SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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CARRAMERICA REALTY CORPORATION
(Name of Registrant as Specified in Its Charter)
The Board of Directors of CarrAmerica Realty Corporation
--------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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0-11.
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(2) Aggregate number of securities to which transaction applies:
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<PAGE>
CARRAMERICA REALTY CORPORATION
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 8, 1997
To our Stockholders:
The 1997 Annual Meeting of Stockholders of CarrAmerica Realty
Corporation will be held on Thursday, May 8, 1997 beginning at 10:30 a.m.,
eastern daylight savings time, at The Willard Inter-Continental Hotel, 1401
Pennsylvania Avenue, N.W., Washington, D.C. 20004. At the Meeting, stockholders
will act on the following matters:
1. Election of one director to serve for a new one-year term
and one director to serve for a new three-year term;
2. Approval of the 1997 CarrAmerica Realty Corporation Stock
Option and Incentive Plan and the grant of certain stock
options to an executive officer and a key employee of the
Company; and
3. Any other business that properly comes before the Meeting or
any adjournments thereof.
Only stockholders of record at the close of business on March 28, 1997
will be entitled to vote at the Meeting or any adjournment.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit
attendance to stockholders only. Registration will begin at 9:30 a.m., and
seating will be available at approximately 10:00 a.m. Cameras and recording
devices will not be permitted at the Meeting. "Street name" holders will need to
bring a copy of a brokerage statement reflecting stock ownership as of the
record date.
WHETHER OR NOT YOU EXPECT TO ATTEND:
Whether or not you expect to attend the Meeting, you are urged to sign
and date the enclosed proxy which is being solicited by the Board of Directors,
and return it promptly in the enclosed envelope.
By order of the Board of Directors,
/s/ Andrea F. Bradley
Andrea F. Bradley
Corporate Secretary
<PAGE>
CARRAMERICA REALTY CORPORATION
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
----------
PROXY STATEMENT
----------
This Proxy Statement contains information related to the solicitation
of proxies for use at the 1997 Annual Meeting of Stockholders (the "Meeting") of
CarrAmerica Realty Corporation, a Maryland corporation (the "Company"), to be
held on Thursday, May 8, 1997 at 10:30 a.m., eastern daylight savings time, for
the purposes set forth in the accompanying Notice of Meeting. This solicitation
is made on behalf of the board of directors of the Company (the "Board of
Directors" or the "Board"). This Proxy Statement, the form of proxy and the 1996
Annual Report to Shareholders are being mailed to stockholders beginning on or
about March 31, 1997. The principal executive offices of the Company are located
at 1700 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
Stockholders Entitled to Vote. Only stockholders of record of common
stock (the "Common Stock") of the Company at the close of business on March 28,
1997 are entitled to receive notice of the Meeting and to vote the shares of
Common Stock held by them on that date at the Meeting. The outstanding Common
Stock constitutes the only class of securities entitled to vote at the Meeting,
and each share of Common Stock entitles its holder to cast one vote on each
matter to be voted on. At the close of business on March 15, 1997, there were
48,734,335 shares of Common Stock outstanding.
Quorum. The presence at the Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on March 28,
1997, will constitute a quorum, permitting the Meeting to conduct its business.
Abstentions and broker non-votes (i.e., shares held by a broker or nominee which
are represented at the Meeting, but with respect to which such broker or nominee
is not empowered to vote on a particular proposal) will be included in the
calculation of the number of shares considered to be present at the Meeting.
Voting. If the accompanying proxy card is properly signed, returned to
the Company and not revoked, it will be voted as directed by the stockholder.
Unless contrary instructions are given, the persons designated as proxy holders
in the proxy card will vote FOR the election of all nominees for director and
FOR approval of the 1997 CarrAmerica Realty Corporation Stock Option and
Incentive Plan and the grant of certain stock options to an executive officer
and a key employee of the Company and as recommended by the Board of Directors
with regard to any other matters, or if no recommendation is given, in their own
discretion.
Revocation of a Proxy. Each stockholder may revoke a previously granted
proxy at any time before it is exercised by filing with the Secretary of the
Company a notice of revocation or a duly-executed proxy bearing a later date.
The powers of the proxy holders will be suspended if the person executing the
proxy attends the Meeting in person and so requests. Attendance at the Meeting
will not, in itself, constitute a revocation of a previously granted proxy.
<PAGE>
ELECTION OF DIRECTORS
(Item 1)
Board of Directors
The directors of the Company are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
On March 25, 1997, the Board approved a reduction in the number of members of
the Board of Directors from 12 to 9, effective as of the Meeting. As a result,
Messrs. David Bonderman, Robert O. Carr, and Anthony R. Manno, Jr., each of
whose term as a director will expire at the Meeting, will not stand for
re-election to the Board of Directors. Caroline S. McBride, who was elected by
the Board of Directors in July 1996, has been nominated for election at the
Meeting as a director to hold office until the 1998 Annual Meeting of
Stockholders and until her successor is elected and qualified. J. Marshall Peck,
whose term as a director will expire at the Meeting, has been nominated for
election at the Meeting as a director to hold office until the 2000 Annual
Meeting of Stockholders and until his successor is elected and qualified.
The Board of Directors of the Company recommends a vote FOR Caroline S.
McBride as a director to hold office until the 1998 Annual Meeting of
Stockholders and until her successor is elected and qualified and a vote FOR J.
Marshall Peck as a director to hold office until the 2000 Annual Meeting of
Stockholders and until his successor is elected and qualified. Should any one or
more of these nominees become unable to serve for any reason prior to the
Meeting, the Board of Directors may designate substitute nominees, in which
event the persons named in the enclosed proxy will vote for the election of such
substitute nominee or nominees, or may reduce the number of directors on the
Board of Directors.
Nominee for Election to Term Expiring 1998
Caroline S. McBride, 43, has been a director of the Company since July
26, 1996. Mrs. McBride was appointed to the Board in connection with the
investment by a wholly-owned subsidiary of Security Capital U.S. Realty ("US
Realty") of approximately $250 million in the Company (the "US Realty
Transaction"). Mrs. McBride is a Managing Director of Security Capital
Investment Research Incorporated, an affiliate of US Realty. From January 1993
to June 1996, Mrs. McBride was the director of private market investments for
the IBM Retirement Fund and from January 1992 to January 1995, she was the
director of real estate investments for such fund. Prior to joining the IBM
Retirement Fund in 1992, Mrs. McBride was director of finance, investments and
asset management for IBM's corporate real estate division. Mrs. McBride is on
the Boards of Directors of the Pension Real Estate Association (PREA) and the
Real Estate Research Institute. Mrs. McBride received her Masters in Business
Administration from New York University and a Bachelor of Arts degree from
Middlebury College. Mrs. McBride is a member of the Investment Committee and the
Audit Committee of the Board of Directors.
Nominee for Election to Term Expiring 2000
J. Marshall Peck, 45, has been a director of the Company since June 12,
1996. Mr. Peck was appointed to the Board in connection with the US Realty
Transaction. Mr. Peck is a Managing Director of Security Capital Investment
Research Incorporated, where he is responsible for the operations and oversight
of strategic investments. Prior to joining Security Capital Investment Research
Incorporated in May 1996, Mr. Peck was a Managing Director of LaSalle Partners
Limited since January 1989, where he served in various capacities over his
14-year tenure, with responsibility for operating groups within both the
investment and services businesses, and was a member of its management
committee. Prior thereto, Mr. Peck held various marketing and management
positions in the Data Processing Division of IBM. Mr. Peck is past Chairman of
the Pension Real Estate Association and serves on the National Real Estate
Advisory Board of the Nature Conservancy. Mr. Peck is on the Boards of Directors
of Regency Realty Corporation and Storage USA, Inc. Mr. Peck received his B.A.
degree from University of North Carolina at Chapel Hill. Mr. Peck is a member of
the Executive Committee and the Executive Compensation Committee of the Board of
Directors.
<PAGE>
Incumbent Directors -- Term Expiring 1998
Thomas A. Carr, 38, has been President and a director of the Company
since February 1993. In May 1995, Mr. Carr was also appointed the Chief
Operating Officer of the Company, at which time he resigned as the Company's
Chief Financial Officer, a position he had held since February 1993. Mr. Carr
was President of Carr Partners, Inc., a financial services affiliate of The
Oliver Carr Company ("OCCO"), the Company's predecessor, from 1991 until
February 1993, when Carr Partners, Inc. ceased operations. Prior to becoming
President of Carr Partners, Inc., Mr. Carr was Vice President of Suburban
Development and Regional Development Partner for Montgomery County for OCCO,
beginning in 1985. Mr. Carr is a director of OCCO. Mr. Carr holds a Masters
degree in Business Administration from Harvard Business School, and a Bachelor
of Arts degree from Brown University. Mr. Carr is a member of the Board of
Governors of the National Association of Real Estate Investment Trusts and a
director of Lafayette Square Partners, Inc. Mr. Carr is the son of Oliver T.
Carr, Jr. and the brother of Robert O. Carr. Mr. Carr is a member of the
Executive Committee and the Investment Committee of the Board of Directors. In
addition, Mr. Carr is a member of management's Operating Committee and
Investment Committee.
A. James Clark, 69, has been a director of the Company since February
1993. He has been Chairman of the Board and President of Clark Enterprises,
Inc., a Bethesda, Maryland-based company involved in real estate,
communications, and commercial and residential construction, since 1972. Mr.
Clark is a member of the University of Maryland Foundation, and serves on the
Board of Trustees of The Johns Hopkins University. He is also a member of the
PGA Tour Investments Policy Board and a director of Lockheed Martin Corporation
and Potomac Electric Power Company. Mr. Clark is a graduate of the University of
Maryland. Mr. Clark is a member of the Executive Committee, the Investment
Committee, the Executive Compensation Committee, and the Nominating Committee of
the Board of Directors.
Wesley S. Williams, Jr., 54, has been a director of the Company since
February 1993. Mr. Williams has been a partner of the law firm of Covington &
Burling since 1975. He was adjunct professor of real estate finance law at the
Georgetown University Law Center from 1971 to 1973 and is a contributing author
to several texts on banking law and on real estate finance and investment. Mr.
Williams is on the Editorial Advisory Board of the District of Columbia Real
Estate Reporter. Mr. Williams serves on the Boards of Directors of Blackstar
Communications, Inc. and its Florida, Michigan, and Oregon subsidiaries;
Blackstar LLC and its Nebraska and South Dakota subsidiaries; and the Federal
Reserve Bank of Richmond, Virginia. Mr. Williams is Chairman of the Boards of
Directors of Broadcast Capital, Inc. and Broadcast Capital Fund, Inc. and is
Vice Chairman of the Board of Directors of The Lockhart Companies, Incorporated.
Mr. Williams also is a member of the Executive Committee of the Board of
Trustees of Penn Mutual Life Insurance Company. Mr. Williams received a B.A. and
J.D. from Harvard University, an M.A. from the Fletcher School of Law and
Diplomacy and an L.L.M. from Columbia University. Mr. Williams is a member of
the Executive Compensation Committee of the Board of Directors.
Incumbent Directors -- Term Expiring 1999
Andrew F. Brimmer, 70, has been a director of the Company since
February 1993. He has been the President of Brimmer & Company, Inc., an economic
and financial consulting firm, since 1976. Since 1995, Dr. Brimmer has served as
chairman of the District of Columbia Financial Control Board. Dr. Brimmer was a
member of the Board of Governors of the Federal Reserve System from 1966 through
1974. He is also the Wilmer D. Barrett Professor of Economics at the University
of Massachusetts--Amherst. Dr. Brimmer serves as a director of BankAmerica
Corporation and Bank of America, BlackRock Investment Income Trust, Inc. (and
other funds), PHH Corporation, E.I. du Pont de Nemours & Company, Navistar
International Corporation, Gannett Company and Airborne Express. Dr. Brimmer
received a B.A. and a Masters degree in Economics from the University of
Washington and a Ph.D. in Economics from Harvard University. Dr. Brimmer is a
member of the Audit Committee of the Board of Directors.
<PAGE>
Oliver T. Carr, Jr., 71 has been the Chief Executive Officer and
Chairman of the Board of Directors of the Company since February 1993. Mr. Carr
founded OCCO in 1962 and since that time has been its Chairman of the Board and
a director. In addition, Mr. Carr has served as President of OCCO since February
1993. He was Chairman of the Board of Trustees of the George Washington
University until May 1995. Mr. Carr is the father of Thomas A. Carr and Robert
O. Carr. Mr. Carr is a member of the Executive Committee and the Investment
Committee of the Board of Directors.
George R. Puskar, 53, has been a director of the Company since February
1993. He has served as the Chairman and Chief Executive Officer of Equitable
Real Estate Investment Management, Inc. ("Equitable Real Estate") since 1989 and
a vice president of The Equitable Life Assurance Society of the United States
("ELAS"). Mr. Puskar joined ELAS in 1966 in its local field office in
Pittsburgh. Mr. Puskar became the President of Equitable Real Estate, a
diversified real estate organization which is a subsidiary of ELAS, in 1984. Mr.
Puskar serves as a director of Equitable Real Estate Capital Markets, Inc. and
is a member of the Boards of Directors of the International Council of Shopping
Centers, Clark Atlanta University, The Atlanta Chamber of Commerce, the Vice
Chairman and a member of the Board of Directors of the National Realty
Committee, and a member of the Advisory Board of the Wharton School's Real
Estate Center in Philadelphia. Mr. Puskar is a member of the Executive Committee
and the Nominating Committee of the Board of Directors.
William D. Sanders, 55, has been a director of the Company since May 1,
1996 following consummation of the US Realty Transaction. He is the Founder and
Chairman of Security Capital Group, an affiliate of US Realty. Mr. Sanders
retired on January 1, 1990 as chief executive officer of LaSalle Partners
Limited, a firm he founded in 1968. Mr. Sanders is on the Boards of Directors of
R.R. Donnelley & Sons Company, US Realty, Storage USA, Inc. and Regency Realty
Corporation. Mr. Sanders is a former trustee and member of the executive
committee of the University of Chicago and a former trustee fellow of Cornell
University. Mr. Sanders received his Bachelor of Science from Cornell
University. Mr. Sanders is a member of the Nominating Committee of the Board of
Directors.
Committees of the Board of Directors; Meetings
In accordance with the By-laws of the Company, the Board of Directors
has established an Executive Committee, an Investment Committee, an Audit
Committee, an Executive Compensation Committee and a Nominating Committee. The
membership of these Committees is set forth in the preceding section of this
Proxy Statement.
Executive Committee. The Executive Committee has the authority, subject
to the Company's conflict of interest policies, to acquire and dispose of real
property and the power to authorize, on behalf of the full Board of Directors,
the execution of certain contracts and agreements, including those related to
the borrowing of money by the Company. The Executive Committee met 11 times in
1996 and took action by unanimous written consent three times.
Investment Committee. The Investment Committee was established in April
1996 to approve agreements and other actions contemplated by and within the
amounts established in the budget for the Company approved by the Board of
Directors and to approve the acquisition of assets and the incurrence of
indebtedness and other matters treated as capital items which involve less than
$50 million for any single transaction or series of related transactions and, in
the aggregate, represent not more than 10% of the Company's total assets during
any fiscal quarter or that do not represent a material change from the Company's
business plan. The Investment Committee does not have authority to approve any
expenditure to or agreement with any member of the Investment Committee, any
member of the immediate family of a member of the Investment Committee, or any
entity in which any such person has a direct or indirect financial interest. The
Investment Committee met one time in 1996 and took action by unanimous consent
four times.
<PAGE>
Audit Committee. The Audit Committee, which consists of two independent
directors, was established to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plans and results of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting controls. The Audit
Committee met one time in 1996.
Executive Compensation Committee. The Executive Compensation Committee
was established to determine compensation for the Company's executive officers
and to implement the Company's option plans. The Executive Compensation
Committee met five times in 1996.
Nominating Committee. The Nominating Committee was established to
consider and make recommendations to the Board of Directors regarding the size
of the Board and nominees for election as members of the Board of Directors of
the Company. The Committee is willing to consider nominees recommended by
stockholders. Stockholders who wish to suggest qualified candidates must comply
with the advance notice provisions and other requirements of Section 3.11 of the
Company's By-laws, which are on file with the Securities and Exchange Commission
and may be obtained from the Secretary of the Company upon request. The
Nominating Committee did not meet in 1996, but took one action by unanimous
written consent.
The Board of Directors held 9 meetings during 1996 and took action by
unanimous written consent four times. Each of the following directors attended
fewer than 75% of the aggregate of the number of meetings of the Board of
Directors during the period for which he has been a member and the number of
meetings of the committees of the Board of Directors for the period for which he
served as a member of any such committees: David Bonderman; Robert O. Carr;
George R. Puskar; and William D. Sanders.
Compensation of Directors
The Company pays fees to its directors who are not officers of the
Company for their services as directors. Directors receive annual compensation
of $12,000 plus a fee of $1,000 (plus out-of-pocket expenses) for attendance (in
person or by telephone) at each meeting of the Board of Directors. Directors who
are not officers of the Company receive a fee of $500 for attendance (in person
or by telephone) at each committee meeting held on a non-board meeting day.
Pursuant to policies of ELAS, any remuneration received by a director that
represents ELAS must be paid to ELAS.
The Company has established the Non-Employee Director Stock Option Plan
for the purpose of attracting and retaining directors who are not employees of
the Company ("Non-Employee Directors"). The stock option plan provides for the
grant of options that are exercisable at fair market value of the Company's
Common Stock on the date of grant. The stock option plan was approved by the
Company's stockholders at its Annual Meeting of Stockholders on April 28, 1995,
following which each then-serving Non-Employee Director was granted options to
purchase 3,000 shares of Common Stock of the Company. Immediately following each
annual election of directors, each then serving Non-Employee Director will
receive options to purchase 5,000 shares of Common Stock. The Non-Employee
Director stock options vest over a three year period, 33 1/3% per year.
As of December 31, 1996 the Company had 150,000 shares of Common Stock
reserved for issuance under the Non-Employee Director Stock Option Plan, of
which 61,000 options were outstanding. During 1996, a total of 2,000 options
were exercised by a total of 2 directors or former directors.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange. Executive officers,
directors and greater than ten percent stockholders are required by the SEC to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based on the Company's review of the copies of such forms it has
received and based on written representations from certain reporting persons
that they were not required to file Forms 5 for the fiscal year, except as noted
below, the Company believes that its executive officers, directors and greater
than ten percent stockholders complied with all filing requirements applicable
to them with respect to transactions during 1996. Certain of the Company's
executive officers and directors failed to report on a timely basis certain
transactions, as follows: Thomas A. Carr, the transfer of partnership interests
in Carr Realty, L.P. to his children and a charitable organization; Philip L.
Hawkins and Robert G. Stuckey, the appointment as an executive officer of the
Company and the grant of Unit options under the 1993 Carr Realty Option Plan
upon commencement of each of their employment with the Company; and J. Marshall
Peck, appointment as a director of the Company and the grant of options to
purchase Common Stock under the Company's Non-Employee Director Stock Option
Plan. These transactions were reported on Forms 4 filed during 1996 after the
reporting deadline.
<PAGE>
APPROVAL OF 1997 CARRAMERICA REALTY CORPORATION
STOCK OPTION AND INCENTIVE PLAN
AND THE GRANT OF CERTAIN STOCK OPTIONS TO
AN EXECUTIVE OFFICER AND A KEY EMPLOYEE OF THE COMPANY
(Item 2)
Introduction
The Company believes that an integral part of its success is
attributable to its ability to continue to attract and retain highly-qualified
and dedicated executive officers, key employees and other persons by providing
such persons with stronger incentives to continue to serve the Company and to
expend maximum effort to improve the business results and earnings of the
Company. Upon the recommendation of the Executive Compensation Committee and
after considering the results of a review of employee compensation conducted on
behalf of the Company by an independent compensation consultant, the Board of
Directors adopted, subject to stockholder ratification, the CarrAmerica Realty
Corporation 1997 Stock Option and Incentive Plan (the "Stock Option Plan"), the
full text of which is set forth in Annex 1 to this Proxy Statement. The Stock
Option Plan is intended to provide eligible persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company. Prior to, but in contemplation of, the adoption of the Stock Option
Plan, during November 1996, in connection with the acquisition of the Peterson
Properties portfolio in suburban Atlanta, options (the "Peterson Options") to
purchase 20,000 shares of Common Stock were granted to Robert E. Peterson, the
Company's Managing Director, Southeast Region, subject to approval by the
stockholders. Prior to, but in contemplation of, the adoption of the Stock
Option Plan, in September 1996, options (the "Merriman Options") to purchase
5,000 shares of Common Stock were granted to Dwight L. Merriman, the Company's
Vice President, Market Officer for Southern California, subject to approval by
the stockholders.
Material Features of the Stock Option Plan
Types of Awards; Eligibility. The Stock Option Plan provides for the
issuance of options ("Stock Options") to purchase shares of Common Stock of the
Company, restricted stock and restricted stock units to any employee of the
Company or of any subsidiary, including Carr Realty, L.P., CarrAmerica Realty,
L.P., and CarrAmerica Realty Services, Inc., as determined by a committee of the
Board of Directors qualified to administer the Stock Option Plan (the
"Committee"). Each Stock Option may be exercised for one share of Common Stock.
Options may be non-qualified stock options or incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
Restricted stock is stock awarded to an eligible grantee, subject to
restrictions and a risk of forfeiture. Restricted stock units are units awarded
to an eligible grantee which represents a conditional right to receive a share
of Common Stock of the Company in the future. The Stock Option Plan does not
confer on any person the right to remain in the employ or service of the Company
or any subsidiary.
Awards. The maximum number of Stock Options or shares of restricted
stock which may be granted under the Stock Option Plan is 3,000,000. The maximum
number of Stock Options or shares of restricted stock that can be awarded to any
eligible grantee is 500,000 per year.
Vesting; Exercise; Price. Under the Stock Option Plan, the Committee
has authority to determine the number of Stock Options to be granted to a person
eligible under the Stock Option Plan and the terms and conditions of each grant,
including the exercise price of any Stock Option and the nature and duration of
any restriction or condition relating to the vesting, exercise, transfer or
forfeiture of a Stock Option. Each Stock Option granted under the Stock Option
Plan will expire on the tenth anniversary of the effective date of grant. Stock
Options must be exercised within 365 days of the termination of employment of
the Stock Option holder.
Amendments; Termination. The Board of Directors has the right to
terminate or suspend the Stock Option Plan. The Board of Directors may amend the
Stock Option Plan from time to time; provided
<PAGE>
that, without the approval of the Company's stockholders, the Stock Option Plan
may not be amended such that it does not comply with the Internal Revenue Code.
Federal Tax Consequences. The grant of a Stock Option is not a taxable
event for the optionee or the Company. Upon exercise of a non-qualified Stock
Option, the optionee will be deemed to receive ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the underlying share of Common Stock on the date of the exercise and the Company
will be entitled to a deduction for the amount recognized as ordinary income by
the optionee. With respect to incentive Stock Options, an optionee will not
recognize taxable income upon exercise of an incentive Stock Option, and any
gain realized upon disposition of shares received pursuant to the exercise of an
incentive Stock Option will be taxed as long-term capital gain if the optionee
holds the shares for at least two years after the date of grant and for one year
after the date of exercise and the date the stock was purchased, whichever is
later. However, the excess of the fair market value of the shares subject to an
incentive Stock Option on the exercise date over the Stock Option exercise price
will be included in the optionee's alternative minimum taxable income in the
year of exercise. If an optionee pays the exercise price of any Stock Option by
delivering shares of Common Stock, the exchange of Common Stock generally will
be treated as a non-taxable transaction.
Material Features of the Peterson Options and the Merriman Options
The Peterson Options. Prior to, but in contemplation of, the adoption
of the Stock Option Plan, as of November 1, 1996, in connection with the
acquisition of the Peterson Properties portfolio in suburban Atlanta, options to
purchase 20,000 shares of Common Stock were granted to Robert E. Peterson, the
Company's Managing Director, Southeast Region, subject to approval by the
stockholders. The Peterson Options were granted at an exercise price of $25.125
per share, with vesting of the options to occur over a five year period, 20% per
year, commencing on the first anniversary of the date of grant. Upon termination
of Mr. Peterson's employment with the Company, the Peterson Options must be
exercised, to the extent vested on the date of termination, within 90 days.
The Merriman Options. In addition, prior to, but in contemplation of,
the adoption of the Stock Option Plan, as of September 1, 1996, options to
purchase 5,000 shares of Common Stock were granted to Dwight L. Merriman, the
Company's Vice President, Market Officer for Southern California, subject to
approval by the stockholders. The Merriman Options were granted at an exercise
price of $24.00 per share, with vesting of the options to occur over a five year
period, 20% per year, commencing on the first anniversary of the date of grant.
Upon termination of Mr. Merriman's employment with the Company, the Merriman
Options must be exercised, to the extent vested on the date of termination,
within 90 days.
Recommendation of the Board of Directors "FOR" this Proposal
The Board of Directors believes that adoption of the Stock Option Plan
and approval of the Peterson Options and the Merriman Options will promote the
interests of the Company and its stockholders and enable the Company to continue
to attract, retain and reward persons important to the Company's success.
Accordingly, the Board of Directors recommends a vote FOR approval of the Stock
Option Plan and the Peterson Options and the Merriman Options. Proxies solicited
by the Board will be so voted in the absence of instructions to the contrary.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for the Chief Executive Officer and the four
most highly compensated executive officers of the Company (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------------ --------------------
` Other Annual Unit Options All Other
Year Salary ($) Bonus ($) Compensation Granted (#) (2) Compensation
---- ---------- --------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oliver T. Carr, Jr.
Chairman and 1996 $225,000 -- -- -- $8,728(6)
Chief Executive Officer 1995 $152,885(3) $67,500 -- -- $8,695(6)
1994 $125,000 -- -- 81,500 $4,806(6)
Thomas A. Carr
President and Chief 1996 $225,000 $225,000 -- -- $8,728(7)
Operating Officer 1995 $225,000 $67,500 -- -- $8,782(7)
1994 $225,000 -- -- 81,500 $9,306(7)
Brian K. Fields --
Chief Financial 1996 $185,000 $185,000 -- -- $8,728(8)
Officer 1995 $150,000 $60,000 -- -- $8,782(8)
1994 $150,000 -- -- 40,767 $9,306(8)
Philip L. Hawkins
Managing Director - 1996 $181,731(1) $210,000 $91,868(4) 20,000 $921(9)
Asset Management
Robert G. Stuckey
Managing Director - 1996 $116,731(1) $185,000 $47,055(5) 20,000 $921(10)
Acquisitions and
Development
</TABLE>
(1) Mr. Hawkins and Mr. Stuckey began their employment with the Company in
1996. The amounts set forth as "Salary" for 1996 represent actual
salary paid to such officers from their respective hire dates to
December 31, 1996. The salaries of Messrs. Philip L. Hawkins and Robert
G. Stuckey for 1996 on an annualized basis were $210,000 and $185,000,
respectively.
(2) Represents options to purchase Class A Units of limited partner
interest in Carr Realty, L.P. ("Class A Units") granted during the
period ended December 31, 1996, 1995, and 1994 respectively. Class A
Units are redeemable by the holder thereof for cash or Common Stock of
the Company, at the option of the Company.
(3) Mr. Oliver Carr's employment contract was amended by the Board of
Directors as of May 22, 1995, to increase his salary to $250,000 on an
annualized basis effective as of October 1995. Mr. Oliver Carr's
employment contract was also amended by the Board of Directors as of
May 22, 1995 to permit Mr. Oliver Carr to receive additional
compensation in such amounts and at such times as the Board of
Directors determines.
(4) Salary for 1996 for Mr. Hawkins includes $91,868 for payment by the
Company of certain employment related expenses.
(5) Salary for 1996 for Mr. Stuckey includes $47,055 for payment by the
Company of certain employment related expenses.
(6) All Other Compensation for 1996, 1995 and 1994 consists solely of
employer contributions to the Carr Realty Retirement Plan in the amount
of $7,500, $8,250 and $3,750, respectively, and life,
<PAGE>
AD&D and long-term disability insurance premiums in the amount of
$1,2128, $445 and $1,056, respectively, paid for the benefit of Mr.
Oliver Carr.
(7) All Other Compensation for 1996, 1995 and 1994 consists solely of
employer contributions to the Carr Realty Retirement Plan in the amount
of $7,500, $8,250 and $8,250, respectively, and life, AD&D and
long-term disability insurance premiums in the amount of $1,228, $532
and $1,056, respectively, paid for the benefit of Mr. Thomas Carr.
(8) All Other Compensation for 1996, 1995 and 1994 consists solely of
employer contributions to the Carr Realty Retirement Plan and Trust in
the amount of $7,500, $8,250 and $8,250, respectively, and life,
AD&D and long-term disability insurance premiums in the amount of
$1,228, $532 and $1,056, respectively, paid for the benefit of
Mr. Fields.
(9) All Other Compensation for 1996 consists solely of life, AD&D and
long-term disability insurance premiums in the amount of $921 paid for
the benefit of Mr. Hawkins.
(10) All Other Compensation for 1996 consists solely of life, AD&D and
long-term disability insurance premiums in the amount of $921 paid for
the benefit of Mr. Stuckey.
Option Plans
The Company has established two option plans for employees: the 1993
Carr Realty Option Plan which provides for the grant of options to purchase
Class A Units in Carr Realty, L.P.; and the 1997 CarrAmerica Realty Corporation
Stock Option and Incentive Plan described in Item 2 above.
1993 Carr Realty Option Plan. A total of 1,266,900 Class A Units have
been reserved for issuance under the 1993 Carr Realty Option Plan. Options
granted under the 1993 Carr Realty Option Plan generally vest 20% on each of the
first five anniversaries of the respective grant dates. On February 12, 1996,
options to acquire 20,000 Class A Units were granted to Philip L. Hawkins, the
Company's Managing Director of Asset Management. On February 26, 1996, options
to acquire 20,000 Class A Units were granted to Robert G. Stuckey, the Company's
Managing Director of Acquisitions and Development. Upon exercise of an option to
acquire Class A Units, an optionee will be deemed to receive ordinary income in
an amount equal to the difference between the exercise price and the fair market
value of the underlying Class A Unit on the date of the exercise and Carr
Realty, L.P. will be entitled to a deduction for the amount recognized as
ordinary income by the optionee. As of March 15, 1997, 941,348 options to
acquire Class A Units are outstanding under the 1993 Carr Realty Option Plan.
1997 CarrAmerica Realty Corporation Stock Option and Incentive Plan.
The material terms and conditions of the Stock Option Plan are described in Item
2 above. As of March 15, 1997, a total of 861,500 Stock Options had been granted
under the Stock Option Plan to a total of 43 executive officers and certain key
and other employees of the Company, subject to stockholder approval.
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed Annual Alternative
Rates of Stock Price to (f) and
Appreciation for Option (g): Grant
Individual Grants Term Date Value
- ------------------------------------------------------------------------------- -------------------------- ---------------
(a) (b) (c) (d) (e) (f) (g) (f)
Number of Percent of
Securities Total Options Exercise Grant
Underlying Granted to or Base Date
Options Employees in Price Expiration Present
Name/1 Granted (#)/2 Fiscal Year ($/Sh) Date 5% ($) 10% ($) Value $
- ---- ------------ ----------- ------ ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Stuckey 20,000 31% $24.75 2/26/06 $305,014 $772,965
Philip L. Hawkins 20,000 31% $24.25 2/12/06 $311,303 $788,903
</TABLE>
1/ No options were granted in 1996 to any other executive officers.
2/ Options to acquire Class A Units pursuant to 1993 Carr Realty Option Plan.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and FY-end Option Values
Number of Unexercised Securities Value of Unexercised
Shares Underlying In-the-Money
Acquired Value Options at FY-End(1) Options at FY-End(2)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Oliver T. Carr, Jr. -- -- 79,700 40,300 $535,038 $263,650
Thomas A. Carr -- -- 79,700 40,300 535,038 263,650
Brian K. Fields -- -- 39,847 20,153 267,485 399,329
Philip L. Hawkins -- -- -- 20,000 -- 100,000
Robert G. Stuckey -- -- -- 20,000 -- 90,000
</TABLE>
- ----------------------
(1) The number of unexercised options at fiscal year end is based on
the number of shares of Common Stock for which each underlying Class A
Unit of Carr Realty, L.P. would have been redeemable on that date.
(2) Based on the last reported sale price of the Common Stock on the NYSE
on December 31, 1996 of $29.25.
<PAGE>
New Plan Benefits
The table below indicates Stock Options granted to the Company's Chief
Executive Officer and the Named Executive Officers and the Company's executive
officers as a group as of March 15, 1997 under the Stock Option Plan, subject to
stockholder approval. No Stock Options under the Stock Option Plan may be
granted to Non-Employee Directors. In each case, the Stock Options were granted
effective as of February 6, 1997, vesting 20% on each of the first five
anniversaries of the date of grant at an exercise price of $29.25 per share.
These Stock Options will terminate on the tenth anniversary of the date of
grant. Upon approval of the Stock Option Plan by the stockholders at the
Meeting, these grants will be effective as of the date such grants were made.
The material features of the Stock Option Plan are described in Item 2 above.
Number of Options Granted
Name and Position Pursuant to Stock Option Plan
- ----------------- -----------------------------
Oliver T. Carr, Jr., Chairman and CEO 50,000
Thomas A. Carr, President and COO 60,000
Brian K. Fields, Chief Financial Officer 35,000
Philip L. Hawkins, Managing Director -
Asset Management 50,000
Robert G. Stuckey, Managing Director -
Acquisitions and Development 50,000
Executive Officer Group, including the
five executive officers named above
(6 persons) 295,000
Employment Contracts
None of the executive officers of the Company have an employment
contract, except for Robert E. Peterson, the Company's Managing Director,
Southeast Region. As of November 1, 1996, in connection with the acquisition of
the Peterson Properties portfolio in suburban Atlanta, the Company entered into
an employment contract with Robert E. Peterson which provides for the employment
of Mr. Peterson for two years at an annual base compensation of $190,000 and
additional cash compensation of a target bonus of $90,000 per year. Mr.
Peterson's employment contract provides for certain severance payments in the
event of disability or termination by the Company without cause or by Mr.
Peterson with cause. Mr. Peterson also entered into a Noncompetition and
Nonsolicitation Agreement with the Company restricting him from competing with
the Company during and for two years after termination or expiration of his
employment with the Company.
<PAGE>
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate SEC filings,
in whole or in part, the following Performance Graph and the Report on Executive
Compensation shall not be incorporated by reference into any such filings:
PERFORMANCE GRAPH
[GRAPHIC OMITTED]
* $100 invested on 2/09/93 in stock or on 1/31/93 in Index including
reinvestment of dividends.
Fiscal year ending December 31.
The points on the graph represent the following numbers:
Year CarrAmerica S&P 500 NAREIT Equity
---- ----------- ------- -------------
1996 178 187 181
1995 138 152 134
1994 93 111 116
1993 109 109 112
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors (the
"Committee") is comprised entirely of non-employee directors and is responsible
for recommending to the Board of Directors compensation policies applicable to
the Company's executive officers. This report addresses the Company's
compensation policies for 1996 as they affected the Chief Executive Officer, the
Named Executive Officers and the other executive officers of the Company.
Compensation Philosophy
The Committee's executive compensation policies are designed to provide
competitive compensation opportunities, to reward executives consistent with the
Company's performance, to recognize individual performance and responsibility,
to assist the Company in attracting and retaining qualified executives and, most
importantly, to underscore the importance of total stockholder return. The
Committee is committed to a compensation philosophy which rewards employees
primarily on the Company's success in attaining corporate financial objectives
and, secondarily, on the employee's success in attaining departmental and
individual financial and qualitative performance objectives. This philosophy is
based on the premise that achievement of the Company's goals results from the
coordinated efforts of all individuals working toward common objectives. The
Company strives to achieve those objectives through teamwork that is focused on
meeting the expectations of customers and stockholders.
The components of the Company's executive compensation program for 1996
were (i) an annual component consisting of base salaries and cash bonuses, and
(ii) long-term incentives. Central to the Company's executive compensation
program is the definition of detailed performance goals and financial targets.
Executive compensation is determined and administered by the Committee on the
basis of total compensation rather than as separate free-standing components. In
determining executive compensation, the Committee considers compensation
packages for executives of comparable position and responsibility in the
industry.
Annual Component
Base salaries for all Named Executive Officers, including the Chief
Executive Officer, are reviewed by the Committee on an annual basis. In
determining appropriate base salaries, the Committee considers external
competitiveness in the context of the Company's financial condition and capital
resources, the roles and responsibilities of the individual, the contributions
of the individual to the Company's business, an analysis of job requirements and
the individual's prior experience and accomplishments.
To provide additional incentive to achieve outstanding performance, the
Committee also makes cash bonus awards based on corporate and individual
performance. The compensation plan adopted by the Committee in 1996 establishes
target cash bonuses based on achievement of financial and operational goals for
the Company and, where appropriate, those activities of the Company managed by
the executive officer. The Committee has the discretion to increase the annual
bonus in any given year to take into account what it deems to be extraordinary
events.
Long-Term Incentives
The Committee believes that the financial interests of executive
officers should be aligned closely with those of stockholders through equity
ownership. The Company's long-term incentive compensation plan currently
consists of the 1993 Carr Realty Option Plan under which executive officers and
other key employees of the Company have been granted options to acquire Class A
Units in Carr Realty, L.P. ("Unit
<PAGE>
Options"). Class A Units of Carr Realty, L.P. are redeemable for Common Stock of
the Company or, at the Company's election, cash equal to the value of an equal
number of shares of Common Stock and, therefore, have a value equal to that of
the Company's Common Stock. To encourage the Company's employees to seek
long-term appreciation in the value of the Company's Common Stock, Unit Options
vest over a specified period of time, and then only if the employee remains with
the Company. Accordingly, an employee generally must remain with the Company for
a period of 5 years to enjoy the full economic benefit of a Unit Option. The
Company awarded 20,000 Unit Options each to two of the Named Executive Officers
at the time they joined the Company in 1996.
In recognition of the changes in the Company's organizational structure
during 1996, the Committee and the Board of Directors have adopted the 1997
CarrAmerica Realty Corporation Stock Option and Incentive Plan (the "Stock
Option Plan") which provides for the grant of options to purchase shares of
Common Stock of the Company to executive officers and a broad-based group of the
Company's employees. The Committee expects that future grants of long-term
incentives to the Company's executives will be made pursuant to the Stock Option
Plan. The Stock Option Plan is being presented to the Company's stockholders for
approval at the Meeting and, accordingly, is described in detail in Item 2
above. The Committee urges stockholders to approve the Stock Option Plan.
Chief Executive Officer Compensation
The salary and long-term incentive awards of Mr. Oliver T. Carr, Jr.
are determined substantially in conformity with the policies described above for
all other executive officers of the Company. The base salary of Mr. Oliver T.
Carr, Jr. for 1996 was based on the terms of his employment agreement with the
Company, as amended. Mr. Carr was not granted any Unit Options during 1996. Mr.
Carr did not receive an annual cash bonus for 1996.
David Bonderman
A. James Clark
J. Marshall Peck
Wesley S. Williams, Jr.
EXECUTIVE COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Executive Compensation Committee is an
employee of the Company.
A. James Clark. As described below, A. James Clark, who is a member of
the Executive Compensation Committee, owns interests in certain entities that,
during 1996, were parties to certain transactions involving the Company.
Carr Real Estate Services, Inc. provides management and leasing
services to properties owned by partnerships in which A. James Clark and/or
Clark Enterprises, Inc. have interests. Carr Services, Inc. received revenue of
$.5 million for 1996 from partnerships in which A. James Clark and/or Clark
Enterprises, Inc. have interests.
Wholly-owned subsidiaries of Clark Enterprises, Inc. have provided
construction services to the Company. In connection with these services, the
subsidiaries received payments from the Company of $1.3 million for 1996,
excluding payments described in the next paragraph. These amounts included
amounts paid by these subsidiaries for materials and to sub-contractors.
<PAGE>
On September 26, 1994, the Company and Cousins Properties Incorporated
entered into a joint venture ("CC-JM II Associates") to develop and own a new
office building to be located in McLean, Virginia. Mr. Clark was a limited
partner in the partnership which sold the land to CC-JM II Associates for a
purchase price of $2.1 million. A wholly-owned subsidiary of Clark Enterprises,
Inc. provided construction services to the joint venture pursuant to an $18
million contract and, for the year ended December 31, 1996 received payments
from the Company, including change orders, of $1.8 million.
J. Marshall Peck. As described below, J. Marshall Peck, who is a member
of the Executive Compensation Committee, is a Managing Director of Security
Capital Investment Research Incorporated, which, as described below, during
1996, was a party to certain transactions involving the Company.
During 1996, payments of $1.1 million were made to Security Capital
Investment Research Incorporated, an affiliate of US Realty, for services
rendered in connection with the acquisition of operating and development
properties.
The Company paid Security Capital Markets Group, Inc., an affiliate of
US Realty, a placement fee of $.4 million in 1996 for services rendered in
connection with the sale of 1,740,000 shares of Series A Cumulative Convertible
Redeemable Preferred Stock issued in October 1996.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of March 15, 1997 for (1) each person
known by the Company to be holding more than 5% of the outstanding Common Stock,
(2) each director and nominee of the Company and each Named Executive Officer,
and (3) the directors and executive officers of the Company as a group. Unless
otherwise indicated in the footnotes, all such interests are owned directly, and
the indicated person or entity has sole voting and investment power. The number
of shares reported as beneficially owned by a person represents the number of
shares of Common Stock the person holds (including shares of Common Stock that
may be issued upon exercise of options that are exercisable within 60 days of
March 15, 1997) plus the number of shares into which Class A Units of Carr
Realty, L.P. held by the person (including Class A Units of Carr Realty, L.P.
that may be issued upon the exercise of options that are exercisable within 60
days of March 15, 1997) are redeemable (if the Company elects to issue shares
rather than pay cash upon such redemption). For purposes of the following table,
the number of shares of Common Stock and Class A Units deemed outstanding
includes 48,734,335 shares of Common Stock, 4,561,284 Class A Units of Carr
Realty, L.P., 901,270 Units of CarrAmerica Realty, L.P. and 309,700 Class A
Units and 11,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of March 15, 1997. The extent to which a person holds
shares of Common Stock, as opposed to Class A Units of Carr Realty, L.P. or
CarrAmerica Realty, L.P. or options to purchase Class A Units of Carr Realty,
L.P. or Common Stock which are exercisable within 60 days of March 15, 1997, is
set forth in the footnotes.
<TABLE>
<CAPTION>
Percent Percent of
Number and Address Number of Shares/Units of All all Shares/
of Beneficial Owner Beneficially Owned Shares(1) Units(2)
- ------------------- ------------------ --------- --------
<S> <C> <C> <C>
Security Capital U.S. Realty
Security Capital Holdings S. A. (3)............ 19,993,877 41.0% 36.9%
69, route d'Esch
L-2953 Luxembourg
Oliver T. Carr, Jr. (4)........................ 1,571,303 3.2% 2.9%
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
A. James Clark (5)............................. 930,575 1.9% 1.7%
Clark Enterprises, Inc.
7500 Old Georgetown Road
Bethesda, MD 20814
Thomas A. Carr (6)............................. 128,422 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
<PAGE>
<CAPTION>
Percent Percent of
Number and Address Number of Shares/Units of All all Shares/
of Beneficial Owner Beneficially Owned Shares(1) Units(2)
- ------------------- ------------------ --------- --------
<S> <C> <C> <C>
Andrew F. Brimmer (7).......................... 2,000
Brimmer & Company
4400 MacArthur Boulevard, N.W.
Washington, D.C. 20007
David Bonderman (8)............................ 39,083 * *
Texas Pacific Group, Inc.
201 Main Street
Fort Worth, Texas 76102
William D. Sanders (9)......................... 1,000 * *
Security Capital Group
7777 Market Center Avenue
El Paso, Texas 79122
J. Marshall Peck (10).......................... 0 * *
Security Capital Investment Research Incorporated
11 South LaSalle Street
Chicago, IL 60603
Philip L. Hawkins (11)......................... 9,000 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Anthony R. Manno, Jr. (12)..................... 11,000 * *
Security Capital Investment Research Incorporated
11 South LaSalle Street
Chicago, Illinois 60603
Robert O. Carr (13)............................ 82,619 * *
Carr Real Estate Services, Inc.
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Brian K. Fields (14)........................... 57,534 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
George R. Puskar (15).......................... 12,000 * *
Equitable Real Estate Management, Inc.
1150 Lake Hearn Drive, N.E.
Suite 400
Atlanta, GA 30342
<PAGE>
<CAPTION>
Percent Percent of
Number and Address Number of Shares/Units of All all Shares/
of Beneficial Owner Beneficially Owned Shares(1) Units(2)
- ------------------- ------------------ --------- --------
<S> <C> <C> <C>
Robert G. Stuckey (16)......................... 4,000 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, DC 20007
Wesley S. Williams, Jr. (17)................... 2,200 * *
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044
Caroline S. McBride (18)....................... 0 * *
Security Capital Investment Research Incorporated
399 Park Avenue, 23rd Floor
New York, New York 10022
- ---------------------------------------------------
All executive officers and directors as a group 2,850,736 5.6% 5.2%
(16 persons)
</TABLE>
- ---------------------------------------------------
*Less than 1.0%
(1) Assumes that all Class A Units of Carr Realty, L.P., held by the person,
if any, (including Class A Units of Carr Realty, L. P. issuable to such
person upon exercise of options which are exercisable within 60 days of
March 15, 1997), are redeemed for shares of Common Stock. The total
number of shares outstanding used in calculating this percentage
includes all currently issued and outstanding shares of Common Stock
plus shares of Common Stock issuable upon redemption of all Class A
Units beneficially owned by the person (including Class A Units issuable
to such person upon exercise of options which are exercisable within 60
days of March 15, 1997), but assumes that none of the Class A Units held
by other persons are redeemed for shares of Common Stock.
(2) Assumes that all Class A Units held by the person (including Class A
Units issuable to such person upon exercise of options which are
exercisable within 60 days of March 15, 1997) are redeemed for shares of
Common Stock. The total number of shares outstanding used in calculating
this percentage includes all currently issued and outstanding shares of
Common Stock and assumes that all of the Class A Units held by other
persons (including Class A Units issuable to such person upon exercise
of options which are exercisable within 60 days of March 15, 1997) are
redeemed for shares of Common Stock.
(3) Security Capital Holdings S.A., a wholly-owned subsidiary of US
Realty, holds all of its interest in shares of Common Stock. Security
Capital Holdings S.A. also owns 520,000 shares of the Company's Series
A Cumulative Convertible Redeemable Preferred Stock.
(4) The aggregate amount of shares of Common Stock beneficially owned by Mr.
Oliver T. Carr, Jr. consists of 69,005 shares of Common Stock and
284,672 Class A Units owned directly by him, and 10,000 shares of Common
Stock and 150,000 Class A Units owned by his spouse, 7,565 shares of
Common Stock owned by Mr. and Mrs. Carr as joint tenants, 2,040 shares
held by their children, 954,061 shares of Common Stock and Class A Units
owned by OCCO, of which Mr. Carr is a director, chairman of the board,
president and trustee of the majority stockholder, and Mr. Carr's
options to purchase 96,000 Class A Units which are exercisable within 60
days of March 15, 1997. Of the amount shown, Mr. Carr and OCCO hold
978,010 Class A Units and 497,293 shares of Common Stock. Mr. Carr
disclaims beneficial ownership of the 2,040 shares held in an
irrevocable trust for the benefit of his minor children.
<PAGE>
(5) The aggregate amount of shares of Common Stock beneficially owned by Mr.
A. James Clark consists of 1,000 shares of Common Stock and 358,596
Class A Units owned directly by him and 569,979 Class A Units owned by
Clark Enterprises, Inc., of which Mr. Clark is chairman, president, a
director and the majority stockholder. Mr. Clark has options to purchase
1,000 shares of Common Stock which are exercisable within 60 days of
March 15, 1997.
(6) Mr. Thomas A. Carr is a director of OCCO. Mr. Carr disclaims beneficial
ownership of the shares of Common Stock and Class A Units held by OCCO.
Mr. Carr holds 29,515 Class A Units directly and 2,907 Class A Units are
held by his children. Mr. Carr has options to purchase 96,000 Class A
Units which are exercisable within 60 days of March 15, 1997.
(7) Dr. Brimmer has options to purchase 2,000 shares of Common Stock of the
Company which are exercisable within 60 days of March 15, 1997.
(8) The aggregate amount of shares of Common Stock beneficially owned by Mr.
Bonderman consists of 22,176 Class A Units owned directly by him, 5,000
Class A Units owned by Group Management, Inc., of which Mr. Bonderman is
the controlling person, 8,084 shares of Common Stock owned directly by
Mr. Bonderman and 1,823 shares of Common Stock owned by Group
Management, Inc. Mr. Bonderman has options to purchase 2,000 shares of
Common Stock of the Company which are exercisable within 60 days of
March 15, 1997. Mr. Bonderman, whose term as a director expires at the
Meeting, is not standing for re-election to the Board of Directors.
(9) Mr. Sanders is a director of Security Capital Group, an affiliate of
Security Capital Holdings S.A., a wholly-owned subsidiary of US Realty,
but disclaims beneficial ownership of the shares held by Security
Capital Holdings, S.A. Mr. Sanders has options to purchase 1,000 shares
of common Stock of the Company which are exercisable within 60 days of
March 15,1997.
(10) Mr. Peck is an officer of Security Capital Investment Research
Incorporated, an affiliate of Security Capital Holdings, S.A., a
wholly-owned subsidiary of US Realty, but disclaims beneficial
ownership of the shares held by Security Capital Holdings, S. A.
(11) Mr. Hawkins holds 5,000 shares of Common Stock and has options to
purchase 4,000 Class A Units which are exercisable within 60 days of
March 15, 1997.
(12) Mr. Manno is an officer of Security Capital Investment Research
Incorporated, an affiliate of Security Capital Holdings, S.A., a
wholly-owned subsidiary of Security Capital US Realty, but disclaims
beneficial ownership of the shares held by Security Capital Holdings,
S.A. Mr. Manno holds 10,000 shares of Common Stock directly and has
options to purchase 1,000 shares of Common Stock. Mr. Manno, whose term
as a director expires at the Meeting, is not standing for re-election
to the Board of Directors.
(13) Mr. Robert O. Carr is a director of OCCO. Mr. Carr disclaims beneficial
ownership of the shares of Common Stock and Class A Units held by OCCO.
Mr. Carr holds 14,083 shares of Common Stock, 6,836 Class A Units and
has options to purchase 61,700 Class A Units which are exercisable
within 60 days of March 15, 1997. Mr. Carr, whose term expires at the
Meeting, is not standing for re-election to the Board of Directors.
(14) Mr. Fields holds 9,534 shares of Common Stock and has options to
purchase 48,000 Class A Units which are exercisable within 60 days of
March 15, 1997.
(15) Mr. Puskar holds all of his interest in the Company in shares of Common
Stock. The aggregate amount of shares of Common Stock beneficially owned
by Mr. Puskar consists of 5,500 shares of Common Stock owned directly by
him, 4,500 shares of Common Stock owned by his spouse and options to
purchase 2,000 shares of Common Stock of the Company which are
exercisable within 60 days of March 15, 1997.
(16) Mr. Stuckey has options to purchase 4,000 Class A Units which are
exercisable within 60 days of March 15, 1997.
(17) Mr. Williams holds all of his interest in the Company in shares of
Common Stock. Mr. Williams owns 200 shares of Common Stock and has
options to purchase 2,000 shares of Common Stock of the Company which
are exercisable within 60 days of March 15, 1997.
<PAGE>
(18) Mrs. McBride is an officer of Security Capital Investment Research
Incorporated, an affiliate of Security Capital Holdings, S.A., a
wholly-owned subsidiary of US Realty, but disclaims beneficial
ownership of the shares held by Security Capital Holdings, S.A.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OCCO and Oliver T. Carr, Jr.
CarrPark, Inc., a subsidiary of OCCO, a stockholder of the Company
whose chairman, president and trustee of the majority stockholder is Oliver T.
Carr. Jr., manages certain of the parking garages in the Company's properties
for fees ranging from 24 to 62 percent of gross receipts from garage operations.
CarrPark, Inc. is responsible for payment of all garage operating expenses. Fees
paid by the Company to CarrPark, Inc. for 1996 totaled $1.9 million.
The Company leases office space from a partnership affiliated with
OCCO. Rent expense amounted to $1.1 million in 1996 under the lease. Future
minimum payments under the lease are $.9 million in 1997 and $.4 million in
1998.
Carr Development and Construction was a division of OCCO until April
30, 1996 when the Company acquired it for $1.75 million. Carr Development and
Construction was the development manager of 1717 Pennsylvania Avenue during 1995
and a portion of 1996. OCCO earned fees of $.2 million in 1996.
Carr Real Estate Services, Inc. provides management and leasing
services to properties owned by partnerships in which OCCO and/or Oliver T.
Carr, Jr. (as well as A. James Clark and ELAS in some circumstances) have
interests. Management fees are generally equal to 2% to 3% of collected revenue
from the managed property, and leasing fees are generally equal to 1.5% to 2% of
the rent payable over the life of the lease. Carr Real Estate Services, Inc.
received revenue from these affiliated partnerships of $6.9 million for 1996.
Oliver T. Carr, Jr., as beneficial owner of the majority of shares of
OCCO, also has an indirect material interest in the transactions involving OCCO
described above.
Clark Enterprises, Inc. and A. James Clark
A wholly-owned subsidiary of Clark Enterprises, Inc., a Unitholder of
Carr Realty, L.P., has provided construction management services to the Company.
In connection with these services, the Company paid $1.3 million in 1996.
Additionally, a wholly-owned subsidiary of Clark Enterprises, Inc. received a
total of $19.6 million during the years of 1996, 1995 and 1994 under a
construction contract for the Booz-Allen & Hamilton Building (in which the
Company is a 50% joint venturer).
The Equitable Life Assurance Society of the United States
The Equitable Life Assurance Society of the United States ("ELAS"), an
affiliate of an entity of which one of the Company's directors serves as an
officer and director, leases approximately 10,000 square feet of office space
from the Company. Rent of $.3 million was received by the Company in 1996.
Carr Real Estate Services, Inc. provides management and leasing
services to properties owned by partnerships in which ELAS has interests. In
addition to revenue received from partnerships in which OCCO also has an
interest (as described above), Carr Real Estate Services, Inc. received revenue
of $.6 million for 1996 from partnerships in which ELAS has an interest.
<PAGE>
Security Capital Affiliates
The Company paid Security Capital Markets Group, an affiliate of US
Realty, a placement fee of $.4 million in 1996 for services rendered in
connection with the sale of 1,740,000 shares of Series A Preferred Stock issued
in October 1996.
During 1996, payments of $1.1 million were made to Security Capital
Investment Research Incorporated, an affiliate of US Realty, for services
rendered in connection with the acquisition of operating and development
properties.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, who has served as independent auditors of the
Company for the fiscal year ended December 31, 1996, will have representatives
present at the Meeting, will have the opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
OTHER MATTERS
The Company's management knows of no other matters which may be
presented for consideration at the Meeting. However, if any other matters
properly come before the Meeting, it is the intention of the persons named in
the proxy to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders to be presented at the 1998 Annual Meeting
must be received by the Secretary of the Company prior to December 1, 1997 to be
considered for inclusion in the proxy material. In addition, any stockholder who
wishes to propose a nominee to the Board of Directors or submit any other matter
to a vote at a meeting of stockholders (other than a stockholder proposal
included in the Company's proxy materials pursuant to Rule 14a-8 of the rules
promulgated under the Securities Exchange Act of 1934, as amended), must comply
with the advance notice provisions and other requirements of Section 3.11 of the
Company's By-laws, which are on file with the Securities and Exchange Commission
and may be obtained from the Secretary of the Company upon request.
VOTING PROCEDURES AND
COSTS OF PROXY SOLICITATION
The affirmative vote of a plurality of the votes cast at the Meeting
will be required for the election of directors. A properly executed proxy marked
"Withhold Authority" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum.
Accordingly, abstentions or broker non-votes as to the election of directors
will not affect the election of the candidates receiving the most votes. For
each other item to be acted upon at the Meeting, the affirmative vote of the
holders of a majority of the shares represented in person or by proxy and
entitled to vote on the item will be required for approval. A properly executed
proxy marked "Abstain" with respect to any such matter will not be voted,
although it will be counted for purposes of determining whether there is a
quorum. Accordingly, an abstention on such other proposals will have the effect
of a vote against the matter in question. Broker non-votes, however, will be
treated as unvoted for purposes of determining approval of such proposals and
will not be counted as votes for or against such proposal.
<PAGE>
The Company pays for preparing, assembling, and mailing the proxy
materials. The Company will, upon request, reimburse brokerage firms and others
for their reasonable expenses in forwarding proxy materials to the beneficial
owners of the Company's Common Stock.
Your vote is important. Please complete the enclosed proxy card and
mail it in the enclosed postage-paid envelope as soon as possible.
By Order of the Board of Directors,
/s/ Oliver T. Carr, Jr.
Oliver T. Carr, Jr.
Chairman of the Board
March 26, 1997
<PAGE>
Annex 1
CARRAMERICA REALTY CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
CarrAmerica Realty Corporation, a Maryland corporation (the "Company"),
sets forth herein the terms of its 1997 Stock Option and Incentive Plan (the
"Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and
retain highly qualified officers, key employees, and other persons to advance
the interests of the Company by providing such persons with stronger incentives
to continue to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company. The Plan is intended to accomplish this objective by providing to
eligible persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock and restricted
stock units in accordance with the terms hereof. Stock options granted under the
Plan may be non-qualified stock options or incentive stock options, as provided
herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of Regulation C
under the Securities Act (as defined herein).
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 14
hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and until
such time as the Board shall determine otherwise, the Committee shall be the
Executive Compensation Committee of the Board.
2.7 "Company" means CarrAmerica Realty Corporation.
<PAGE>
2.8 "Effective Date" means March 25, 1997, the date on which the Plan
was adopted by the Board.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock, determined
as follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the Nasdaq National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Committee in good
faith.
2.11 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
2.12 "Grant Date" means the date as of which the Committee approves a
Grant.
2.13 "Grantee" means a person who receives or holds an Option,
Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as set forth in Section 11 hereof.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18 "Other Agreement" shall have the meaning set forth in Section 13
hereof.
2.19 "Plan" means the CarrAmerica Realty Corporation 1997 Stock Option
and Incentive Plan.
2.20 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.21 "Restricted Period" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 12.2 hereof.
2.22 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 12 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.23 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant
to Section 12 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.24 "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.25 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Committee pursuant to
Section 6 hereof.
<PAGE>
2.26 "Stock" means the common stock, par value $0.01 per share, of the
Company.
2.27 "Subsidiary" means Carr Realty, L.P., CarrAmerica Realty, L.P.,
CarrAmerica Realty Services, Inc., CarrAmerica Realty LP Holdings, Inc.,
CarrAmerica Realty GP Holdings, Inc. and any "subsidiary corporation" of the
Company within the meaning of Section 425(f) of the Code.
2.28 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 11.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Committee. The Board
may remove members, add members, and fill vacancies on the Committee from time
to time, all in accordance with the Company's articles of incorporation and
by-laws and applicable law; provided, however, that each member of the Committee
shall at all times qualify in all respects as a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act or any successor rule or
regulation. Notwithstanding the foregoing, to the extent that shares of Stock
are then available for grant and issuance under the Plan, the President of the
Company, acting on behalf of the Board of Directors, shall have the authority to
grant to employees of or consultants to the Company options to purchase such
number of shares of Stock as determined by the Committee from time to time, at
such times and on such terms as are set forth in or determined pursuant to the
Plan.
3.2 Plenary Authority of the Committee. The Committee shall have such
powers and authorities related to the administration of the Plan as are
consistent with the Company's articles of incorporation and by-laws and
applicable law. The Committee shall have full power and authority to take all
actions and to make all determinations required or provided for under the Plan,
any Grant or any Award Agreement, and shall have full power and authority to
take all such other actions and determinations not inconsistent with the
specific terms and provisions of the Plan that the Committee deems to be
necessary or appropriate to the administration of the Plan, any Grant or any
Award Agreement. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Committee present at a meeting or by
unanimous consent of the Committee executed in writing in accordance with the
Company's articles of incorporation and by-laws and applicable law. The
interpretation and construction by the Committee of any provision of the Plan,
any Grant or any Award Agreement shall be final and conclusive.
3.3 Grants. Subject to the other terms and conditions of the Plan, the
Committee shall have full and final authority (i) to designate Grantees, (ii) to
determine the type or types of Grant to be made to a Grantee, (iii) to determine
the number of shares of Stock to be subject to a Grant, (iv) to establish the
terms and conditions of each Grant (including, but not limited to, the exercise
price of any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing a Grant, and (vi)
to amend, modify, or supplement the terms of any outstanding Grant. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Grant, the Committee shall have the
right, at its discretion, to require Grantees to return to the Company Grants
previously awarded under the Plan. Subject to the terms and conditions of the
Plan, any such new Grant shall be upon such terms and conditions as are
specified by the Committee at the time the new Grant is made.
3.4 No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
3.5 Applicability of Rule 16b-3. Those provisions of the Plan that make
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
<PAGE>
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 16 hereof, the number of
shares of Stock available for issuance under the Plan shall be 3,000,000. Stock
issued or to be issued under the Plan shall be authorized but unissued shares.
If any shares covered by a Grant are not purchased or are forfeited, or if a
Grant otherwise terminates without delivery of any Stock subject thereto, then
the number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to the extent of any
such forfeiture or termination, again be available for making Grants under the
Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective
Date, subject to approval of the Plan within one year of the Effective Date, by
a majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan has no termination date; however, no Incentive Stock
Option may be granted on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of
Incentive Stock Options) may be made under the Plan to any employee of the
Company or of any Subsidiary, including any such employee who is an officer or
director of the Company or of any Subsidiary, as the Committee shall determine
and designate from time to time.
6.2 Successive Grants. An eligible person may receive more than one
Grant, subject to such restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1 Limitation on Shares of Stock Subject to Grants. The maximum number
of shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 6 hereof is 500,000 per year. The
maximum number of shares of Restricted Stock that can be awarded under the Plan
(including for this purpose any shares of Stock represented by Restricted Stock
Units) to any person eligible for a Grant under Section 6 hereof is 500,000 per
year.
7.2 Limitations on Incentive Stock Options. An Option shall constitute
an Incentive Stock Option only (i) if the Grantee of such Option is an employee
of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by taking
Options into account in the order in which they were granted.
<PAGE>
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Committee shall from time to time determine. Award Agreements
granted from time to time or at the same time need not contain similar
provisions but shall be consistent with the terms of the Plan. Each Award
Agreement evidencing a Grant of Options shall specify whether such Options are
intended to be non-qualified stock options or Incentive Stock Options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Committee and
stated in the Award Agreement evidencing such Option. The Option Price shall be
the aggregate Fair Market Value on the Grant Date of the shares of Stock subject
to the Option or such other price as the Committee, in its discretion, shall
determine; provided, however, that in the event that a Grantee would otherwise
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of a share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 Vesting and Option Period. Subject to Section 10.2 hereof, each
Option granted under the Plan shall become exercisable at such times and under
such conditions as shall be determined by the Committee and stated in the Award
Agreement. For purposes of this Section 10.1, fractional numbers of shares of
Stock subject to an Option shall be rounded down to the next nearest whole
number. The period during which any Option shall be exercisable shall constitute
the "Option Period" with respect to such Option.
10.2 Term. Each Option granted under the Plan shall terminate, and all
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of ten years from the date such Option is granted, or under such circumstances
and on such date prior thereto as is set forth in the Plan or as may be fixed by
the Committee and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3 Acceleration. Any limitation on the exercise of an Option contained
in any Award Agreement may be rescinded, modified or waived by the Committee, in
its sole discretion, at any time and from time to time after the Grant Date of
such Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in Section 5.1 hereof.
10.4 Termination of Employment or Other Relationship. Upon the
termination of a Grantee's employment with the Company other than by reason of
death or "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code), any Option or portion thereof held by such Grantee that
has not vested in accordance with the provisions of Section 10.1 hereof shall
terminate immediately, and any Option or portion thereof that has vested in
accordance with the provisions of Section 10.1 hereof but has not been exercised
shall terminate at the close of business on the 365th day following the
Grantee's termination of employment, unless the Committee, in its discretion,
extends the period during which the Option may be exercised (which period may
not be extended beyond the original term of the Option). Upon termination of an
Option or portion thereof, the Grantee shall have no further right to purchase
shares of Stock pursuant to such Option or portion thereof. Whether a leave of
absence or leave on military or government service shall constitute a
termination of employment for purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive. For purposes of
the Plan, a
<PAGE>
termination of employment, service or other relationship shall not be deemed
to occur if the Grantee is immediately thereafter a director of the Company.
10.5 Rights in the Event of Death. If a Grantee dies while employed by
the Company, all Options granted to such Grantee shall fully vest on the date of
death, and the executors or administrators or legatees or distributees of such
Grantee's estate shall have the right, at any time within one year after the
date of such Grantee's death (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period) and
prior to termination of the Option pursuant to Section 10.2 above, to exercise
any Option held by such Grantee at the date of such Grantee's death.
10.6 Rights in the Event of Disability. If a Grantee terminates
employment with the Company by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period),
subject to earlier termination of the Option as provided in Section 10.2 above.
Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
10.7 Limitations on Exercise of Option. Notwithstanding any other
provision of the Plan, in no event may any Option be exercised, in whole or in
part, prior to the date the Plan is approved by the shareholders of the Company
as provided herein, or after ten years following the date upon which the Option
is granted, or after the occurrence of an event referred to in Section 16 hereof
which results in termination of the Option.
10.8 Method of Exercise. An Option that is exercisable may be exercised
by the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Committee. Such notice shall specify the number of shares of Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of (i)
100 shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the shares purchased pursuant
to the exercise of an Option shall be made (i) in cash or in cash equivalents;
(ii) through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
by a combination of the methods described in (i) and (ii). The Committee may
provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a shareholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock ) until the shares of
Stock covered thereby are fully paid and issued to him. Except as provided in
Section 16 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such issuance.
10.9 Delivery of Stock Certificates. Promptly after the exercise of an
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
<PAGE>
11. TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during a Grantee's
lifetime, be exercisable only by the Grantee or his or her permitted
transferees, and neither the Option nor any right thereunder shall be
transferable by the Grantee, by operation of law or otherwise, other than as may
be provided in the Award Agreement evidencing such Option or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
12. RESTRICTED STOCK
12.1 Grant of Restricted Stock or Restricted Stock Units. The Committee
may from time to time grant Restricted Stock or Restricted Stock Units to
persons eligible to receive Grants under Section 6 hereof, subject to such
restrictions, conditions and other terms as the Committee may determine.
12.2 Restrictions. At the time a Grant of Restricted Stock or Restricted
Stock Units is made, the Committee shall establish a period of time (the
"Restricted Period") applicable to such Restricted Stock or Restricted Stock
Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject
to a different Restricted Period. The Committee may, in its sole discretion, at
the time a Grant of Restricted Stock or Restricted Stock Units is made,
prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units. Such performance objectives shall be
established in writing by the Committee prior to the ninetieth day of the year
in which the Grant is made and while the outcome is substantially uncertain.
Performance objectives shall be based on Stock price, market share, sales,
earnings per share, return on equity or costs. Performance objectives may
include positive results, maintaining the status quo or limiting economic
losses. Subject to the second sentence of this Section 12.2, the Committee also
may, in its sole discretion, shorten or terminate the Restricted Period or waive
any other restrictions applicable to all or a portion of the Restricted Stock or
Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Stock
or Restricted Stock Units.
12.3 Restricted Stock Certificates. The Company shall issue, in the name
of each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date. The Secretary
of the Company shall hold such certificates for the Grantee's benefit until such
time as the Restricted Stock is forfeited to the Company, or the restrictions
lapse.
12.4 Rights of Holders of Restricted Stock. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock shall have
the right to vote such Stock and the right to receive any dividends declared or
paid with respect to such Stock. The Committee may provide that any dividends
paid on Restricted Stock must be reinvested in shares of Stock, which may or may
not be subject to the same vesting conditions and restrictions applicable to
such Restricted Stock. All distributions, if any, received by a Grantee with
respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the
restrictions applicable to the original Grant.
12.5 Rights of Holders of Restricted Stock Units. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Committee may provide
in an Award Agreement evidencing a Grant of Restricted Stock Units that the
holder of such Restricted Stock Units shall be entitled to receive, upon the
Company's payment of a cash dividend on its outstanding Stock, a cash payment
for each Restricted Stock Unit held equal to the per-share dividend paid on the
Stock. Such Award Agreement may also provide that such cash payment will be
deemed reinvested in additional Restricted Stock Units at a price per unit equal
to the Fair Market Value of a share of Stock on the date that such dividend is
paid.
<PAGE>
12.6 Termination of Employment. Upon the termination of a Grantee's
employment with the Company other than by reason of death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code), any
Restricted Stock or Restricted Stock Units held by such Grantee that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Committee, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock or
Restricted Stock Units, the Grantee shall have no further rights with respect to
such Grant, including but not limited to any right to vote Restricted Stock or
any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or
government service shall constitute a termination of employment for purposes of
the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter a director of the Company.
12.7 Rights in the Event of Death. If a Grantee dies while employed by
the Company, all Restricted Stock or Restricted Stock Units granted to such
Grantee shall fully vest on the date of death, and the shares of Stock
represented thereby shall be deliverable in accordance with the terms of the
Plan to the executors, administrators, legatees or distributees of the Grantee's
estate.
12.8 Rights in the Event of Disability. If a Grantee terminates
employment with the Company by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Restricted Stock or Restricted Stock Units shall continue to vest in
accordance with the applicable Award Agreement for a period of one year after
such termination of employment or service (or such longer period as the
Committee, in its discretion, may determine prior to the expiration of such
one-year period), subject to the earlier forfeiture of such Restricted Stock or
Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered by
reason of "permanent and total disability" for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive.
12.9 Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
13. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute
<PAGE>
Payment under this Plan that would have the effect of decreasing the after-tax
amount received by the Grantee as described in clause (ii) of the preceding
sentence, then the Grantee shall have the right, in the Grantee's sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.
14. REQUIREMENTS OF LAW
14.1 General. The Company shall not be required to sell or issue any
shares of Stock under any Grant if the sale or issuance of such shares would
constitute a violation by the Grantee, any other individual exercising an
Option, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares
subject to a Grant upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares hereunder, no shares of Stock may be
issued or sold to the Grantee or any other individual exercising an Option
pursuant to such Grant unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of the Grant. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of
Restricted Stock or Stock underlying Restricted Stock Units, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Grant, the Company shall not be required to sell or issue
such shares unless the Committee has received evidence satisfactory to it that
the Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Committee shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
14.2 Rule 16b-3. It is the intent of the Company that Grants pursuant to
the Plan and the exercise of Options granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Committee does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 15 or
Section 16 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
<PAGE>
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1 Changes in Stock. If the number of outstanding shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Grants are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options shall
not change the aggregate Option Price payable with respect to shares that are
subject to the unexercised portion of an Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share.
16.2 Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs. Subject to Section 16.3 hereof, if the
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
16.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control. Upon the dissolution or liquidation of the Company or upon a
merger, consolidation, or reorganization of the Company with one or more other
entities in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another entity, or upon any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert, owning [fifty percent] or more of the combined voting power of all
classes of securities of the Company, (i) all outstanding shares of Restricted
Stock and Restricted Stock Units shall be deemed to have vested, and all
restrictions and conditions applicable to such shares of Restricted Stock and
Restricted Stock Units shall be deemed to have lapsed, immediately prior to the
occurrence of such event, and (ii) all Options outstanding hereunder shall
become immediately exercisable for a period of fifteen days immediately prior to
the scheduled consummation of the event. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan or the
assumption of such Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor Company, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares or units and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. The Committee shall send written notice of an event that will result
in such a termination to all individuals who hold Options not later than the
time at which the Company gives notice thereof to its shareholders.
16.4 Adjustments. Adjustments under this Section 16 related to shares of
Stock or securities of the Company shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
16.5 No Limitations on Company. The making of Grants pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its
<PAGE>
capital or business structure or to merge, consolidate, dissolve, or liquidate,
or to sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Grant
awarded under the Plan shall be affected by any change of duties or position of
the Optionee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any participant or beneficiary
under the terms of the Plan. No Grantee shall have any of the rights of a
shareholder with respect to the shares of Stock subject to an Option except to
the extent the certificates for such shares of Stock shall have been issued upon
the exercise of the Option.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company or the
Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Subsidiary shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this Section 19 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
20. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
<PAGE>
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
24. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of Maryland.
* * *
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 25th day of March, 1997.
/s/ Andrea F. Bradley
---------------------------------
Andrea F. Bradley
Vice President, General Counsel
and Corporate Secretary
The Plan was duly approved by the shareholders of the Company on the
____ day of ____________, 1997.
/s/
---------------------------------
[Name]
[Title]
