<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FM 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.
[_] 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(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:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF FM PROPERTIES INC. APPEARS HERE]
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1998
------------------
March 27, 1998
The Annual Meeting of Stockholders of FM Properties Inc. will be held at the
Hotel Crescent Court, 400 Crescent Court, Dallas, Texas, on Thursday, May 14,
1998, at 1:30 p.m., for the following purposes:
(1) To elect one of the three directors to hold office for three years
and until his successor is elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as the independent
auditors to audit the financial statements of the corporation and its
subsidiaries for the year 1998;
(3) To act upon a proposal to amend the corporation's Amended and
Restated Certificate of Incorporation to change the name of the corporation
from FM Properties Inc. to Stratus Properties Inc.;
(4) To act upon a proposal to approve the corporation's 1998 Stock Option
Plan; and
(5) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 18, 1998 as
the record date for the determination of stockholders entitled to notice of
and to vote at the meeting.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly
in the enclosed envelope. Your cooperation will be appreciated.
By Order of the Board of Directors.
/s/ Michael C. Kilanowski,Jr.
Michael C. Kilanowski, Jr.
Secretary
<PAGE>
FM PROPERTIES INC.
98 SAN JACINTO BOULEVARD, SUITE 220
AUSTIN, TEXAS 78701
The 1997 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
March 27, 1998.
PROXY STATEMENT
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
FM Properties Inc. (the "Company") for use at its Annual Meeting of
Stockholders to be held on May 14, 1998, and at any adjournments thereof (the
"Meeting").
VOTING PROCEDURES
Stockholders of record at the close of business on March 18, 1998 (the
"Record Date"), will be entitled to vote at the Meeting. On the Record Date,
there were 14,288,270 shares of common stock (the "Common Stock") outstanding.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, will constitute a quorum at the Meeting. The persons
appointed by the Company to act as inspectors of election will treat shares of
Common Stock represented by a properly executed and returned proxy as present
at the Meeting for purposes of determining a quorum. The shares of Common
Stock present at the Meeting that are abstained from voting or that are the
subject of broker non-votes will be counted as present for purposes of
determining a quorum. A broker non-vote occurs when a nominee holding Common
Stock for a beneficial owner does not vote on a particular matter because the
nominee does not have discretionary voting power with respect to that item and
has not received voting instructions from the beneficial owner.
Each share of Common Stock will entitle the holder to one vote at the
Meeting, and votes cast will be counted by the inspectors of election. The
Company's directors are elected by a plurality vote. Adoption of the proposal
to amend the Company's Amended and Restated Certificate of Incorporation to
change the Company's name from FM Properties Inc. to Stratus Properties Inc.
(the "Charter Proposal") requires the approval of a majority vote of the
issued and outstanding shares of Common Stock entitled to vote at the Meeting.
Except as otherwise provided by statute, the Company's Amended and Restated
Certificate of Incorporation or the Company's By-Laws, all other matters
coming before the Meeting, including the proposal to approve the Company's
1998 Stock Option Plan (the "Plan Proposal"), will be decided by the vote of a
majority of the shares of
<PAGE>
Common Stock present in person or represented by proxy and entitled to vote at
the Meeting. Abstentions and broker non-votes will have no effect upon the
election of the director but will have the same effect as votes against the
Charter Proposal. Abstentions as to all other matters to come before the
Meeting, including the Plan Proposal, will have the same effect as votes
against those matters, but broker non-votes as to those matters will not be
deemed to be a part of the voting power present with respect to, will not
count as votes for or against, and will not be included in calculating the
number of votes necessary for approval of those matters.
The Board of Directors is soliciting a proxy in the enclosed form to provide
you with an opportunity to vote on all matters scheduled to come before the
Meeting, whether or not you attend in person. If you properly execute and
return a proxy in the enclosed form, your shares will be voted as you specify.
If you make no specifications, the proxy will be voted for the election of one
director, for the ratification of the appointment of auditors, for the
adoption of the Charter Proposal, and for the adoption of the Plan Proposal.
If you submit a proxy, you may subsequently revoke it or submit a revised
proxy at any time before it is voted. You may also attend the Meeting in
person and vote by ballot, which would cancel any proxy that you previously
gave. Management expects no matters to be presented for action at the Meeting
other than the items described in this Proxy Statement. If, however, any other
matters properly come before the Meeting, the persons named as proxies in the
enclosed form of proxy intend to vote in accordance with their judgment on the
matters presented.
PROXY SOLICITATION
The Company will pay all expenses of soliciting proxies for the Meeting. In
addition to solicitations by mail, arrangements have been made for brokers and
nominees to send proxy materials to their principals, and the Company will
reimburse them for their reasonable expenses in doing so. The Company has
retained Georgeson & Co. Inc., Wall Street Plaza, New York, New York, to
assist it in the solicitation of proxies from brokers and nominees. It is
estimated that the fees for Georgeson's services will be $6,500 plus its
reasonable out-of-pocket expenses. Certain representatives of the Company, who
will receive no compensation for their services, may also solicit proxies by
telephone, telegram, telex, telecopy, or personal interview.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Company's 1999 proxy
materials, stockholder proposals must be received by the Company no later than
November 30, 1998. In addition, the Company's By-Laws provide that
stockholders intending to nominate a director or bring any other matter before
a stockholders' meeting must furnish timely written notice containing
specified information concerning, among other things, the matters to be
brought before the meeting and the stockholder proposing the matters. In
general, to be timely a stockholder's notice must be received by the Company's
secretary not less than 60 nor more than 90 days prior to the stockholders'
2
<PAGE>
meeting. If less than 70 days' notice or prior public disclosure of the date
of the stockholders' meeting is made, the secretary must receive the
stockholder's notice within 10 days of the mailing of the meeting notice or
public disclosure of the meeting date. The Company will be permitted to
disregard any nomination or other matter that fails to comply with these By-
Law procedures.
CORPORATE GOVERNANCE
The Board of Directors, which held four meetings during 1997, has primary
responsibility for directing the management of the business and affairs of the
Company. The Board currently consists of three members. To provide for
effective direction and management of the Company's business, the Board of
Directors has established committees of the Board, including the Audit
Committee and the Corporate Personnel Committee. The Board has no standing
nominating committee.
The Audit Committee reviews the financial statements of the Company and
exercises general oversight with respect to the activities of the Company's
independent auditors and related matters. The Audit Committee currently
consists of Mr. Madden, as Chairman, and Messrs. Adkerson and Leslie. The
Audit Committee met four times during 1997.
The Corporate Personnel Committee, which is described further below,
currently consists of Mr. Leslie, as Chairman, and Mr. Madden. The Corporate
Personnel Committee met once during 1997.
ELECTION OF DIRECTOR
At the Meeting one director is to be elected to a three-year term and to
hold office until his successor is elected and qualified. Richard C. Adkerson
has been nominated for election to the Board of Directors at the Meeting. The
Board of Directors consists of three classes, each of which serves for three
years, with one class being elected each year. The persons named in the
enclosed form of proxy intend to vote your proxy, unless otherwise directed,
for the election of Mr. Adkerson as the member of the class to serve until the
2001 Annual Meeting of Stockholders. Mr. Madden is the member of the class to
serve until the 1999 Annual Meeting of Stockholders and Mr. Leslie is the
member of the class to serve until the 2000 Annual Meeting of Stockholders.
If, contrary to present expectation, the nominee should become unavailable for
any reason, votes may be cast pursuant to the accompanying form of proxy for a
substitute nominee designated by the Board.
3
<PAGE>
INFORMATION ABOUT NOMINEE AND DIRECTORS
The following table provides certain information as of the Record Date with
respect to the nominee and each other director whose term will continue after
the Meeting. Unless otherwise indicated, each person has been engaged in the
principal occupation shown for the past five years.
<TABLE>
<CAPTION>
YEAR
FIRST
NAME OF NOMINEE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS ELECTED A
OR DIRECTOR AGE AND POSITIONS WITH THE COMPANY DIRECTOR
--------------- --- ------------------------------------------------ ---------
<S> <C> <C> <C>
Richard C. Adkerson 51 Chairman of the Board and Chief Executive 1992
Officer of the Company. President, Chief
Operating Officer and Chief Financial Officer
of Freeport-McMoRan Copper & Gold Inc., a
mining company. Director and Vice Chairman of
the Board of Freeport-McMoRan Sulphur Inc., a
sulphur mining company. Director, Co-Chairman
of the Board and Chief Executive Officer of
McMoRan Oil & Gas Co. ("MOXY"), an independent
oil and gas company. Vice Chairman of the Board
of Freeport-McMoRan Inc. ("FMI"), a natural
resources company, until 1997. Senior Vice
President and Chief Financial Officer of FMI
until 1995.
James C. Leslie 41 President and Chief Operating Officer of The 1996
Staubach Company, a commercial real estate
services firm. President of Wolverine Holding
Company, a real estate holding company.
President of Staubach Financial Services, a
financial real estate services firm, until
March 1996. Director of Forum Retirement
Partners, L.P. and Wyndham International Inc.
Michael D. Madden 49 Chairman of the Board of Hanover Capital L.L.C., 1992
investment bankers. Vice Chairman of the Board
of PaineWebber Incorporated, investment
bankers, until December 1995. Executive Vice
President and Chief Origination Officer of
Kidder Peabody Group Inc., investment bankers,
until December 1994. Executive Managing
Director and Head of Global Business
Development of Kidder Peabody Group Inc. until
September 1994. Senior Managing Director and
Co-Head of Worldwide Investment Banking, Lehman
Brothers Inc., investment bankers, until 1993.
Director of Comforce Corporation and Gruntal &
Co. Incorporated.
</TABLE>
4
<PAGE>
DIRECTOR COMPENSATION
Each director receives a fee of $500 for attending each Board meeting. Each
non-employee and non-officer director also receives $500 for attending each
Board committee meeting as well as an annual fee consisting of (i) $10,000 for
serving on the Board, (ii) $1,000 for each committee of which he is a member,
and (iii) $1,000 for each committee of which he is the chairman.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Each non-employee and non-officer director is eligible for the grant of
options under the 1996 Stock Option Plan for Non-Employee Directors (the "1996
Plan"). On September 1, 1996, each eligible director was granted an option to
purchase 20,000 shares of Common Stock at 100% of the fair market value of the
shares on the grant date. On September 1 of each subsequent year, each
eligible director will be granted an option to purchase 5,000 shares of Common
Stock at 100% of the fair market value of the shares on the grant date. Each
option granted under the 1996 Plan expires ten years after the grant date, and
each eligible director may transfer his options during his lifetime to his
immediate family members or certain entities owned by or for the benefit of
his immediate family members or pursuant to a domestic relations order. In
accordance with the 1996 Plan, on September 1, 1997, each eligible director
was granted an option to purchase 5,000 shares of Common Stock at an exercise
price of $4.8125. During 1997 none of the current non-employee and non-officer
directors exercised options granted under the 1996 Plan.
COMMON STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the ownership of the
Common Stock by (i) each director and nominee for director of the Company,
(ii) each executive officer for whom compensation information is disclosed
under the heading "Executive Officer Compensation" and (iii) all directors and
executive officers of the Company as a group, determined in accordance with
Rule 13d-3 of the Securities and Exchange Commission ("SEC") based on
information furnished by them. Each individual holds less than 1% of the
outstanding Common Stock. Unless otherwise indicated, all information is
presented as of December 31, 1997, and all shares indicated as beneficially
owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
------------------------ ------------
<S> <C>
Richard C. Adkerson 135,183(2)
William H. Armstrong, III 39,350
James C. Leslie 70,900
Michael D. Madden 5,000
All directors and executive officers as a group (5 persons) 361,726(3)
</TABLE>
5
<PAGE>
- ---------
(1) Includes shares that could be acquired within sixty days after December
31, 1997 upon the exercise of options granted pursuant to Company stock
option plans, as follows: Mr. Adkerson, 75,000 shares; Mr. Armstrong,
31,250 shares; Mr. Leslie, 5,000 shares; Mr. Madden, 5,000 shares; all
directors and executive officers as a group, 141,250 shares.
(2) Includes 183 shares held in a retirement trust for the benefit of Mr.
Adkerson's spouse.
(3) Includes (a) 9 shares held in a retirement trust for the benefit of an
executive officer's spouse but as to which he disclaims beneficial
ownership, (b) 100 shares held by an executive officer as custodian but as
to which he disclaims beneficial ownership and (c) 26,201 shares held in
trusts with respect to which an executive officer, as co-trustee, shares
voting and investment power but as to which he disclaims beneficial
ownership. Total represents approximately 2.5% of the outstanding Common
Stock.
------------------
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the ownership of the
Company's Common Stock by each person known to the Company to be a beneficial
owner of more than five percent of the outstanding Common Stock, determined in
accordance with Rule 13d-3 of the SEC based on information furnished by them.
Unless otherwise indicated, all information is presented as of December 31,
1997, and all shares indicated as beneficially owned are held with sole voting
and investment power.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF PERSON OWNED CLASS
-------------------------- ------------ -------
<S> <C> <C>
The Goldman Sachs Group, L.P. 764,591(1) 5.4%
85 Broad Street
New York, New York 10004
The Guardian Life Insurance Company of America 858,000(2) 6.0%
201 Park Avenue South
New York, New York 10003
Ingalls & Snyder LLC 2,830,842(3) 19.8%
61 Broadway
New York, New York 10006
U.S. Bancorp 740,480(4) 5.2%
111 S.W. Fifth Avenue
Portland, Oregon 97204
</TABLE>
- ---------
(1) Based on the amended Schedule 13G dated February 14, 1998 that The Goldman
Sachs Group, L.P. filed with the SEC, The Goldman Sachs Group, L.P. has
shared voting and investment power with respect to all 764,591 shares.
6
<PAGE>
(2) Based on the Schedule 13G dated February 11, 1998 that The Guardian Life
Insurance Company of America filed with the SEC, The Guardian Life
Insurance Company of America has sole voting and investment power with
respect to 501,000 of those shares and, through its affiliates, shared
voting and investment power with respect to 357,000 of those shares.
(3) Based on the Schedule 13G dated February 9, 1998 that Ingalls & Snyder LLC
filed with the SEC, Ingalls & Snyder LLC has sole voting power with
respect to 314,300 of those shares.
(4) Based on the Schedule 13G dated February 11, 1997 that U.S. Bancorp filed
with the SEC, U.S. Bancorp, through its affiliates, has sole voting power
with respect to 740,000 shares.
------------------
EXECUTIVE OFFICER COMPENSATION
Throughout 1997, Richard C. Adkerson, Chairman of the Board and Chief
Executive Officer, was employed by other entities and performed his duties for
the Company in accordance with a Services Agreement between the Company and a
corporation in which the Company owns a 10% equity interest (the "Services
Company"). In 1997, Mr. Adkerson was compensated by his employers. The Company
paid a fixed fee of $524,000 in 1997 for all services under the Services
Agreement, which included executive, technical, administrative, accounting,
financial, tax and other services. The Services Agreement was recently amended
effective January 1, 1998 to provide that the amount that the Company will pay
for future services will no longer be a fixed fee but will instead be the sum
of (i) the expenses incurred by the Services Company that are readily
identifiable as having been incurred on behalf of the Company, (ii) the costs
of goods, services and other items paid by the Services Company on behalf of
the Company, and (iii) an allocable portion of all other expenses incurred by
the Services Company in connection with providing services to the Company.
William H. Armstrong, III was the only executive officer employed by the
Company who earned in excess of $100,000 for services provided to the Company
in 1997. The following table shows compensation that the Company paid to Mr.
Armstrong (with Mr. Adkerson, the "Named Executive Officers") for all services
rendered to the Company and its subsidiaries in 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William H. Armstrong, III 1997 $159,167 $150,000 $1,000(1) 65,000 $17,917(2)
President, Chief Operating 1996 150,000 120,000 0 25,000 0
Officer and Chief Financial 1995 56,250 80,000 0 50,000 100,100(3)
Officer
</TABLE>
7
<PAGE>
- ---------
(1) Consists of matching gifts under the matching gifts program.
(2) Consists of Company contributions to defined contribution plans.
(3) Consists of consulting fees.
------------------
The following table sets forth information with respect to the grant of
stock options to each Named Executive Officer during 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION PRESENT
NAME GRANTED(1) 1997 PRICE DATE VALUE(2)
---- ---------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Richard C. Adkerson 80,000 29.6% $3.50 May 8, 2007 $218,400
William H. Armstrong,
III 65,000 24.1% 3.50 May 8, 2007 $177,450
</TABLE>
- ---------
(1) The options will become immediately exercisable in their entirety if (a)
any person or group of persons acquires beneficial ownership of shares
representing 20% or more of the Company's total voting power or (b) under
certain circumstances, the composition of the Board of Directors is
changed after a tender offer, exchange offer, merger, consolidation, sale
of assets or contested election or any combination thereof. The options
granted to Mr. Adkerson may be transferred by him during his lifetime to
his immediate family members or certain entities owned by or for the
benefit of his immediate family members or pursuant to a domestic
relations order.
(2) The Black-Scholes option pricing model was used to determine the grant
date present value of the options granted by the Company to Messrs.
Adkerson and Armstrong. Under the Black-Scholes option pricing model, the
grant date present value of each option referred to in the table was
calculated to be $2.73. The following facts and assumptions were used in
making this calculation: (a) an exercise price for each stock option of
$3.50; (b) a fair market value of $3.50 for one share on the grant date;
(c) a term for options as set forth under the column labeled "Expiration
Date"; (d) a stock volatility of 64%, based on an analysis of historical
weekly closing prices of the Common Stock over a 104-week period; and (e)
an assumed risk-free interest rate of 6.8%, this rate being equivalent to
the yield on the grant date on a treasury note with a maturity date
comparable to the expiration date of the options. No other discounts or
restrictions related to vesting or the likelihood of vesting of the
options were applied. The resulting grant date present value for the
options was multiplied by the total number of shares covered by the
options granted to Messrs. Adkerson and Armstrong.
------------------
8
<PAGE>
The following table sets forth information with respect to all outstanding
Company stock options held by each Named Executive Officer as of December 31,
1997. None of them exercised any Company stock options during 1997.
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Richard C. Adkerson 37,500/192,500 $138,281/$549,844
William H. Armstrong,
III 31,250/108,750 100,391/ 242,109
</TABLE>
CORPORATE PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporate Personnel Committee is composed of two directors, neither of
whom is an officer or employee of the Company. The Committee determines the
compensation of certain of the Company's executive officers and administers
the Company's performance incentive awards program and stock option plans.
The Company's executive compensation is comprised of (i) an annual cash
incentive award and (ii) long-term incentive compensation in the form of stock
options. In addition, the Committee determines the salaries, if any, of the
Company's executive officers.
Richard C. Adkerson, the Chairman of the Board and Chief Executive Officer
of the Company, provided services to the Company in 1997 pursuant to a
Services Agreement between the Company and the Services Company. Except for
Mr. Adkerson's participation in the Company's stock option plan and receipt of
director fees, Mr. Adkerson received no benefits, salary or other compensation
from the Company in 1997.
The salary of the President and Chief Operating Officer, the only executive
officer of the Company who received a salary in 1997, is based on his level of
responsibility and the Committee's subjective assessment of his performance.
Under the Company's performance incentive awards program, the Committee
determines the amount of annual cash bonuses for the Company's executive
officers. Each person selected under the program is assigned a target award,
expressed as a percentage of base salary, which serves as a guideline amount
that will generally be paid if Company performance meets expectations set for
the year. When determining the total amount awarded to executive officers for
any year, the Committee considers both individual and operating or staff unit
performance, as well as the performance of the Company as measured by its
operational accomplishments, including operating results, cash flow and debt
reduction.
9
<PAGE>
For 1997, the Committee considered the Company's operational
accomplishments, including the continued strong sales of developed homesites
and undeveloped commercial and residential properties, commencing the
development of approximately 850 acres within Barton Creek, the reduction of
$21.2 million of debt, the restructuring of the Company's bank debt to extend
the maturity and provide for staged reductions, and the purchase of FMI's .2%
managing general partnership interest in FM Properties Operating Co., a
Delaware general partnership (the "Partnership"). The Committee determined
that the level of performance achieved warranted the payment of a cash bonus
to the President and Chief Operating Officer in the amount shown in the
Summary Compensation Table under the heading "Executive Officer Compensation."
The Company also grants long-term incentives to executive officers in the
form of stock options. The stock option award guidelines are intended to
reinforce the relationship between compensation and increases in the market
price of the Company's common stock and align the executive officers'
financial interests with those of the Company's stockholders. The Committee
establishes guidelines based upon the position of each participating officer
and the Committee's subjective assessment of each participant's individual
performance. The table entitled "Option Grants in 1997" under the heading
"Executive Officer Compensation" shows the stock options that the Committee
granted in 1997 to two executive officers, including the Chief Executive
Officer, based upon the Committee's guidelines and subjective assessment.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. No executive officer of
the Company reached the deductibility limitation for 1997. The Committee
believes that the stock options granted to executive officers, as discussed
above, qualify for the exclusion from the deduction limitation under Section
162(m). The Committee anticipates that the remaining components of individual
executive compensation that do not qualify for an exclusion from Section
162(m) should not exceed $1 million in any year and therefore will continue to
qualify for deductibility.
James C. Leslie, Chairman Michael D. Madden
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Corporate Personnel Committee are
Messrs. Leslie and Madden. In 1997, no executive officer of the Company served
as a director or member of the compensation committee of another entity, where
one of the other entity's executive officers served as a director of the
Company or on the Company's Corporate Personnel Committee.
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the change in the cumulative total stockholder
return on the Common Stock with the cumulative total return of the Standard &
Poor's 500 Stock Index and the Dow Jones Real Estate Investment Companies
Group during 1997, 1996, 1995, 1994 and 1993.
COMPARISON OF CUMULATIVE TOTAL RETURN*
FM PROPERTIES INC., S&P 500 INDEX &
DOW JONES REAL ESTATE INVESTMENT COMPANIES GROUP
[Graph appears here]
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FM Properties Inc. $100.00 $232.32 $180.69 $ 90.35 $154.88 $267.79
S&P 500 Stock Index 100.00 110.08 111.53 153.45 188.68 251.63
Dow Jones Real Estate
Investment Companies Group 100.00 98.87 100.99 119.62 161.77 194.75
</TABLE>
ASSUMES $100 INVESTED ON DECEMBER
31, 1992 IN FM PROPERTIES INC. * FM PROPERTIES INC.
COMMON STOCK, S&P 500 INDEX & DOW
JONES REAL ESTATE INVESTMENT
COMPANIES GROUP . S&P 500 STOCK INDEX
* TOTAL RETURN ASSUMES REINVESTMENT
OF DIVIDENDS [ ] DOW JONES REAL ESTATE
INVESTMENT COMPANIES GROUP
11
<PAGE>
CERTAIN TRANSACTIONS
In 1997 the Company sold interests in certain exploration properties for $3
million to MOXY, of which Mr. Adkerson is Co-Chairman of the Board and Chief
Executive Officer, and Phosphate Resource Partners Limited Partnership, of
which Mr. Adkerson was an executive officer in 1997. The Company also sold to
MOXY in 1997 small interests in a large number of other oil and gas properties
for $1.5 million. The purchase price for the oil and gas properties was
determined by negotiations between the managements of the Company and MOXY
based on the risk adjusted reserves attributable to the overriding royalty
interest, the acreage of the exploration prospects and the cash flow generated
by the other oil and gas properties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, controller and beneficial owners of more than
10% of the Common Stock to file certain beneficial ownership reports with the
SEC. Mr. Madden, a director of the Company, failed to file timely a statement
of changes in beneficial ownership on Form 4 reporting one transaction in
1995. Mr. Armstrong, an executive officer of the Company, failed to file
timely a statement on Form 4 reporting one transaction in 1996. William J.
Blackwell, a former Vice President and Controller of the Company, failed to
file timely a statement on Form 4 reporting one transaction in 1997.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors seeks stockholder ratification of the Board's
appointment of Arthur Andersen LLP to act as the independent auditors of the
financial statements of the Company and its subsidiaries for the year 1998.
The Board has not determined what, if any, action would be taken should the
appointment of Arthur Andersen LLP not be ratified. One or more
representatives of the firm will be available at the Meeting to respond to
appropriate questions, and those representatives will also have an opportunity
to make a statement.
APPROVAL OF THE CHARTER PROPOSAL
The Board of Directors unanimously proposes that the stockholders approve an
amendment to Article FIRST of the Amended and Restated Certificate of
Incorporation (the "Charter") of the Company to change the Company's name from
FM Properties Inc. to Stratus Properties Inc. The text of Article FIRST of the
Charter as proposed to be amended is as follows:
"FIRST: The name of the Corporation is Stratus Properties Inc."
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REASONS FOR THE PROPOSED AMENDMENT
The Company was organized in 1992 by FMI to hold a 99.8% general partnership
interest in the Partnership, and the Company Common Stock was distributed to
the FMI stockholders. FMI retained a .2% managing general partnership interest
in the Partnership, which was formed by FMI to hold, operate and develop
substantially all domestic oil and gas properties of FMI (all of which the
Company subsequently sold) and real estate then held for development by FMI.
The Partnership also assumed substantially all the liabilities related to
those assets, most all of which were guaranteed by FMI.
In December 1997, FMI merged into IMC Global Inc. ("IGL"), and, prior to the
effectiveness of the merger, FMI sold its .2% managing general partnership
interest in the Partnership to the Company and a subsidiary of the Company. In
connection with the merger of FMI into IGL, the Company restructured and
consolidated its existing debt and IGL became the guarantor of this
restructured debt in place of FMI.
The restructuring of the Company indebtedness and the purchase of the
managing general partnership interest make the Company autonomous in its
Partnership operations, reduce restrictions on its business activities, and
allow it to pursue its previously announced objective of establishing a long-
term, self-supporting capital structure. Accordingly, the Board of Directors
has concluded that the present name of the Company, which signifies its origin
and relationship with FMI, is no longer appropriate. The Board of Directors
believes that it is in the best interests of the Company and its stockholders
to change its name to Stratus Properties Inc. in recognition of its new
autonomous status and the concentration of its operations in the development
and marketing of real estate.
EFFECTIVENESS OF THE PROPOSED AMENDMENT
If approved by the holders of the Common Stock, the amendment to Article
FIRST of the Charter will become effective upon filing a Certificate of
Amendment to the Charter with the Secretary of State of Delaware, which is
expected to occur shortly after the Meeting. Upon effectiveness of the
proposed amendment to the Charter, Company stockholders would not be required
to exchange outstanding stock certificates for new certificates. If the
proposed amendment to the Charter is not approved by the holders of the Common
Stock, the Certificate of Amendment to the Charter will not be filed.
VOTE REQUIRED FOR APPROVAL OF THE PROPOSED AMENDMENT
Approval of the proposed amendment to Article FIRST of the Charter requires
the affirmative vote of a majority of the issued and outstanding shares of
Common Stock entitled to vote at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT TO ARTICLE FIRST OF THE CHARTER.
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APPROVAL OF THE PLAN PROPOSAL
The Board of Directors unanimously proposes that the stockholders approve
the 1998 Stock Option Plan (the "Stock Plan"), which is summarized below. The
summary is qualified in its entirety by reference to the text of the Stock
Plan, which is attached to this Proxy Statement as Exhibit A.
REASONS FOR THE PROPOSAL
The Company's Board of Directors believes that the growth of the Company
depends significantly upon the efforts of its officers and key employees and
that they are best motivated to put forth maximum effort on behalf of the
Company if they own an equity interest in the Company. The Company's Stock
Option Plan is currently in effect and stock options and other equity-based
awards may still be granted under that plan with respect to 47,500 shares of
Common Stock. In order that the Company may continue to motivate and reward
its key personnel with stock-based awards at an appropriate level, the Board
of Directors believes that it is important that a new equity-based plan be
adopted at this time.
SUMMARY OF THE STOCK PLAN
Administration
Awards under the Stock Plan are made by the Corporate Personnel Committee
(the "Committee"), which currently consists of two members of the Board, each
of whom is a "non-employee director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934 (the "Exchange Act") and qualifies as an
"outside director" under Section 162(m) of the Internal Revenue Code (the
"Code"). The Committee has full power and authority to designate participants,
set the terms of awards and to make any determinations necessary or desirable
for the administration of the Stock Plan.
Eligible Participants
Employees and officers (whether or not employees) of the Company and its
existing or future subsidiaries, employees and officers (whether or not
employees) of any entity with which the Company has contracted to receive
executive, management or legal services and who provide services to the
Company under such arrangement, consultants, advisers and any person who has
agreed in writing to become a person otherwise eligible to participate within
not more than 30 days, in each case who can make substantial contributions to
the successful performance of the Company, are eligible to participate in the
Stock Plan. The Committee has delegated to the Chairman of the Board of the
Company the power to make awards to eligible persons who are not executive
officers or directors of the Company, subject to the limitations established
by the Committee. It is anticipated that the Committee's determinations of
which eligible individuals will be granted awards and the
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terms thereof will be based on each individual's present and potential
contribution to the success of the Company and its subsidiaries. It is
estimated that approximately 216 persons will be eligible for awards under the
Stock Plan; however, it is anticipated that only about 15 persons will be
granted awards.
Number of Shares
The maximum number of shares of Common Stock with respect to which awards
payable in shares of Common Stock may be granted under the Stock Plan is
850,000. Awards that may be paid only in cash are not counted against the
850,000-share limit. However, grants of stock appreciation rights, limited
rights and other stock-based awards not granted in tandem with options and
payable only in cash may relate to no more than 850,000 shares. No individual
may receive in any year awards under the Stock Plan, whether payable in cash
or shares, that relate to more than 250,000 shares of Common Stock. Shares
subject to awards that are forfeited or cancelled will again be available for
award. In addition, to the extent that shares are delivered to pay the
exercise price of options or are delivered or withheld by the Company in
payment of the withholding taxes relating to an award under the Stock Plan,
the number of shares withheld or delivered will again be available for grant
under the Stock Plan. The shares to be delivered under the Stock Plan will be
made available from the authorized but unissued shares of Common Stock or from
treasury shares.
On March , 1998, the closing price of a share of Common Stock on The
Nasdaq Stock Market was $ .
Types of Awards
Stock options, stock appreciation rights, limited rights and other stock-
based awards may be granted under the Stock Plan in the discretion of the
Committee. Options granted under the Stock Plan may be either non-qualified or
incentive stock options. Only employees of the Company and its subsidiaries
will be eligible to receive incentive stock options. Stock appreciation rights
and limited rights may be granted in conjunction with or unrelated to other
awards and, if in conjunction with an outstanding option or other award, may
be granted at the time of the award or thereafter, at the exercise price of
the other award. The Committee has discretion to fix the exercise price of
options, stock appreciation rights and limited rights at a price not less than
100% of the fair market value of the underlying Common Stock at the time of
grant (or at the time of grant of the related award in the case of a stock
appreciation right or limited right granted in conjunction with an outstanding
award), except that this limitation on the Committee's discretion does not
apply in the case of awards granted in substitution for outstanding awards
previously granted by an acquired company or a company with which the Company
combines. The Committee has broad discretion as to the terms and conditions
upon which options and stock appreciation rights are exercisable, but under no
circumstances will an option, a stock appreciation right or a limited right
have a term exceeding ten years.
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The option exercise price may be satisfied in cash, or in the discretion of
the Committee, by exchanging Common Stock owned by the optionee or by a
combination of cash and Common Stock. The ability to pay the option exercise
price in Common Stock would permit an optionee to engage in a series of
successive stock-for-stock exercises of an option (sometimes referred to as
"pyramiding") and thereby fully exercise an option with little or no cash
investment; however, the Committee's current policy requires any stock
tendered in payment of the exercise price of an option to be in certificated
form and to have been held by the exercising optionee for such time as is
sufficient to avoid any adverse accounting consequences to the Company
resulting from the permitting of stock-for-stock exercises.
Upon the exercise of a stock appreciation right with respect to Common
Stock, a participant would be entitled to receive, for each share subject to
the right, the excess of the fair market value of the shares on the exercise
date over the exercise price of the right. The Committee has the authority to
determine whether the value of a stock appreciation right is paid in cash or
Common Stock or a combination thereof.
Limited rights generally are exercisable only during a period beginning not
earlier than one day and ending not later than 90 days after the expiration
date of any tender offer, exchange offer or similar transaction that results
in any person or group becoming the beneficial owner of more than 40% of all
classes and series of the Company's stock outstanding, taken as a whole that
have voting rights with respect to the election of directors of the Company
(not including preferred shares which may be issued in the future that have
the right to elect directors only if the Company fails to pay dividends). Upon
the exercise of a limited right granted under the Stock Plan, a participant
would be entitled to receive, for each share of Common Stock subject to the
right, the excess, if any, of the highest price paid in or in connection with
the transaction over the grant price of the limited right.
The Stock Plan also authorizes the Committee to grant to participants awards
of Common Stock and other awards that are denominated in, payable in, valued
in whole or in part by reference to, or are otherwise based on the value of,
Common Stock ("Other Stock-Based Awards"). The Committee has discretion to
determine the participants to whom Other Stock-Based Awards are to be made,
the times at which these awards are to be made, the size of these awards, the
form of payment, and all other conditions of these awards, including any
restrictions, deferral periods or performance requirements. The terms of the
Other Stock-Based Awards will be subject to rules and regulations as the
Committee determines.
Any award under the Stock Plan may provide that the participant has the
right to receive currently or on a deferred basis dividends or dividend
equivalents or other cash payments in addition to or in lieu of such awards,
all as the Committee determines.
Transferability
No award granted under the Stock Plan may be transferred, pledged, assigned,
or encumbered except by will, by the laws of descent and distribution, or, if
permitted by the Committee, pursuant
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to a domestic relations order, as defined in the Code. If permitted by the
Committee, stock options and limited rights granted in tandem with stock
options under the Stock Plan may also be transferred or assigned by the
grantee to immediate family members of the grantee or certain entities owned
by or for the benefit of immediate family members of the grantee.
Adjustments
If the Committee determines that any stock split, stock dividend or other
distribution (whether in the form of cash, securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
shares, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate event affects the Common
Stock such that an adjustment is appropriate in order to preserve or prevent
enlargement of the benefits intended under the Stock Plan, then the Committee
has discretion to (i) make equitable adjustments in (a) the number and kind of
shares that may be the subject of future awards under the Stock Plan and (b)
the number and kind of shares (or other securities or property) subject to
outstanding awards and the respective grant or exercise prices thereof and
(ii) if appropriate, provide for the payment of cash to a participant.
Amendment or Termination
The Stock Plan may be amended or terminated at any time by the Board of
Directors, except that no amendment may be made without stockholder approval
if such approval is necessary to comply with any tax or regulatory
requirement, including any approval that is necessary to qualify awards as
"performance-based" compensation under Section 162(m) of the Code, if deemed
advisable by the Committee.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
Generally, the grant of a stock option under the Stock Plan will not result
in any tax consequence to the participant or the Company. When an optionee
exercises a non-qualified option, the difference between the exercise price
and any higher fair market value of the Common Stock on the date of exercise
will be ordinary income to the optionee (subject to withholding) and, subject
to Section 162(m) of the Code, will generally be allowed as a deduction at
that time for federal income tax purposes to the Company.
Any gain or loss realized by an optionee on disposition of the Common Stock
acquired upon exercise of a non-qualified option will generally be capital
gain or loss to the optionee, long-term or short-term depending on the holding
period, and will not result in any additional federal income tax consequences
to the Company. The optionee's basis in the Common Stock for determining gain
or loss on the disposition will be the fair market value of the Common Stock
determined generally at the time of exercise.
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When an optionee exercises an incentive stock option while employed by the
Company or a subsidiary or within three months (one year for disability) after
termination of employment, no ordinary income will be recognized by the
optionee at that time, but the excess (if any) of the fair market value of the
Common Stock acquired upon such exercise over the option price will be an
adjustment to taxable income for purposes of the federal alternative minimum
tax applicable to individuals. If the Common Stock acquired upon exercise of
the incentive stock option is not disposed of prior to the expiration of one
year after the date of acquisition and two years after the date of grant of
the option, the excess (if any) of the sale proceeds over the aggregate option
exercise price of the Common Stock will be long-term capital gain, but the
Company will not be entitled to any tax deduction with respect to the gain.
Generally, if the Common Stock is disposed of prior to the expiration of those
periods (a "Disqualifying Disposition"), the excess of the fair market value
of the Common Stock at the time of exercise over the aggregate option exercise
price (but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be
ordinary income at the time of such Disqualifying Disposition (and the Company
will generally be entitled to a federal income tax deduction in a like
amount). Any gain realized by the optionee as the result of a Disqualifying
Disposition that exceeds the amount treated as ordinary income will be capital
in nature, long-term or short-term depending on the holding period. If an
incentive stock option is exercised more than three months (one year for
disability) after termination of employment, the federal income tax
consequences are the same as described above for non-qualified stock options.
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement. If the option is a non-qualified option, the
income recognized on exercise is added to the basis. If the option is an
incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and have not been held for the applicable holding period. This gain will be
added to the basis of the shares received in replacement of the previously
owned shares.
If the Stock Plan is approved by the stockholders at the Meeting, the
Company believes that taxable compensation arising in connection with all
stock options granted under the Stock Plan should be fully deductible to the
Company for purposes of Section 162(m) of the Code. Section 162(m) may limit
the deductibility of an executive's compensation in excess of $1,000,000 per
year.
Awards under the Stock Plan that are granted, accelerated or enhanced upon
the occurrence of a change of control may give rise, in whole or in part, to
excess parachute payments within the meaning of Section 280G of the Code to
the extent that such payments, when aggregated with other payments subject to
Section 280G, exceed the limitations contained therein. Excess parachute
payments will be nondeductible to the Company and subject the recipient of the
payments to a 20% excise tax.
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If permitted by the Committee, at any time that a participant is required to
pay to the Company the amount required to be withheld under applicable tax
laws in connection with the exercise of a stock option, the participant may
elect to have the Company withhold from the shares that the participant would
otherwise receive shares of Common Stock having a value equal to the amount to
be withheld. This election must be made prior to the date on which the amount
of tax to be withheld is determined.
The foregoing discussion summarizes the federal income tax consequences
applicable to stock options granted under the Stock Plan based on current
provisions of the Code, which are subject to change. This summary does not
cover any foreign, state or local tax consequences or participation in the
Stock Plan.
AWARDS TO BE GRANTED
The grant of awards under the Stock Plan is entirely in the discretion of
the Committee. The Committee has not yet made a determination as to the awards
to be granted under the Stock Plan, if it is approved by the stockholders.
VOTE REQUIRED FOR APPROVAL OF THE STOCK PLAN
Approval of the Stock Plan requires the affirmative vote of a majority of
the shares of Common Stock present and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
STOCK PLAN.
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EXHIBIT A
SET FORTH BELOW IS THE TEXT OF THE FM PROPERTIES INC. 1998 STOCK OPTION
PLAN, AS PROPOSED TO BE ADOPTED. IF THE CHARTER PROPOSAL IS ADOPTED BY THE
STOCKHOLDERS (SEE "APPROVAL OF THE CHARTER PROPOSAL" IN THE PROXY STATEMENT),
THE NAME "FM PROPERTIES INC." WHEREVER IT APPEARS IN THE STOCK PLAN SHALL
INSTEAD BE "STRATUS PROPERTIES INC." AS SHOWN IN BRACKETS. THE PLAN PROPOSAL
IS NOT, HOWEVER, SUBJECT TO OR CONTINGENT ON THE ADOPTION OF THE CHARTER
PROPOSAL.
FM PROPERTIES INC.
[STRATUS PROPERTIES INC.]
1998 STOCK OPTION PLAN
SECTION 1
Purpose. The purpose of the FM Properties Inc. [Stratus Properties Inc.]
1998 Stock Option Plan (the "Plan") is to motivate and reward key employees,
consultants and advisers by giving them a proprietary interest in the
Company's continued success.
SECTION 2
Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
"Award" shall mean any Option, Stock Appreciation Right, Limited Right or
Other Stock-Based Award.
"Award Agreement" shall mean any notice of grant, written agreement,
contract or other instrument or document evidencing any Award, which may, but
need not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not fewer than two directors, each of
whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-
employee director" within the meaning of Rule 16b-3 and, to the extent
necessary to comply with Section 162(m) only, is an "outside director" under
Section 162(m). Until otherwise determined by the Board, the Committee shall
be the Corporate Personnel Committee of the Board.
"Company" shall mean FM Properties Inc. [Stratus Properties Inc.]
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"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive the benefits
due the Participant under the Plan in the event of the Participant's death. In
the absence of an effective designation by the Participant, Designated
Beneficiary shall mean the Participant's estate.
"Eligible Individual" shall mean (i) any person providing services as an
officer of the Company or a Subsidiary, whether or not employed by such
entity, including any such person who is also a director of the Company, (ii)
any employee of the Company or a Subsidiary, including any director who is
also an employee of the Company or a Subsidiary, (iii) any officer or employee
of an entity with which the Company has contracted to receive executive,
management or legal services who provides services to the Company or a
Subsidiary through such arrangement, (iv) any consultant or adviser to the
Company, a Subsidiary or to an entity described in clause (iii) hereof who
provides services to the Company or a Subsidiary through such arrangement and
(v) any person who has agreed in writing to become a person described in
clauses (i), (ii), (iii) or (iv) within not more than 30 days following the
date of grant of such person's first Award under the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Incentive Stock Option" shall mean an option granted under Section 6 of the
Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
"Limited Right" shall mean any right granted under Section 8 of the Plan.
"Nonqualified Stock Option" shall mean an option granted under Section 6 of
the Plan that is not intended to be an Incentive Stock Option.
"Offer" shall mean any tender offer, exchange offer or series of purchases
or other acquisitions, or any combination of those transactions, as a result
of which any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall beneficially own more than 40% of
all classes and series of the Company's stock outstanding, taken as a whole,
that has voting rights with respect to the election of directors of the
Company (not including any series of preferred stock of the Company that has
the right to elect directors only upon the failure of the Company to pay
dividends).
"Offer Price" shall mean the highest price per Share paid in any Offer that
is in effect at any time during the period beginning on the ninetieth day
prior to the date on which a Limited Right is exercised and ending on and
including the date of exercise of such Limited Right. Any securities or
property that comprise all or a portion of the consideration paid for Shares
in the Offer shall be valued in determining the Offer Price at the higher of
(i) the valuation placed on such securities or property by the person or
persons making such Offer, or (ii) the valuation, if any, placed on such
securities or property by the Committee or the Board.
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"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Other Stock-Based Award" shall mean any right or award granted under
Section 9 of the Plan.
"Participant" shall mean any Eligible Individual granted an Award under the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission, including the staff
thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all regulations
promulgated thereunder as in effect from time to time.
"Shares" shall mean the shares of Common Stock, par value $0.01 per share,
of the Company and such other securities of the Company or a Subsidiary as the
Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right granted under Section 7 of
the Plan.
"Subsidiary" shall mean (i) any corporation or other entity in which the
Company possesses directly or indirectly equity interests representing at
least 50% of the total ordinary voting power or at least 50% of the total
value of all classes of equity interests of such corporation or other entity
and (ii) any other entity in which the Company has a direct or indirect
economic interest that is designated as a Subsidiary by the Committee.
SECTION 3
(a) Administration. The Plan shall be administered by the Committee. Subject
to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to an Eligible
Individual; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, whole Shares, other whole securities, other
Awards, other property or
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other cash amounts payable by the Company upon the exercise of that or other
Awards, or canceled, forfeited or suspended and the method or methods by which
Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other amounts payable by
the Company with respect to an Award shall be deferred either automatically or
at the election of the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan,
all designations, determinations, interpretations and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion of
the Committee, may be made at any time and shall be final, conclusive and
binding upon all Persons, including the Company, any Subsidiary, any
Participant, any holder or beneficiary of any Award, any stockholder of the
Company and any Eligible Individual.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers of the Company the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Eligible Individuals
who are not officers or directors of the Company for purposes of Section 16 of
the Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
SECTION 4
Eligibility. Any Eligible Individual shall be eligible to be granted an
Award.
SECTION 5
(a) Shares Available for Awards. Subject to adjustment as provided in Section
5(b):
(i) Calculation of Number of Shares Available.
(A) The number of Shares with respect to which Awards payable in
Shares may be granted under the Plan shall be 850,000. Awards that by
their terms may be settled only in cash shall not be counted against
the maximum number of Shares provided herein.
(B) Grants of Stock Appreciation Rights, Limited Rights and Other
Stock-Based Awards not granted in tandem with Options and payable only
in cash may relate to no more than 850,000 Shares.
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(C) Any Shares granted under the Plan that are forfeited because of
failure to meet an Award contingency or condition shall again be
available for grant pursuant to new Awards under the Plan.
(D) To the extent any Shares covered by an Award are not issued
because the Award is forfeited or cancelled or the Award is settled in
cash, such Shares shall again be available for grant pursuant to new
Awards under the Plan.
(E) To the extent that Shares are delivered to pay the exercise price
of an Option or are delivered or withheld by the Company in payment of
the withholding taxes relating to an Award, the number of Shares so
delivered or withheld shall become Shares with respect to which Awards
may be granted.
(ii) Substitute Awards. Any Shares delivered by the Company, any Shares
with respect to which Awards are made by the Company, or any Shares with
respect to which the Company becomes obligated to make Awards, through the
assumption of, or in substitution for, outstanding awards previously
granted by an acquired company or a company with which the Company
combines, shall not be counted against the Shares available for Awards
under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist of authorized and unissued Shares or of
treasury Shares, including Shares held by the Company or a Subsidiary and
Shares acquired in the open market or otherwise obtained by the Company or
a Subsidiary.
(iv) Individual Limit. Any provision of the Plan to the contrary
notwithstanding, no individual may receive in any year Awards under the
Plan, whether payable in cash or Shares, that relate to more than 250,000
Shares.
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares,
Subsidiary securities, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment is determined
by the Committee to be appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in its sole discretion and in such manner as it may
deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject
to outstanding Awards, and (iii) the grant or exercise price with respect to
any Award and, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award and, if deemed appropriate, adjust outstanding
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Awards to provide the rights contemplated by Section 9(b) hereof; provided, in
each case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would cause
the Plan to violate Section 422(b)(1) of the Code or any successor provision
thereto and, with respect to all Awards under the Plan, no such adjustment
shall be authorized to the extent that such authority would be inconsistent
with the requirements for full deductibility under Section 162(m); and
provided further, that the number of Shares subject to any Award denominated
in Shares shall always be a whole number.
SECTION 6
(a) Stock Options. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the
authority to grant Incentive Stock Options, Nonqualified Stock Options or
both. In the case of Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be required by
Section 422 of the Code, as from time to time amended, and any implementing
regulations. Except in the case of an Option granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the exercise price of any Option granted
under this Plan shall not be less than 100% of the fair market value of the
underlying Shares on the date of grant.
(b) Exercise. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter, provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of 10 years after the date of such grant. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any condition relating to the application of Federal or state
securities laws, as it may deem necessary or advisable.
(c) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by applying cash amounts payable by the
Company upon the exercise of such Option or other Awards by the holder thereof
or by exchanging whole Shares owned by such holder (which are not the subject
of any pledge or other security interest), or by a combination of the
foregoing, provided that the combined value of all cash, cash equivalents,
cash amounts so payable by the Company upon exercises of Awards and the fair
market value of any such whole Shares so tendered to the Company, valued (in
accordance with procedures established by the Committee) as of the effective
date of such exercise, is at least equal to such option price.
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SECTION 7
(a) Stock Appreciation Rights. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Eligible
Individuals to whom Stock Appreciation Rights shall be granted, the number of
Shares to be covered by each Award of Stock Appreciation Rights, the grant
price thereof and the conditions and limitations applicable to the exercise
thereof. Stock Appreciation Rights may be granted in tandem with another
Award, in addition to another Award, or freestanding and unrelated to any
other Award. Stock Appreciation Rights granted in tandem with or in addition
to an Option or other Award may be granted either at the same time as the
Option or other Award or at a later time. Stock Appreciation Rights shall not
be exercisable after the expiration of 10 years after the date of grant.
Except in the case of a Stock Appreciation Right granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the grant price of any Stock Appreciation
Right granted under this Plan shall not be less than 100% of the fair market
value of the Shares covered by such Stock Appreciation Right on the date of
grant or, in the case of a Stock Appreciation Right granted in tandem with a
then outstanding Option or other Award, on the date of grant of such related
Option or Award.
(b) A Stock Appreciation Right shall entitle the holder thereof to receive
upon exercise, for each Share to which the SAR relates, an amount equal to the
excess, if any, of the fair market value of a Share on the date of exercise of
the Stock Appreciation Right over the grant price. Any Stock Appreciation
Right shall be settled in cash, unless the Committee shall determine at the
time of grant of a Stock Appreciation Right that it shall or may be settled in
cash, Shares or a combination of cash and Shares.
SECTION 8
(a) Limited Rights. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Eligible Individuals
to whom Limited Rights shall be granted, the number of Shares to be covered by
each Award of Limited Rights, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Limited Rights may be granted
in tandem with another Award, in addition to another Award, or freestanding
and unrelated to any Award. Limited Rights granted in tandem with or in
addition to an Award may be granted either at the same time as the Award or at
a later time. Limited Rights shall not be exercisable after the expiration of
10 years after the date of grant and shall only be exercisable during a period
determined at the time of grant by the Committee beginning not earlier than
one day and ending not more than ninety days after the expiration date of an
Offer. Except in the case of a Limited Right granted in assumption of or
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the grant price of any Limited Right granted
under this Plan shall not be less than 100% of the fair market value of the
Shares covered by such Limited Right on
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the date of grant or, in the case of a Limited Right granted in tandem with a
then outstanding Option or other Award, on the date of grant of such related
Option or Award.
(b) A Limited Right shall entitle the holder thereof to receive upon
exercise, for each Share to which the Limited Right relates, an amount equal
to the excess, if any, of the Offer Price on the date of exercise of the
Limited Right over the grant price. Any Limited Right shall be settled in
cash, unless the Committee shall determine at the time of grant of a Limited
Right that it shall or may be settled in cash, Shares or a combination of cash
and Shares.
SECTION 9
(a) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Eligible Individuals an "Other Stock-Based Award", which shall consist of an
Award, the value of which is based in whole or in part on the value of Shares,
that is not an instrument or Award specified in Sections 6 through 8 of this
Plan. Other Stock-Based Awards may be awards of Shares or may be denominated
or payable in, valued in whole or in part by reference to, or otherwise based
on or related to, Shares (including, without limitation, securities
convertible or exchangeable into or exercisable for Shares), as deemed by the
Committee consistent with the purposes of the Plan. The Committee shall
determine the terms and conditions of any such Other Stock-Based Award and may
provide that such awards would be payable in whole or in part in cash. Except
in the case of an Other Stock-Based Award granted in assumption of or in
substitution for an outstanding award of a company acquired by the Company or
with which the Company combines, the price at which securities may be
purchased pursuant to any Other Stock-Based Award granted under this Plan, or
the provision, if any, of any such Award that is analogous to the purchase or
exercise price, shall not be less than 100% of the fair market value of the
securities to which such Award relates on the date of grant.
(b) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may
provide the holder thereof with dividends or dividend equivalents, payable in
cash, Shares, Subsidiary securities, other securities or other property on a
current or deferred basis.
SECTION 10
(a) Amendments to the Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any approval
necessary to qualify Awards as "performance based" compensation under Section
162(m) or any successor provision if such qualification is deemed necessary or
advisable by
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<PAGE>
the Committee. Notwithstanding anything to the contrary contained herein, the
Committee may amend the Plan in such manner as may be necessary for the Plan
to conform with local rules and regulations in any jurisdiction outside the
United States.
(b) Amendments to Awards. The Committee may amend, modify or terminate any
outstanding Award at any time prior to payment or exercise in any manner not
inconsistent with the terms of the Plan, including without limitation, to
change the date or dates as of which an Award becomes exercisable.
Notwithstanding the foregoing, no amendment, modification or termination may
impair the rights of a holder of an Award under such Award without the consent
of the holder.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 5(b) hereof) affecting the Company, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan.
(d) Cancellation. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder
to be canceled in consideration of a cash payment or alternative Award made to
the holder of such canceled Award equal in value to such canceled Award. The
determinations of value under this subparagraph shall be made by the Committee
in its sole discretion.
SECTION 11
(a) Award Agreements. Each Award hereunder shall be evidenced by a writing
delivered to the Participant that shall specify the terms and conditions
thereof and any rules applicable thereto, including but not limited to the
effect on such Award of the death, retirement or other termination of
employment of the Participant and the effect thereon, if any, of a change in
control of the Company.
(b) Withholding. (i) A Participant may be required to pay to the Company,
and the Company shall have the right to deduct from all amounts paid to a
Participant (whether under the Plan or otherwise), any taxes required by law
to be paid or withheld in respect of Awards hereunder to such Participant. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payment
of any Award.
(ii) At any time that a Participant is required to pay to the Company an
amount required to be withheld under the applicable tax laws in connection
with the issuance of shares of Common Stock under the Plan, the Participant
may, if permitted by the Committee, satisfy this obligation in whole
A-9
<PAGE>
or in part by electing (the "Election") to have the Company withhold from the
issuance shares of Common Stock having a value equal to the amount required to
be withheld. The value of the shares withheld shall be based on the fair
market value of the Common Stock on the date that the amount of tax to be
withheld shall be determined in accordance with applicable tax laws (the "Tax
Date").
(iii) Each Election must be made prior to the Tax Date. The Committee may
suspend or terminate the right to make Elections at any time.
(iv) A Participant may also satisfy his or her total tax liability related
to the Award by delivering Shares owned by the Participant. The value of the
Shares delivered shall be based on the fair market value of the Shares on the
Tax Date.
(c) Transferability. No Awards granted hereunder may be transferred,
pledged, assigned or otherwise encumbered by a Participant except: (i) by
will; (ii) by the laws of descent and distribution; (iii) pursuant to a
domestic relations order, as defined in the Code, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto; or
(iv) if permitted by the Committee and so provided in the Award Agreement or
an amendment thereto, Options and Limited Rights granted in tandem therewith
may be transferred or assigned (a) to Immediate Family Members, (b) to a
partnership in which Immediate Family Members, or entities in which Immediate
Family Members are the owners, members or beneficiaries, as appropriate, are
the partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the owners, members
or beneficiaries, as appropriate, are the members, or (d) to a trust for the
benefit of Immediate Family Members; provided, however, that no more than a de
minimus beneficial interest in a partnership, limited liability company or
trust described in (b), (c) or (d) above may be owned by a person who is not
an Immediate Family Member or by an entity that is not beneficially owned
solely by Immediate Family Members. "Immediate Family Members" shall be
defined as the spouse and natural or adopted children or grandchildren of the
Participant and their spouses. To the extent that an Incentive Stock Option is
permitted to be transferred during the lifetime of the Participant, it shall
be treated thereafter as a Nonqualified Stock Option. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of Awards, or
levy of attachment or similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The designation of a
Designated Beneficiary shall not be a violation of this Section 11(c).
(d) Share Certificates. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall
be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Shares or
other securities are then listed, and any applicable federal or state laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
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<PAGE>
(e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of
options, stock appreciation rights and other types of Awards provided for
hereunder (subject to stockholder approval of any such arrangement if approval
is required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(f) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of or as a
consultant or adviser to the Company or any Subsidiary or in the employ of or
as a consultant or adviser to any other entity providing services to the
Company. The Company or any Subsidiary or any such entity may at any time
dismiss a Participant from employment, or terminate any arrangement pursuant
to which the Participant provides services to the Company or a Subsidiary,
free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement. No Eligible
Individual or other person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of Eligible Individuals,
Participants or holders or beneficiaries of Awards.
(g) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware.
(h) Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company
pursuant to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
A-11
<PAGE>
(k) Headings. Headings are given to the subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.
SECTION 12
Term of the Plan. Subject to Section 10(a), the Plan shall remain in effect
until all Awards permitted to be granted under the Plan have either been
satisfied, expired or cancelled under the terms of the Plan and any
restrictions imposed on Shares in connection with their issuance under the
Plan have lapsed.
A-12
<PAGE>
FM PROPERTIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF
STOCKHOLDERS, MAY 14, 1998
The undersigned hereby appoints Richard C. Adkerson and William H. Armstrong,
III as proxies, with full power of substitution, to vote the shares of the
undersigned in FM Properties Inc. at the Annual Meeting of Stockholders to be
held on Thursday, May 14, 1998, at 1:30 p.m., and at any adjournment thereof,
on all matters coming before the meeting. THE PROXIES WILL VOTE: (1) AS YOU
SPECIFY ON THE BACK OF THIS CARD, (2) AS THE BOARD OF DIRECTORS RECOMMENDS
WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER LISTED ON THE BACK OF THIS CARD,
AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER.
If you wish to vote on all matters as the Board of Directors recommends,
please sign, date and return this card. If you wish to vote on items
individually, please also mark the appropriate boxes on the back of this card.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
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(continued on reverse side)
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FOLD AND DETACH HERE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Please mark
your votes as [X]
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
FOR WITHHELD FOR AGAINST ABSTAIN
ITEM 1--Election of the nominee for director. [ ] [ ] ITEM 3--Approval of the amendment [ ] [ ] [ ]
Nominee for director of FM Properties Inc. to the Certificate of
Richard C. Adkerson Incorporation.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
ITEM 2--Ratification of appointment of Arthur [ ] [ ] [ ] ITEM 4--Approval of the 1998 [ ] [ ] [ ]
Andersen LLP as independent auditors. Stock Option Plan.
SIGNATURE(S)___________________________________________________________________________________ DATED:________________ 1998
YOU MAY SPECIFY YOUR VOTES BY MARKING THE APPROPRIATE BOXES ON THIS SIDE. YOU NEED NOT MARK ANY BOXES, HOWEVER, IF YOU WISH TO
VOTE ALL ITEMS IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. IF YOUR VOTES ARE NOT SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
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</TABLE>
