CONSTRUCTION. The masculine pronoun shall be deemed to
include the feminine pronoun and the singular form of a word shall be deemed
to include the plural form, unless the context requires otherwise. Unless
the text indicates otherwise, references to sections are to sections of the
Plan.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee, no member of which shall be eligible to participate in the Plan.
The Committee shall have full and final authority, in each case subject to
and consistent with the provisions of the Plan, (i) to select the
Participants, (ii) to grant Awards, (iii) to determine the type, number and
other terms and conditions of, and all other matters related to, Awards,
(iv) to prescribe Award Documents (which need not be identical for each
Participant), (v) to establish rules and regulations for the administration
of the Plan, (vi) to construe and interpret the Plan and the forms of Award
Documents and to correct defects, supply omissions or reconcile
inconsistencies therein, (vii) to make factual determinations in connection
with the administration or interpretation of the Plan, and (viii) to make
all other decisions or interpretations as the Committee may deem necessary
or advisable for the administration of the Plan. Any decision of the
Committee in the administration of the Plan shall be final and conclusive on
all interested persons.
A-3
<PAGE>
(b) DELEGATION. The Committee may delegate its responsibility with
respect to the administration of the Plan to one or more officers of the
Company, to one or more members of the Committee or to one or more members
of the Board; PROVIDED, HOWEVER, that the Committee may not delegate its
responsibility (i) to make Awards to individuals who are subject to Section
16 of the Exchange Act, (ii) to make Awards under Section 14 which are
intended to constitute "qualified performance-based compensation" under
Section 162(m) of the Code or (iii) to amend or terminate the Plan in
accordance with Section 20. The Committee may also appoint agents to assist
in the day-to-day administration of the Plan and may delegate the authority
to execute documents under the Plan to one or more members of the Committee
or to one or more officers of any of the Companies.
(c) TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL. The Committee
shall also have full authority to determine and specify in the applicable
Award Document the effect, if any, that a Participant's termination of
employment for any reason will have on the vesting, exercisability, payment
or lapse of restrictions applicable to an Award. The date of a Participant's
termination of employment for any reason shall be determined in the sole
discretion of the Committee. Similarly, the Committee shall have full
authority to determine the effect, if any, of a change in control of the
Company on the vesting, exercisability, payment or lapse of restrictions
applicable to an Award, which effect may be specified in the applicable
Award Document or determined at a subsequent time.
(d) RELIANCE AND INDEMNIFICATION. The Committee shall be entitled to
rely in good faith upon any report or other information furnished to it by
any officer or employee of the Companies or from the financial, accounting,
legal or other advisers of any of the Companies. Each member of the
Committee, each individual to whom the Committee delegates authority
hereunder, each individual designated by the Committee to administer the
Plan and each other person acting at the direction of or on behalf of the
Committee shall not be liable for any determination or anything done or
omitted to be done by him or by any other member of the Committee or any
other such individual in connection with the Plan, except for his own
willful misconduct or as expressly provided by statute, and, to the extent
permitted by law and the bylaws of the Company, shall be fully indemnified
and protected by the Company with respect to such determination, act or
omission.
4. PARTICIPATION.
(a) ELIGIBLE INDIVIDUALS. Only officers and key employees of one of
the Companies (or a division or operating unit thereof) or any individual
who has accepted an offer of employment with any of the Companies as an
officer or key employee shall be eligible to participate in the Plan and to
receive Awards under the Plan.
(b) AWARDS TO PARTICIPANTS. The Committee shall have no obligation to
grant any Eligible Individual an Award or to designate an Eligible
Individual as a Participant for a Performance Period solely by reason of
such Eligible Individual having received a prior Award or having been
designated as a Participant for any prior Performance Period. The Committee
may grant more than one Award to a Participant at the same time or may
designate an Eligible Individual as a Participant in Performance Periods
that begin on the same date or that cover overlapping periods of time.
5. COMMON STOCK SUBJECT TO THE PLAN.
(a) PLAN LIMIT. Subject to adjustment in accordance with the terms of
Section 18, the Company is authorized to issue up to 3,000,000 shares of
Common Stock under the Plan (the "PLAN LIMIT"). Such shares of Common Stock
may be newly issued shares of Common Stock or reacquired shares of Common
Stock held in the treasury of the Company. Any shares issued in connection
with Substitute Awards shall not be counted against the Plan Limit and shall
not be subject to Section 5(d).
(b) RULES APPLICABLE TO DETERMINING SHARES AVAILABLE FOR ISSUANCE. For
purposes of determining the number of shares of Common Stock that remain
available for issuance, the following shares shall be added back to the Plan
Limit and again be available for Awards:
A-4
<PAGE>
(i) The number of shares tendered to pay the exercise price of an
Option or other Award or to satisfy a Participant's tax withholding
obligations; and
(ii) The number of shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay the
exercise price of an Option or other form of Award.
(c) RESERVE. In administering the Plan, the Committee may establish
reserves against the Plan Limit for amounts payable in settlement of Awards
or in settlement of Deferred Compensation Accounts. The Committee may also
promulgate additional rules and procedures for calculating the portion of
the Plan Limit available for Awards. This Section 5 shall be applied and
construed by the Committee so that no share of Common Stock is counted more
than once for purposes of any debit or credit to the Plan Limit.
(d) SPECIAL LIMITS. Anything to the contrary in Section 5(a)
notwithstanding, but subject to Section 18(b), the following special limits
shall apply to shares of Common Stock available for Awards under the Plan:
(i) The maximum number of shares of Common Stock that may be subject
to Options or free-standing SARs granted to any Eligible Individual in
any calendar year shall equal 1,000,000 shares, plus any shares which
were available under this Section 5(d)(i) for Awards of Options or
free-standing SARs to such Eligible Individual in any prior calendar year
but which were not covered by such Awards.
(ii) In no event will the number of shares of Common Stock issued in
connection with the grant of Incentive Stock Options exceed 3,000,000
shares.
6. AWARDS IN GENERAL. Awards under the Plan may consist of Stock Awards,
RSUs, Options, SARs, Performance Units, Dividend Equivalents, Other Awards,
Performance Awards or any combination of the foregoing. Any Award may be granted
singly or in combination or tandem with any other Award, as the Committee may
determine. Awards may be made in combination with or as alternatives to grants
or rights under any other compensation or benefit plan of the Companies,
including the plan of any acquired entity. The terms and conditions of each
Award shall be set forth in an Award Document in a form approved by the
Committee for such Award, which shall contain terms and conditions not
inconsistent with the Plan. Except in connection with a transaction or event
described in Section 18(b) or in connection with the grant of Substitute Awards,
nothing in the Plan shall be construed as permitting the Company to reduce the
exercise price of Options previously granted under this Plan or options
previously granted under any other plan of the Companies without stockholder
approval.
7. STOCK AWARDS.
(a) FORM OF AWARD. The Committee is authorized to grant shares of
Common Stock to an Eligible Individual as a Stock Award for no consideration
other than the provision of services or at a purchase price determined by
the Committee. Stock Awards may be granted in lieu of other compensation or
benefits payable to a Participant or in settlement of previously granted
Awards. Shares of Common Stock granted pursuant to this Section 7 shall be
subject to such restrictions on transfer or other incidents of ownership for
such periods of time, and shall be subject to such conditions of vesting, as
the Committee may determine. If shares of Common Stock are offered for sale
under the Plan, the purchase price shall be payable in cash, or, in the sole
discretion of the Committee or as set forth in the applicable Award
Document, in shares of Common Stock already owned by the Participant or
other consideration acceptable to the Committee or in any combination of
cash, shares of Common Stock or such other consideration.
(b) SHARE CERTIFICATES; RIGHTS AND PRIVILEGES. At the time Restricted
Shares are granted or sold to a Participant, share certificates representing
the appropriate number of Restricted Shares shall be registered in the name
of the Participant but shall be held by the Company in custody for the
account
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<PAGE>
of such person. The certificates shall bear a legend restricting their
transferability as provided herein. Except for such restrictions on transfer
or other incidents of ownership as may be determined by the Committee and
set forth in the Agreement relating to an award or sale of Restricted
Shares, a Participant shall have the rights of a stockholder as to such
Restricted Shares, including the right to receive dividends and the right to
vote in accordance with applicable law.
(c) DISTRIBUTIONS. Unless the Committee determines otherwise at or
after the time of grant, any shares of Common Stock or other securities of
the Company received by a Participant to whom Restricted Shares have been
granted or sold as a result of a non-cash distribution to holders of Common
Stock or as a stock dividend on Common Stock shall be subject to the same
terms, conditions and restrictions as such Restricted Shares.
8. RSUS. The Committee is authorized to grant RSUs to Eligible
Individuals. Each RSU shall entitle the holder thereof to receive, as determined
by the Committee at or after the time of grant, one share of Common Stock or
cash and other property with a value equal to the Fair Market Value of a share
of Common Stock on the date of settlement of the RSU. RSUs shall be subject to
such vesting, payment and settlement terms and restrictions as the Committee
shall impose. RSUs may be granted in lieu of other compensation or benefits
payable to a Participant or in settlement of previously granted Awards.
9. STOCK OPTIONS.
(a) FORM OF AWARD. The Committee is authorized to grant Options to
Eligible Individuals. An Option shall entitle a Participant to purchase a
specified number of shares of Common Stock during a specified time at an
exercise price that is fixed at the time of grant or for which the method of
determining the exercise price is specified at the time of grant, all as the
Committee may determine; PROVIDED, HOWEVER, that, except in the case of
Options which are Substitute Awards, the exercise price per share shall be
no less than 100% of the Fair Market Value per share on the date of grant
(or if the exercise price is not fixed on the date of grant, then on such
date as the exercise price is fixed). An Option may be an Incentive Stock
Option or a Nonqualified Stock Option as determined by the Committee and set
forth in the applicable Award Document. Payment of the exercise price of an
Option shall be made in cash, or, to the extent provided by the Committee at
or after the time of grant, in shares of Common Stock (including shares
already owned by the Participant or to be issued to the Participant upon
exercise of the Option) or in any combination of cash and shares of Common
Stock. An Option may also be exercised through a "cashless exercise"
procedure facilitated by a broker approved by the Company, and in accordance
with procedures established by the Committee, for this purpose. An Option
shall be effective for such term as shall be determined by the Committee and
set forth in the Award Document relating to such Option, and the Committee
may extend the term of an Option after the time of grant; PROVIDED, HOWEVER,
that the term of an Option may in no event extend beyond the tenth
anniversary of the date of grant of such Option. The Committee may also
provide at or after the time of grant that a Participant shall have the
right to receive a Restoration Option upon the exercise through the
tendering of shares of Common Stock of an Option or an option granted under
another plan of the Company.
(b) INCENTIVE STOCK OPTIONS. Each Option granted pursuant to the Plan
shall be designated at the time of grant as either an Incentive Stock Option
or as a Nonqualified Stock Option. No Incentive Stock Option may be issued
pursuant to the Plan to any individual who, at the time the Option is
granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries,
unless (A) the exercise price determined as of the date of grant is at least
110% of the Fair Market Value on the date of grant of the shares of Common
Stock subject to such Option, and (B) the Incentive Stock Option is not
exercisable more than five years from the date of grant thereof. No
Incentive Stock Option may be granted under the Plan after the tenth
anniversary of the Effective Date.
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10. STOCK APPRECIATION RIGHTS.
(a) FORM OF AWARD. The Committee is authorized to grant SARs to
Eligible Individuals. An SAR shall entitle a Participant to receive, upon
exercise, (i) an amount in cash equal to the excess, if any, of the Fair
Market Value on the exercise date of the number of shares of Common Stock
for which the stock appreciation right is exercised, over the Fair Market
Value of such number of shares on the date of grant (or, in the case of an
SAR granted in tandem with an Option, the aggregate exercise price which the
Participant would otherwise have been required to pay under the terms of the
Option in order to purchase such shares), (ii) a number of shares of Common
Stock having an aggregate Fair Market Value, as of the date of exercise,
equal to the amount determined as in the preceding clause (i), or (iii) a
combination of cash and shares having an aggregate value equal to the amount
determined as in the preceding clause (i). An SAR may be granted on a
free-standing basis or in tandem with another Award. Notwithstanding the
foregoing, the exercise price of an SAR that is a Substitute Award may be
less than the Fair Market Value of a share of Common Stock on the date of
grant.
(b) EXERCISABILITY. The Committee shall determine at or after the time
of grant whether payments in respect of an SAR shall be in cash, shares of
Common Stock or a combination thereof. An SAR shall be exercisable at the
time or times established by the Committee at or after the time of grant.
(c) TANDEM SARS. If an SAR is granted in tandem with an Option, the
SAR shall not be exercisable prior to or later than the time the related
Option could be exercised. An SAR granted in tandem with an Option may be
granted either at the same time as such Option or subsequent thereto. If
granted in tandem with an Option, an SAR shall cover the same number of
shares of Common Stock as covered by the Option (or such lesser number of
shares as the Committee may determine) and shall be exercisable only at such
time or times and to the extent the related Option shall be exercisable, and
shall have the same term and exercise price as the related Option (which, in
the case of an SAR granted after the grant of the related Option, may be
less than the Fair Market Value per share on the date of grant of the tandem
SAR). Upon exercise of an SAR granted in tandem with an Option, the related
Option shall be canceled automatically to the extent of the number of shares
covered by such exercise; conversely, if the related Option is exercised as
to some or all of the shares covered by the tandem grant, the tandem SAR
shall be canceled automatically to the extent of the number of shares
covered by the Option exercise.
11. PERFORMANCE UNITS. The Committee is authorized to grant Performance
Units to Eligible Individuals. Performance Units may be granted as fixed or
variable share- or dollar-denominated units subject to such conditions of
vesting and time of payment as the Committee may determine and as shall be set
forth in the applicable Award Document relating to such Performance Units.
Performance Units may be paid in cash, Common Stock, Awards, other property or
any combination thereof, as the Committee may determine at or after the time of
grant.
12. DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Common
Stock, Awards or other property equal in value to the dividends paid in respect
of a specified number of shares of Common Stock. Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents will be paid or distributed when
accrued or will be deemed reinvested in additional shares of Common Stock,
Awards, or other investment vehicles as the Committee may specify. Dividend
Equivalents may be subject to the same terms and conditions as any Award granted
in connection therewith or to such other terms and conditions as the Committee
specifies in connection with the granting of the Dividend Equivalents.
13. OTHER AWARDS. The Committee is authorized to grant Other Awards in
addition to the Awards as described in Sections 6 through 12 pursuant to which
cash, Common Stock or other securities of the
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Company, other property or any combination thereof is, or in the future may be,
acquired by a Participant. Other Awards may be valued in whole or in part with
reference to, or otherwise based upon or related to one or more Performance
Goals, the value of a share of Common Stock or the value of other securities of
the Company, including preferred stock, debentures, notes, convertible or
exchangeable debt securities, rights or warrants, the value of any asset or
property of the Company or such other criteria as the Committee shall specify.
Other Awards may consist solely of cash bonuses or supplemental cash payments to
a Participant, including without limitation, payments to permit the Participant
to pay some or all of the tax liability incurred in connection with the vesting,
exercise, payment or settlement of an Award. Other Awards may be granted in lieu
of other compensation or benefits payable to a Participant or in settlement of
previously granted Awards.
14. PERFORMANCE AWARDS.
(a) FORM OF AWARD. Subject to the further provisions of this Section
14, the Committee is authorized to grant Performance Awards under this
Section 14 which shall provide for Target Payments to Participants for a
Performance Period upon the achievement of the Target or Targets established
by the Committee for such Performance Period. Target Payments may be made in
cash, Common Stock, Awards, other property or any combination thereof. The
provisions of this Section 14 shall be construed and administered by the
Committee in a manner which complies with the requirements under Section
162(m) of the Code applicable to "qualified performance-based compensation."
(b) PERFORMANCE GOALS AND TARGETS. The Performance Goals and Targets
applicable to a Performance Period shall be established by the Committee
prior to, or reasonably promptly following the inception of, a Performance
Period but, to the extent required by Section 162(m) of the Code and the
regulations thereunder, by no later than the earlier of the date that is
ninety days after the commencement of the Performance Period or the day
prior to the date on which twenty-five percent of the Performance Period has
elapsed. At the time that the Committee specifies the Performance Goals and
Targets applicable to a Performance Period, the Committee shall also specify
(i) the Target Payment payable for the Performance Period if the applicable
Target or Targets are achieved, (ii) the amount, if any, payable in excess
of the Target Payment if actual performance exceeds the Target or Targets
and (iii) the amount by which the Target Payment will be reduced if actual
performance is less than the Target or Targets established for the
Performance Period. The Committee may also establish the minimum level of
performance on one or more Performance Goals for a Performance Period below
which no amounts will be payable for the Performance Period.
(c) ADDITIONAL PROVISIONS APPLICABLE TO PERFORMANCE PERIODS. More than
one Performance Goal may apply to a given Performance Period and the payment
in connection with a Performance Award for a given Performance Period may be
made based upon (i) the attainment of the performance Targets for only one
Performance Goal or for any one of the Performance Goals applicable to that
Performance Period or (ii) performance related to two or more Performance
Goals, whether assessed individually or in combination with each other. The
Committee may, in connection with the establishment of Performance Goals and
Targets for a Performance Period, establish a matrix setting forth the
relationship between performance on two or more Performance Goals and the
amount of the Award payable for that Performance Period.
(d) DURATION OF THE PERFORMANCE PERIOD. The Committee shall establish
the duration of each Performance Period at the time that it sets the
Performance Goals and Targets applicable to that period. The Committee shall
be authorized to permit overlapping or consecutive Performance Periods.
(e) CERTIFICATION. Following the completion of each Performance
Period, the Committee shall certify, in accordance with the requirements in
the regulations under Section 162(m) of the Code, whether the criteria for
paying amounts in respect of each Performance Award related to that
A-8
<PAGE>
Performance Period have been achieved. Unless the Committee determines
otherwise, no amounts payable in respect of Performance Awards shall be paid
for a Performance Period until the Performance Period has ended and the
Committee has certified the amount of the Awards payable for the Performance
Period in accordance with Section 162(m) of the Code.
(f) DISCRETION. The Committee is authorized at any time during or
after a Performance Period to reduce or eliminate the amount payable in
respect of a Performance Award to any Participant, for any reason,
including, without limitation, (i) in recognition of unusual or nonrecurring
events affecting the Company, any Subsidiary, or any business division or
unit or the financial statements of the Company or any Subsidiary, or in
response to changes in applicable laws, regulations, or accounting
principles, (ii) to take into account a change in the position or duties of
a Participant during the Performance Period or a change in the Participant's
employment status during the Performance Period or (iii) to take into
account subjective or objective performance factors not otherwise set forth
in the Plan or applicable Award Documents.
(g) TIMING OF PAYMENT. Subject to Section 14(e), the amounts, if any,
payable in respect of Performance Awards for a Performance Period will
generally be paid within ninety days following the end of the applicable
Performance Period.
(h) MAXIMUM AMOUNT PAYABLE PER PARTICIPANT UNDER THIS SECTION 14. The
maximum aggregate value of the cash and other property in settlement of a
Performance Award (prior to adjustment in accordance with Section 14(i))
payable per Participant for any Performance Period of twelve months may not
exceed $2,000,000 (the "PERFORMANCE DOLLAR LIMIT"). If the Target Payment in
connection with a Performance Award payable to a Participant for a
Performance Period of twelve months is expressed as a percentage of the
Participant's base salary, then, in addition to the limit set forth in the
previous sentence, the maximum aggregate value of the cash and other
property (prior to adjustment in accordance with Section 14(i)) payable to
such Participant in respect of the Performance Award for such Performance
Period shall not exceed 300% (the "SALARY LIMIT") of the Participant's
annual rate of base salary as of the start of the Performance Period. If a
Performance Period is greater than or less than twelve months, the
applicable Performance Dollar Limit or Salary Limit, as the case may be,
shall be determined by multiplying the applicable twelve-month limit by a
fraction, the numerator of which is the number of whole and partial months
in the Performance Period and the denominator of which is twelve.
(i) PAYMENT OF PERFORMANCE AWARDS IN SHARES OF COMMON STOCK. In the
event that the Company settles a Performance Award through the payment of
Common Stock that is subject to either forfeiture or transfer restrictions,
the Company may apply a reasonable discount to the then Fair Market Value of
the stock in determining the number of shares issued in settlement of such
portion of the award; PROVIDED, HOWEVER, that the amount of the discount
applied to the Fair Market Value of a share of Common Stock may not exceed
twenty-five percent.
15. VESTING; FORFEITURE; TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL. The Committee shall specify at or after the time of grant of an Award
the vesting, forfeiture and other conditions applicable to the Award and the
provisions governing the disposition of an Award in the event of a Participant's
termination of employment with the Companies. In connection with a Participant's
termination of employment, the Committee may vary the vesting, exercisability
and settlement provisions of an Award relative to the circumstances resulting in
such termination of employment. The Committee shall have the discretion to
accelerate the vesting or exercisability of, eliminate the restrictions and
conditions applicable to, or extend the post-termination exercise period of an
outstanding Award. Similarly, the Committee shall have full authority to
determine the effect, if any, of a change in control of the Company on the
vesting, exercisability, payment or lapse of restrictions applicable to an
Award, which effect may be specified in the applicable Award Document or
determined at a subsequent time.
A-9
<PAGE>
16. ACCELERATION AND DEFERRAL.
(a) ACCELERATION. The Committee may accelerate the payment or
settlement of an Award and may apply a reasonable discount to the amount
delivered to the Participant to reflect such accelerated payment or
settlement. If the Committee accelerates the payment or settlement of a
Performance Award, the amount of the discount applied to such accelerated
payment or settlement shall meet the requirements of the regulations under
Section 162(m) of the Code.
(b) DEFERRAL. In accordance with rules and procedures established by
the Committee, the Committee (i) may permit a Participant at or after the
time of grant to defer receipt of payment or settlement of some or all of an
Award to one or more dates elected by the Participant, subsequent to the
date on which such Award is payable or otherwise to be settled, or (ii) may
require at or after the time of grant that the portion of an Award in excess
of an amount specified by the Committee be mandatorily deferred until one or
more dates specified by the Committee. Amounts deferred in accordance with
the preceding sentence shall be noted in a bookkeeping account maintained by
the Company for this purpose and may periodically be credited with notional
interest or earnings in accordance with procedures established by the
Committee from time to time. Deferred amounts shall be paid in cash, Common
Stock or other property, as determined by the Committee at or after the time
of deferral, on the date or dates elected by the Participant or, in the case
of amounts which are mandatorily deferred, on the date or dates specified by
the Committee.
17. GENERAL PROVISIONS.
(a) NON-TRANSFERABILITY OF AWARD. Unless the Committee determines
otherwise, no Award or amount payable under, or interest in, the Plan shall
be transferable by a Participant except by will or the laws of descent and
distribution or otherwise be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge;
PROVIDED, HOWEVER,that the Committee may, in its discretion and subject to
such terms and conditions as it shall specify, permit the transfer of an
Award for no consideration to a Participant's family members or to one or
more trusts or partnerships established in whole or in part for the benefit
of one or more of such family members (collectively, "PERMITTED
TRANSFEREES"); and PROVIDED FURTHER that this sentence shall not preclude a
Participant from designating a Beneficiary to receive the Participant's
outstanding Award following the death of the Participant. Any Award
transferred to a Permitted Transferee shall be further transferable only by
will or the laws of descent and distribution or, for no consideration, to
another Permitted Transferee of the Participant. The Committee, may in its
discretion, permit transfers of Awards other than those contemplated by this
Section 17(a). During the lifetime of the Participant, an Option, SAR or
similar-type Other Award shall be exercisable only by the Participant or by
a Permitted Transferee to whom such Option, SAR or Other Award has been
transferred in accordance with this Section 17(a).
(b) RIGHTS WITH RESPECT TO SHARES. A Participant shall have no rights
as a stockholder with respect to shares of Common Stock covered by an Award
until the date the Participant or his nominee becomes the holder of record
of such shares, and, except as provided in Section 12, no adjustments shall
be made for cash dividends or other distributions or other rights as to
which there is a record date preceding the date such person becomes the
holder of record of such shares.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the creation of the Plan
nor the granting of Awards thereunder shall be deemed to create a condition
of employment or right to continued employment with the Company, and each
Participant shall be and shall remain subject to discharge by the Company as
though the Plan had never come into existence.
(d) CONSENT TO PLAN. By accepting any Award or other benefit under the
Plan, each Participant and each person claiming under or through him shall
be conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or
the Committee.
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<PAGE>
(e) WAGE AND TAX WITHHOLDING. The Company or any Subsidiary is
authorized to withhold from any Award or any compensation or other payment
to a Participant amounts of withholding and other taxes due in connection
with any Award, and to take such other action as the Committee may deem
necessary or advisable to enable the Company and the Participants to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority shall include authority for the
Company to withhold or receive Common Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations, either on a mandatory or elective basis in the discretion of
the Committee.
(f) COMPLIANCE WITH SECURITIES LAWS. An Award may not be exercised,
and no shares of Common Stock may be issued in connection with an Award,
unless the issuance of such shares has been registered under the Securities
Act of 1933, as amended, and qualified under applicable state "blue sky"
laws, or the Company has determined that an exemption from registration and
from qualification under such state "blue sky" laws is available.
(g) UNFUNDED PLAN. The Plan is intended to constitute an "unfunded"
plan for incentive compensation. Nothing contained in the Plan (or in any
Award Documents or other documentation related thereto) shall give any
Participant any rights that are greater than those of a general creditor of
the Company; PROVIDED, HOWEVER, that the Committee may authorize the
creation of trusts and deposit therein cash, shares of Common Stock, or
other property or make other arrangements, to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with
the "unfunded" status of the Plan unless the Committee determines otherwise.
The trustee of such trusts may be authorized to dispose of trust assets and
reinvest the proceeds in alternative investments, subject to such terms and
conditions as the Committee may specify.
(h) OTHER EMPLOYEE BENEFIT PLANS. Payments received by a Participant
under any Award made pursuant to the Plan shall not be included in, nor have
any effect on, the determination of benefits under any other employee
benefit plan or similar arrangement provided by the Company, unless
otherwise specifically provided for under the terms of such plan or
arrangement or by the Committee.
(i) COMPLIANCE WITH RULE 16B-3. Notwithstanding anything contained in
the Plan or in any Award Document to the contrary, if the consummation of
any transaction under the Plan would result in the possible imposition of
liability on a Participant pursuant to Section 16(b) of the Exchange Act,
the Committee shall have the right, in its sole discretion, but shall not be
obligated, to defer such transaction or the effectiveness of such action to
the extent necessary to avoid such liability, but in no event for a period
longer than six months.
(j) EXPENSES. The costs and expenses of administering and implementing
the Plan shall be borne by the Company.
(k) APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of Common Stock or other securities pursuant to Award will be used
for general corporate purposes.
18. RECAPITALIZATION OR REORGANIZATION.
(a) AUTHORITY OF THE COMPANY AND STOCKHOLDERS. The existence of the
Plan, the Award Documents and the Awards granted hereunder shall not affect
or restrict in any way the right or power of the Company or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of stock or
of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect
the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
A-11
<PAGE>
(b) CHANGE IN CAPITALIZATION. Notwithstanding any provision of the
Plan or any Award Document, the number and kind of shares authorized for
issuance under Section 5(a), including the maximum number of shares
available under the special limits provided for in Section 5(d), may be
equitably adjusted in the sole discretion of the Committee in the event of a
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, extraordinary dividend, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase Common Stock at
a price substantially below Fair Market Value or other similar corporate
event affecting the Common Stock in order to preserve, but not increase, the
benefits or potential benefits intended to be made available under the Plan.
In addition, upon the occurrence of any of the foregoing events, the number
of outstanding Awards and the number and kind of shares subject to any
outstanding Award and the purchase price per share, if any, under any
outstanding Award may be equitably adjusted (including by payment of cash to
a Participant) in the sole discretion of the Committee in order to preserve
the benefits or potential benefits intended to be made available to
Participants granted Awards. Such adjustments shall be made by the
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final. Unless otherwise determined by the
Committee, such adjusted Awards shall be subject to the same vesting
schedule and restrictions to which the underlying Award is subject.
19. EFFECTIVE DATE. The Plan shall become effective on the Effective Date,
subject to subsequent approval thereof by the Company's stockholders at the
first annual meeting of stockholders to occur after the Effective Date, and
shall remain in effect until it has been terminated pursuant to Section 20. If
the Plan is not approved by the stockholders at such annual meeting, the Plan
and all interests in the Plan awarded to Participants before the date of such
annual meeting shall be void AB INITIO and of no further force and effect.
Section 14 of the Plan and the definition of "Performance Goal" shall be
submitted to the Company's stockholders at the first stockholder meeting that
occurs in the fifth year following the year in which the Plan was last approved
by stockholders (or any earlier meeting designated by the Board), in accordance
with the requirements of Section 162(m) of the Code and the regulations
thereunder. If stockholder approval of the Plan is not obtained at any such
meeting, then no further Performance Awards shall be made under Section 14 after
the date of such annual meeting, but the remainder of the Plan shall continue in
effect until terminated in accordance with Section 20.
20. AMENDMENT AND TERMINATION. Notwithstanding anything herein to the
contrary, the Board or the Committee may, at any time, terminate or, from time
to time, amend, modify or suspend the Plan; PROVIDED, HOWEVER, that no amendment
which (i) increases the Plan Limit or increases limits set forth in Section 5(d)
(except as otherwise contemplated by the terms of the Plan as approved by
stockholders), (ii) allows for grants of Options (other than Substitute Awards)
at an exercise price less than Fair Market Value at the time of grant or (iii)
amends the last sentence of Section 6 in a manner that would permit a reduction
in the exercise price of Options (or options granted under another plan of the
Companies), under circumstances other than those stated in such sentence, shall
be effective without stockholder approval.
21. GOVERNING LAW. The validity, construction and effect of the Plan, any
rules and regulations relating to the Plan, and any Award shall be determined in
accordance with the laws of the State of Nevada applicable to contracts to be
performed entirely within such state and without giving effect to principles of
conflicts of laws.
A-12
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT OF RESTATED
ARTICLES OF INCORPORATION OF
CORNERSTONE PROPERTIES INC.
The undersigned, being the President and Secretary of Cornerstone Properties
Inc., a Nevada corporation (the "Corporation"), do hereby certify as follows:
1. That on , 1998, the board of directors of the Corporation by a
vote taken and adopted, consented to the adoption of resolutions setting
forth the proposed amendment to the Restated Articles of Incorporation of
the Corporation, as hereinafter set forth, declaring the advisability
thereof, and calling a meeting of the shareholders for the purpose of
considering and voting upon the proposed amendment.
2. Said resolution called for the following amendment to the Restated
Articles of Incorporation:
I. The first paragraph of ARTICLE 4, Section 4.01, Authorized
Shares, is hereby amended in its entirety as follows:
Section 4.01 AUTHORIZED SHARES. The aggregate number of shares that
the Corporation shall have the authority to issue is Three Hundred
Fifteen Million (315,000,000) shares of Capital Stock consisting of
Sixty-Five Million (65,000,000) shares of Preferred Stock with no par
value per share and Two Hundred Fifty Million (250,000,000) shares of
Common Stock with no par value per share.
Except as specifically amended herein, ARTICLE 4 shall not be affected by
this amendment and shall continue in full force and effect.
3. That at the annual meeting of the shareholders of the Corporation
held on May 20, 1998, of a total of votes cast at such annual meeting,
shareholders holding shares of the Corporation, which constituted a
majority of shares entitled to vote at the annual meeting, cast votes in
favor and adopted and consented to the adoption of a resolution setting
forth the proposed amendment to the Corporation's Restated Articles of
Incorporation as hereinabove set forth.
4. That the Restated Articles of Incorporation of the Corporation are
hereby amended as set forth above and the undersigned make this certificate
pursuant to Section 78.385 and 78.390 of the Nevada Revised Statutes.
CORNERSTONE PROPERTIES INC.
By:
-----------------------------------
Rodney C. Dimock
PRESIDENT
By:
-----------------------------------
Thomas P. Loftus
SECRETARY
State of New York
County of Richmond
B-1
<PAGE>
This instrument was acknowledged before me on , 1998 by Rodney C.
Dimock as President of CORNERSTONE PROPERTIES INC.
--------------------------------------
Notary Public
Printed:
--------------------------------
My Commission expires:
----------------------
(Seal, if any)
B-2
<PAGE>
REVOCABLE PROXY CARD
CORNERSTONE PROPERTIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 1998
The undersigned stockholder of Cornerstone Properties Inc., hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement with respect to the Annual Meeting of Stockholders of
Cornerstone Properties Inc. to be held at the Four Seasons Hotel, 57 East
57th Street, New York, New York 10022 on Wednesday, May 20, 1998, at 2:00
p.m. (local time), and hereby appoints Kevin P. Mahoney and Thomas P. Loftus,
and each of them, proxies and attorneys-in-fact, each with power of
substitution and revocation, and each with all powers that the undersigned
would possess if personally present, to vote the Cornerstone Properties Inc.
Common Stock of the undersigned at such meeting and any postponements or
adjournments of such meeting, as set forth below, and in their discretion
upon any other business that may properly come before the meeting (and any
such postponements or adjournments).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2, 3 AND 4 AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING
AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE
<PAGE>
/X/ Please mark votes
as in this example.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED ENVELOPE.
1. To elect eleven directors to the
Company's Board of Directors.
NOMINEES: Cecil D. Conlee, Rodney C. Dimock, Blake Eagle,
Dr. Karl-Ludwig Hermann, Hans C. Mautner, Dr. Lutz Mellinger,
John S. Moody, Craig R. Stapleton, Michael J.G. Topham, Dick
van den Bos, Jan van der Vlist.
WITHHELD
FOR ALL FROM ALL
NOMINEES NOMINEES
/ / / /
/ / / /
/ /
/ / ______________________________________________
For all nominees except as noted above
MARK HERE FOR / /
ADDRESS / /
CHANGE AND
NOTE BELOW
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To approve the Cornerstone Properties Inc. 1998 / / / / / /
Long-Term Incentive Plan. / / / / / /
3. To approve an amendment to the Company's Restated / / / / / /
Articles of Incorporation to increase the number / / / / / /
of authorized shares of Preferred Stock from the
current amount of 15,000,000 shares to 65,000,000
shares.
4. To ratify the appointment of Coopers & Lybrand / / / / / /
L.L.P. as independent public accountants of the / / / / / /
Company for fiscal year 1998.
5. To transact such other business as may properly come
before the meeting or any adjournment thereof.
</TABLE>
This proxy card should be signed by the stockholder(s)
exactly as his or her name(s) appear(s) hereon, dated and
returned promptly in the enclosed envelope. Persons signing
in a fiduciary capacity should so indicate. If shares are
held by joint tenants or as community property, both persons
should sign.
Signature_________________ Date__________ Signature ___________ Date__________
