SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[(Amendment No. ___)]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss.240.14a-12
CHELSEA GCA REALTY, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:____________________________________________
(2) Aggregate number of securities to which
transaction applies: ___________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
_________________________________________________________________
(4) Proposed maximum aggregate value of transaction:_________________
(5) Total fee paid:__________________________________________________
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_________________________________________
(2) Form, Schedule or Registration Statement No.:___________________
(3) Filing Party:___________________________________________________
(4) Date Filed:_____________________________________________________
<PAGE>
CHELSEA GCA REALTY, INC.
-------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998
-------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Chelsea GCA Realty, Inc. (the "Company") will be held at The Eagle Rock Club, 4
Becker Farm Road, Roseland, New Jersey, on June 11, 1998 at 10:00 in the morning
for the following purposes:
1. To elect one Director.
2. To approve the 1998 Employee Stock Purchase Plan.
3. To approve the Long Term Incentive Plan.
4. To approve the appointment of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1998.
5. To transact such other business as may properly come before
the meeting, or any adjournment thereof.
Stockholders of record at the close of business on April 17, 1998,
shall be entitled to notice of, and to vote at, the meeting.
By order of the Board of Directors
Denise M. Elmer
SECRETARY
Dated: April 30, 1998
Roseland, New Jersey
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED
PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING.
<PAGE>
CHELSEA GCA REALTY, INC.
103 EISENHOWER PARKWAY
ROSELAND, NEW JERSEY 07068
-----------------------------
PROXY STATEMENT
-----------------------------
The accompanying Proxy is solicited by the Board of Directors of
Chelsea GCA Realty, Inc., a Maryland corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Meeting") to be held on June 11, 1998, at
10:00 in the morning, or any adjournment thereof, at which stockholders of
record at the close of business on April 17, 1998 shall be entitled to vote. The
cost of solicitation of proxies will be borne by the Company. The Company may
use the services of its Directors, officers, employees and others to solicit
proxies, personally or by telephone; arrangements may also be made with
brokerage houses and other custodians, nominees, fiduciaries and stockholders of
record to forward solicitation material to the beneficial owners of stock held
of record by such persons. The Company may reimburse such solicitors for
reasonable out-of-pocket expenses incurred by them in soliciting, but no
compensation will be paid for their services.
Each proxy executed and returned by a stockholder may be revoked at
any time before it is voted by timely submission of written notice of revocation
or by submission of a duly executed proxy bearing a later date (in either case
directed to the Secretary of the Company) or, if a stockholder is present at the
Meeting, he may elect to revoke his proxy and vote his shares personally.
There is being mailed herewith to each stockholder of record the
Company's Annual Report to Stockholders for the fiscal year ended December 31,
1997. The date of this Proxy Statement is the approximate date on which this
Proxy Statement and form of Proxy were first sent or given to stockholders.
On April 17, 1998, the Company had outstanding and entitled to vote
with respect to all matters to be acted upon at the meeting 15,356,733 shares of
Common Stock. Each holder of Common Stock is entitled to one vote for each share
of stock held by such holder. The presence of holders representing a majority of
all the votes entitled to be cast at the meeting will constitute a quorum at the
meeting. In accordance with Maryland law, abstentions, but not broker non-
votes, are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Each item on the agenda must receive the
affirmative vote of a majority of the shares voted at the meeting in order to
pass. Abstentions and broker non-votes are not counted in determining the votes
cast with respect to any of the matters submitted to a vote of stockholders.
It is expected that the following business will be considered at the
meeting and action taken thereon:
1. ELECTION OF DIRECTORS
Pursuant to the By-Laws of the Company, the number of Directors of the
Company has been set at seven members who are divided into three classes serving
staggered three-year terms of office. It is proposed to elect one Class II
Director at this Meeting to hold office for a three-year term until the 2001
Annual Meeting of Stockholders and until his successor is duly elected and
qualifies. Class I and Class III Directors will be elected at the Annual
Meetings to be held in 2000 and 1999, respectively, for three-year terms, and
until their respective successors are duly elected and qualify. It is intended
that the accompanying form of Proxy will be voted for the nominee set forth
below, who is presently a Director of the Company. If some unexpected occurrence
should make necessary, in the Board of Directors' judgment, the substitution of
some other person for the nominee, shares will be voted for such other person as
the Board of Directors may select. The Board of Directors is not aware that the
nominee may be unable or unwilling to serve as a Director. The following table
sets forth certain information with respect to the nominee and also with respect
to each Director whose term of office will continue after this Meeting.
NOMINEE FOR ELECTION
YEAR
TERM
OF SERVED
PRINCIPAL OCCUPATION AND OFFICE AS A
NAME AGE POSITIONS HELD WILL DIRECTOR
EXPIRE SINCE
Brendan T. Byrne 74 Senior partner in the law firm 2001 1993
of Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein since
1982; Governor of New Jersey from
1974 to 1982; Prosecutor Essex
County (New Jersey), President of
the Public Utility Commission, Assignment
Judge of the New Jersey Superior Court,
Vice President of the National District
Attorneys Association, Trustee of Princeton
University, Chairman of the Princeton
University Council on New Jersey
Affairs, Chairman of the United States
Marshals Foundation, Commissioner of the
New Jersey Sports and Exposition Authority
and Chairman of the National Commission on
Criminal Justice Standards and Goals (1977);
serves on a Board of the National Judicial College.
<PAGE>
DIRECTORS WHOSE TERM OF OFFICE WILL
CONTINUE AFTER MEETING
YEAR
TERM
OF SERVED
PRINCIPAL OCCUPATION AND OFFICE AS A
NAME AGE POSITIONS HELD WILL DIRECTOR
EXPIRE SINCE
David C. Bloom 41 Chairman of the Board and Chief 1999 1993
Executive Officer of the
Company since 1993; founder and
principal of The Chelsea Group,
a predecessor of the Company
("Chelsea") and President of
Chelsea from 1985 until
formation of the Company.
William D. Bloom 35 Executive Vice President of the
2000 1995 Company since 1993;
employed by Chelsea since 1986.
Robert Frommer 63 Principal of Robert Frommer 2000 1993
Associates, a real estate consulting
firm, since 1991; President of
PG&E Properties, Inc. since April
1993; President of The Harlan
Company from September 1987 to January
1991; Executive Vice President of
Urban Investment & Development
Company, a wholly-owned subsidiary of
Aetna Life & Casualty Company, from
1972 to 1984; Vice President for
Institutional Facilities for New
York University from 1984 to 1987.
Barry M. Ginsburg 60 Vice Chairman of the Company 1999 1993
since 1993; principal in Ginsburg
Craig Associates (a predecessor of
the Company) and its predecessor
companies from 1986 to 1993; employed
by Dansk International Designs, Ltd.
from 1966 through 1985
and corporate Chief Operating Officer
and Director from 1980 to 1985.
Philip D. Kaltenbacher 60 Chairman of the Board of 1999 1993
Directors and Chief Executive
Officer of Seton Company, a
manufacturer of leather; health care
products; industrial foams, films,
tapes, adhesives and laminates and
chemicals since 1974; Commissioner
of The Port Authority of New York
and New Jersey from September 1985
through February 1993, and
Chairman from September 1985 through
April 1990.
Reuben S. Leibowitz 50 Managing Director of E.M. 2000 1993
Warburg, Pincus & Co., LLC ("Warburg,
Pincus"), a venture banking and
investment counseling firm;
associated with Warburg, Pincus since 1984.
Mr. Leibowitz is a director of Grubb & Ellis Company and Lennar
Corporation. Mr. Byrne is a director of Mack-Cali, Inc. David Bloom and William
Bloom are brothers.
The Company's Board of Directors has several committees, consisting of
an Audit Committee, a Compensation Committee and an Executive Committee. The
functions of the Audit Committee (which consists of Messrs. Byrne, Frommer and
Kaltenbacher) include recommending to the Board of Directors the engaging and
discharging of the independent auditors, reviewing with the independent auditors
the plan and results of the auditing engagement, reviewing the independence of
the independent auditors, including the range of audit and non-audit fees, and
reviewing the adequacy of the Company's system of internal accounting controls.
The functions of the Compensation Committee (which consists of Messrs. Byrne,
Frommer and Leibowitz) include determining compensation for the Company's
executive officers, and administering the Company's 1993 Stock Option Plan (the
"Option Plan") and the Long Term Incentive Plan (the "Incentive Plan"). The
Executive Committee consists of Messrs. D. Bloom, Ginsburg and Leibowitz.
In the fiscal year ended December 31, 1997, there were two meetings of
the Audit Committee, one meeting of the Compensation Committee and four meetings
of the Board of Directors. Each Director of the Company attended in excess of
75% of the total number of meetings of the Board of Directors and committees on
which he served.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not principals of or
representatives of principals of the Company's predecessors an annual fee of
$15,000 and a per meeting fee of $1,000 (for each directors' meeting attended),
and each such director is reimbursed for expenses incurred in attending
meetings. In addition, each such director has received 15,000 stock options at
an exercise price equal to the closing price on the day the options were
granted, with each such set of options vesting over five years.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company to its Chief Executive Officer and to each of
the four most highly compensated executive officers whose salary and bonus for
1997 exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Other
Annual Stock All Other
Salary Bonus Compensation Options Compensation(1)
Name and Year $ $ $ # $
Principal Position
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David C. Bloom 1997 280,000 165,200 - - 9,500
Chief Executive Officer 1996 232,313 139,388 - - 9,500
1995 225,000 73,350 - - 9,000
Leslie T. Chao 1997 189,271 131,543 - - 9,374
President 1996 180,688 108,413 - - 9,231
1995 175,000 57,050 - - 7,000
Thomas J. Davis 1997 177,225 120,513 - - 9,500
Chief Operating Officer 1996(2) 170,000 100,000 - - 9,500
1995(3) - - - 50,000 -
William D. Bloom 1997 177,178 116,000 - - 7,079
Executive Vice President 1996 170,363 96,468 - - 7,317
1995 165,000 53,790 - - 8,232
Bruce Zalaznick 1997 175,833 116,929 - - 9,500
Executive Vice President 1996 170,000 76,932 - 20,000 9,500
1995 140,000 38,080 - - 6,731
(1) Consists of employee contributions to the Company's 401(k)
Plan as a tax deferral.
(2) Commenced employment in January 1996.
(3) Entered into an employment agreement in December 1995.
</TABLE>
OPTIONS GRANTED
There were no stock options granted in 1997 to the executive officers
named in the Summary Compensation Table.
<PAGE>
The table below sets forth information for the executive officers
named in the Summary Compensation Table concerning option exercises during 1997
and outstanding options at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND
DECEMBER 31, 1997 OPTION/SAR VALUES
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money
Acquired on Value Options/SARs at Options/SARs at
Name Exercise(#) Realized ($) December 31, 1997(#) December 31, 1997($s)(1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
David C. Bloom 12,834 144,383 62,166 50,000 920,834 740,625
Leslie T. Chao - - 36,000 24,000 533,250 355,500
William D. Bloom 4,278 60,962 31,722 24,000 469,882 355,500
Thomas J. Davis - - 20,000 30,000 173,750 260,625
Bruce Zalaznick 1,800 27,000 20,200 28,000 277,213 326,750
(1) Assumes, for all unexercised in-the-money options, the difference between
fair market value ($38.1875 per share) at December 31, 1997 and the
exercise price of the options ranging from $23.375 to $29.50 per share.
</TABLE>
The table below sets forth information for the executive officers
named in the Summary Compensation Table concerning performance units awarded
during 1997.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR(1)
Estimated Future Payouts
------------------------------------------
Number of Performance or Other
Shares, Units or Period Until Maturation Threshold Target Maximum
Name Other Rights (#) or Payout (2) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
David C. Bloom 7,000 5 years 140,000 700,000 7,000,000
Leslie T. Chao 4,500 5 years 90,000 450,000 4,500,000
Thomas J. Davis 4,500 5 years 90,000 450,000 4,500,000
William D. Bloom 3,000 5 years 60,000 300,000 3,000,000
Bruce Zalaznick 3,000 5 years 60,000 300,000 3,000,000
(1) The Long Term Incentive Plan as described below in Proposal Number 3 is
subject to stockholder approval.
(2) Performance units were granted on March 13, 1997.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Brendan T. Byrne, Robert Frommer and Reuben S. Leibowitz are members
of the Compensation Committee. None of the executive officers of the Company has
served on the Board of Directors or compensation committee of any other entity
that has had any of such entity's officers serve either on the Company's Board
of Directors or Compensation Committee. During 1996 and 1997, Mr. Frommer
received $240,318 in fees and expenses for consulting services performed in
connection with the Company's acquisition of Waikele Factory Outlet Stores on
March 31, 1997. In addition, Mr. Frommer and the Company entered into a
consulting agreement effective August 1, 1997. See "Certain Relationships and
Transactions."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee currently consists of Brendan T. Byrne,
Robert Frommer and Reuben S. Leibowitz. The Compensation Committee is
responsible for determining the level of compensation paid to the Chief
Executive Officer, approving the level of compensation paid to the Company's
other executive officers, determining awards under, and administering, the
Option Plan and Incentive Plan and reviewing and establishing any and all other
executive compensation plans adopted from time to time by the Company. The
Company's philosophy for compensating executive officers is designed to attract,
retain, motivate and reward key executives in the Company's highly competitive
industry. The Company's compensation program for 1997 consisted of salary and
bonuses designed to motivate individuals to enhance the long-term value of the
Company's stock and grants of performance units under the Incentive Plan.
The amount of compensation to be paid to an executive officer is
generally based upon the Compensation Committee's subjective analyses of each
individual's performance, contributions to the Company and responsibilities to
be undertaken on behalf of the Company. The Committee did not use any specific
qualitative or quantitative measures or factors in assessing individual
performance. In 1998, the Compensation Committee increased the salary of each of
its executive officers based on the performance of the Company in 1997 and upon
its knowledge of salaries paid by competitors of the Company as disclosed in
public documents.
The Company has established a bonus plan for the Senior Executives
which has been approved by the Compensation Committee and provides for bonuses
of up to 50% in 1995, 75% in 1996 and 100% in 1997 and beyond of the Senior
Executive's base salary. The award of any bonus compensation, however, is
dependent on meeting or exceeding the Company's internal funds from operations
forecast. Bonus compensation levels above the forecast will be established at
the discretion of the Compensation Committee.
Stock-based compensation is also an important element of the Company's
compensation program. The Option Plan was adopted and approved by the Board of
Directors on October 20, 1993 and amended November 30, 1995 to allow the Company
to grant options to purchase shares of the Company. The Compensation Committee
determines in its sole discretion, subject to the terms and conditions of the
Option Plan, the size of a particular award based upon its subjective assessment
of the individual's performance, responsibility and functions and how this
performance may have contributed to the Company's performance. The Compensation
Committee believes awards pursuant to the Option Plan align the interests of
management with those of the Company's stockholders by emphasizing long-term
stock ownership and increases in stockholder value. Management will be benefited
under such options only if the other shareholders of the Company also benefit.
The purpose of the Option Plan is to encourage executives and others to acquire
a larger proprietary interest in the Company, thereby further stimulating their
active interest in the development and financial success of the Company. All
options granted under the Option Plan have been granted at the fair market value
of the Company's Common Stock on the date of grant. The number of options that
the Compensation Committee grants to executive officers is based on individual
performance and level of responsibility. Since stock options are tied to the
future performance of the Company's Common Stock, they will provide value only
if the price of the Company's Common Stock exceeds the exercise price of the
options.
Certain of the Company's executive officers also participate in the
Incentive Plan, which is designed to provide a strong incentive to participants
to improve the Company's performance. In addition, the Incentive Plan requires
the continued employment of participants over five years in order to receive the
full benefits under the Incentive Plan. Awards under the Incentive Plan
generally replaced the granting of stock options in 1997. The number of units
awarded under the Incentive Plan was based on individual performance and level
of responsibility.
The Chief Executive Officer's compensation for 1997 was based on the
same performance and other criteria as summarized in the preceding paragraphs
relative to all executive officers.
The Internal Revenue Code of 1986, as amended, was amended in 1993
with respect to the ability of publicly-held corporations such as the Company to
deduct compensation in excess of $1,000,000 per individual, other than
performance-based compensation. The Compensation Committee continues to evaluate
maximizing the deductibility of executive compensation, while retaining the
discretion it deems necessary to compensate executive officers. The Incentive
Plan is designed to meet the requirements of Section 162(m) of the Internal
Revenue Code.
THE COMPENSATION COMMITTEE
Brendan T. Byrne
Robert Frommer
Reuben S. Leibowitz
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following line graph sets forth for the period October 26, 1993,
the date on which trading of the Company's Common Stock commenced, through
December 31, 1997, a comparison of the percentage change in the cumulative total
stockholder return on the Company's Common Stock compared to the index of equity
real estate investment trusts prepared by the National Association of Real
Estate Investment Trusts ("NAREIT"), the NAREIT Equity REIT Total Return Index
and the index of the four other publicly traded factory outlet REITs ("Outlet
REIT Peer Group"), prepared by SNL Securities. The Outlet REIT Peer Group
consists of FAC Realty Trust, Inc., Horizon Group Inc., Prime Retail, Inc. and
Tanger Factory Outlet Centers, Inc.
The graph assumes that the shares of the Company's Common Stock were
bought at the initial public offering price of $27.50 per share and that the
value of the investment in each of the Company's Common Stock and the indices
was $100 at the beginning of the period. The graph further assumes the
reinvestment of dividends. The NAREIT Equity REIT Total Return Index, which is
only published monthly based on the last closing prices of the preceding month,
has been prorated for the month of October 1993 to arrive at the beginning index
used in this graph.
The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
CHELSEA GCA REALTY, INC.
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
Period Ending
----------------------------------------------------------------------------------
Index 10/26/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chelsea GCA Realty, Inc. 100.00 99.73 107.28 127.49 158.78 187.40
NAREIT All Equity REIT INDEX 100.00 94.12 96.89 111.56 151.40 182.08
Outlet REIT Peer Group 100.00 93.84 93.76 95.75 102.12 103.76
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 31, 1998, to the knowledge of the Company, the following
is a schedule of all persons who beneficially owned more than 5% of the
outstanding stock of the Company:
Number of Shares Percent
Name and Address Beneficially Owned of Stock
Simon De Bartolo Group, L.P. 1,408,450 9.2%
115 West Washington Street
Indianapolis, IN 46209
LaSalle Advisors Limited Partnership 1,405,167 9.2%
ABKB/LaSalle Securities Limited Partnership
11 South LaSalle Street
Chicago, IL 60603
David C. Bloom 968,891 5.9%
c/o Chelsea GCA Realty, Inc.
103 Eisenhower Parkway
Roseland, NJ 07068(1)
(1) Includes limited partnership interests in the Partnership (the "Units")
convertible into shares of Common Stock of the Company and vested options
to purchase shares of Common Stock under the Company's Option Plan.
The following table sets forth information concerning the security
ownership of directors and executive officers as of March 31, 1998.
Number of Shares Percent
Name and Address Beneficially Owned (1) of Stock
David C. Bloom(2) 968,891 5.9%
William D. Bloom (2) 435,235 2.8%
Brendan T. Byrne (2) 12,000 *
Leslie T. Chao(2) 204,095 1.1%
Thomas J. Davis(2) 20,000 *
Robert Frommer(2) 16,441 *
Barry M. Ginsburg(3) 515,218 3.3%
Philip D. Kaltenbacher(2)(4) 387,619 2.5%
Reuben S. Leibowitz(5) 15,600 *
Bruce Zalaznick(2) 22,000 *
Directors and Executive 2,735,027 15.2%
officers as a group(6)
(19 persons)
- --------------------
* Less than 1%
(1) Includes Units which are convertible into shares of Common Stock of the
Company.
(2) Includes vested options to purchase shares of Common Stock granted under
the 1993 Stock Option Plan.
(3) Includes Units beneficially owned by Mr. Ginsburg's family and trusts
for the benefit of Mr. Ginsburg's family.
(4) Includes 185,931 Units owned by Mr. Kaltenbacher as trustee for his
daughters and 1,000 Units owned by Mr. Kaltenbacher's wife, as to which
Mr. Kaltenbacher disclaims beneficial ownership.
(5) Includes 2,500 shares of Common Stock owned by the wife of Mr.
Leibowitz, 2,000 shares of Common Stock owned by a foundation and 600
shares of Common Stock owned by the children of Mr. Leibowitz. Mr.
Leibowitz disclaims beneficial ownership of all these shares.
(6) Includes Units convertible into 2,322,058 shares of Common Stock and
vested options to purchase 367,038 shares of Common Stock granted under
the Option Plan.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
America Direct Outlets, a company formerly 50%-owned by Philip D.
Kaltenbacher and presently 100%-owned by a trust for the benefit of the wife of
Edward Bloom, a brother of David and William Bloom, rents a total of 51,046
square feet of GLA (1.2% of the Company's total GLA) from the Company in eleven
centers. The gross annual rental (including expense reimbursements) for such
space was $1,493,000 in 1997. Management considers these rentals to be at fair
market value.
During 1996 and 1997, Robert Frommer received $240,318 in fees and
expenses for consulting services performed in connection with the Company's
acquisition of Waikele Factory Outlet Stores on March 31, 1997. Effective August
1, 1997, Mr. Frommer and the Company entered into a Consulting Agreement
pursuant to which Mr. Frommer agreed to perform services for the Company in
connection with the development and operation of manufacturers outlet centers in
Japan and Hawaii. The agreement provides for a payment of $10,000 per month and
expires December 31, 2001, unless terminated effective December 31, 1999 on at
least six months prior notice. If the Company elects to terminate the agreement,
it shall pay to Mr. Frommer the amount of $40,000. In addition, during the
agreement and for four years after the agreement ends, Mr. Frommer will be
entitled to a fee of 1% of the development costs, up to a maximum amount of
$500,000 per project, on all projects in which he was involved in Japan or
Hawaii. During 1997, Mr. Frommer received $54,377 for fees and expenses under
this agreement.
In March 1997, the Company loaned Thomas J. Davis the amount of
$115,000, which is due in five years, together with interest at the rate of 7.5%
per annum.
All transactions in which a director is an interested party, including
any interest in a lessee of space from the Company, require the approval of a
majority of the disinterested directors.
David C. Bloom guarantees certain of the Company's obligations under a
lease for one of the Company's properties. The Company has indemnified him from
and against any liability which he may incur pursuant to this guaranty.
The Company has entered into a registration rights agreement with all
recipients of Units (the "Rightholders") to enable the Rightholders to sell or
distribute shares of Common Stock owned by or issuable to any of them upon
exchange of Units or any other securities with respect to such Common Stock
issued or issuable to any of them through any registered offering of its
securities that the Company has determined to undertake. In addition, the
Rightholders have the right to demand that the Company prepare and file from
time to time a registration statement with respect to the sale or distribution
of their common stock. In such event, the expenses of such registration will be
borne by the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company believes that during 1997 all of its officers, directors
and holders of more than 10% of its Common Stock complied with all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934. In
making this disclosure, the Company has relied solely on written representations
of its directors, officers and more than 10% holders and on copies of reports
that have been filed with the Securities and Exchange Commission.
2. APPROVAL OF THE CHELSEA GCA REALTY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company, subject to shareholder
approval, has adopted the 1998 Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan is intended to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Board of Directors believes that the Purchase Plan will provide a
convenient method for the Company's employees to purchase Common Stock,
encourage such employees to continue in the employ of the Company and motivate
them to exert their best efforts on behalf of the Company and its subsidiaries.
If the Purchase Plan is approved by the shareholders at the Annual Meeting, it
will be effective as of July 1, 1998.
The following is a summary of the principal features of the Purchase
Plan. The summary, however, does not purport to be a complete description of all
the provisions of the Purchase Plan.
The Purchase Plan covers an aggregate of 500,000 shares of Common
Stock (subject to adjustment for stock splits or other changes in the Common
Stock).
The Purchase Plan will be administered by a committee ("Committee") of
one or more members appointed by the Board of Directors or its delegate.
Employees who are eligible to participate in the Purchase Plan are
employees who have been in the employ of the Company or a participating
subsidiary for five months or more and who customarily work more than 20 hours
per week, other than (1) employees who are "highly compensated employees" (as
defined in Section 414(q) of the Code) and are subject to Section 16 of the
Securities Exchange Act of 1934, and (2) any employee who owns 5% or more of the
total combined voting power or value of all classes of stock of the Company or a
subsidiary, taking into account certain attribution rules.
The Purchase Plan authorizes grants of options to purchase Common
Stock to eligible employees pursuant to one or more offerings to be made under
the Purchase Plan. Unless the Committee decides otherwise, the Purchase Plan
will be implemented by consecutive three-month offerings (each an "Option
Period"), with the first Option Period being from the date the Purchase Plan
becomes effective through the next March 31st, June 30th, September 30th or
December 31st, whichever is earlier. Thereafter, Option Periods will commence on
each subsequent January 1, July 1, April 1, or October 1 and terminate three
months thereafter until the Purchase Plan is terminated or no additional shares
of Common Stock are available for purchase under the Purchase Plan. No eligible
employee may be granted an option which provides the employee the right to
purchase stock under all employee stock purchase plans of the Company or a
subsidiary which accrues at a rate that exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for any one calendar
year.
The Company will grant to each eligible employee the right to become a
participant in the Purchase Plan. Participants in the Purchase Plan will have
deducted from their compensation a percentage to be applied toward the purchase
of shares of Common Stock of the Company. Each eligible participant is empowered
to authorize deductions of up to a maximum of 10% of the employee's weekly base
pay and any bonus or similar compensation. On the date on which a particular
Option Period begins, participants will automatically be granted (subject to the
$25,000 annual limitation described above) an option to purchase the number of
whole and fractional shares of Common Stock which such employee's accumulated
payroll deductions will purchase as of the date such Option Period terminates.
The price at which the shares may be purchased in any Option Period under the
Purchase Plan shall be the lower of: (a) 85% of the fair market value of the
stock on the first day of the Option Period and (b) 85% of the fair market value
of the stock on the last day of the Option Period. Provisions are included in
the Purchase Plan for termination of participation, increase or reduction of
payroll deductions, and the effect of death or termination of employment.
The Purchase Plan will terminate after five years unless terminated
earlier by the Board of Directors or its delegate.
The Board of Directors or its delegate may at any time amend, suspend
or terminate the Purchase Plan. However, the Board of Directors or its delegate
may not, without shareholder approval, increase the number of shares issuable
under the Purchase Plan.
An employee generally will not be subject to income taxation upon the
grant or exercise of an option under the Purchase Plan. Pursuant to Section
423(a) of the Code, an employee will generally only be entitled to the benefits
of Section 421(a) of the Code if the employee refrains from disposing of Common
Stock purchased under the Plan for a period of two years from the commencement
of the applicable Option Period and one year from the date of transfer of such
stock to him or her or if the employee dies while owning such stock. Upon such a
disposition or death there will be included in the employee's gross income an
amount equal to the lesser of (i) the excess of the fair market value of the
stock on the date of such disposition or death over the purchase price or (ii)
the excess of the fair market value of the stock at the commencement of the
Option Period over the purchase price computed as if the stock had been
purchased on the first day of the Option Period. Any such amount included in the
employee's gross income will be treated as ordinary income. The employee's basis
in the stock will be increased by the amount of ordinary income recognized and
any remaining gain upon such a disposition will generally be treated as capital
gain, which will be mid-term or long-term gain depending on the holding period
of the stock. Any loss upon such a disposition will generally be treated as
capital loss. The Company will not be entitled to a federal income tax deduction
if the employee qualifies for the above-described tax treatment.
If an employee makes a disposition of the Common Stock before the
expiration of the time period described above, then ordinary income will be
recognized by the employee in the year of making such a disposition. The amount
of ordinary income recognized will be equal to the excess of the stock's fair
market value on the date of purchase over its purchase price. The employee's
basis in the stock will equal the sum of the purchase price and the amount of
ordinary income recognized. Any additional gain or any loss realized upon a
disposition of the Common Stock will be treated as capital gain or loss, which
may be short-term, mid-term or long-term depending on the holding period. The
Company will be entitled to a corresponding deduction in the year in which the
employee recognizes ordinary income.
The price of the Common Stock as reported on the New York Stock
Exchange at the close of business on April 21, 1998 was $38.25 per share.
The affirmative vote of holders of a majority of the shares of stock
of the Company present, or represented by proxy, and entitled to vote at the
meeting is required for approval of the Chelsea GCA 1998 Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE CHELSEA
GCA 1998 EMPLOYEE STOCK PURCHASE PLAN.
3. APPROVAL OF THE LONG TERM INCENTIVE PLAN
In 1997, the Compensation Committee approved The Long Term Incentive
Plan (the "Incentive Plan") pursuant to which the Compensation Committee may
grant performance units to participants, the payment of which is contingent on
the meeting of performance goals during a performance period established by the
Committee.
Performance units are valued based on the Company's cumulative
compound growth rate in funds from operations ("FFO") over a five-year
performance period and each unit has a target value of $100 based on the Company
achieving a 10% cumulative compound growth rate in FFO during this performance
period. The Company believes that FFO should be considered in conjunction with
net income, to facilitate a clearer understanding of the operating results of
the Company. The Company considers FFO an appropriate measure of performance for
an equity real estate investment trust.
Under the Incentive Plan, units vest based on continued service to the
Company, with 20% vesting after three years, 40% vesting after four years and
100% vesting after five years. Performance units held in reserve may be awarded
during the performance period in recognition of individual performance and
contribution to the Company's long term success. Final valuation of performance
units is determined by multiplying the number of performance units granted times
the performance unit value based on the five-year cumulative compound growth
rate in FFO. This value will be paid at the end of the fifth year in the form of
cash.
In the event of termination of a participant under the Incentive Plan,
all unvested performance units will be cancelled. All vested units will be
valued and paid based on the reason for termination. In the event of death or
disability, payment will be based on performance to the date of termination. For
other events of termination, units will be paid at the end of the performance
period at the lower of the value at the end of the performance period or the
date of termination.
Under the Budget Reconciliation Act of 1993, compensation to any
individual employee in excess of $1 million per year is not deductible as a
business expense unless such compensation is incentive based (i) as provided by
pre-determined standards, with the outcome substantially in doubt at the time
the standards are set, (ii) is payable in accordance with a plan approved by an
independent Compensation Committee (or independent subcommittee thereof), and
(iii) such plan has been approved by the stockholders. In order to preserve the
maximum tax deductions available to the Company in the event an individual were
to receive annual compensation in excess of $1 million as a result of the
Incentive Plan, the stockholders are requested to ratify and approve the
Incentive Plan.
The affirmative vote of holders of a majority of the shares of stock
of the Company present, or represented by proxy, and entitled to vote at the
meeting is required for approval of the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE INCENTIVE PLAN.
4. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP
as independent auditors of the Company for the fiscal year ending December 31,
1998. A representative of Ernst & Young LLP is expected to be present at the
meeting with the opportunity to make a statement if such representative so
desires and to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS.
5. OTHER MATTERS
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company on or prior
to December 31, 1998 to be eligible for inclusion in the Company's Proxy
Statement and form of Proxy to be used in connection with such meeting.
OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the Meeting
is that hereinabove set forth. If any other matter or matters are properly
brought before the meeting, or any adjournment thereof, it is the intention of
the persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their judgment.
Denise M. Elmer
SECRETARY
Dated: April 30, 1998
<PAGE>
PROXY
CHELSEA GCA REALTY, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS - JUNE 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CHELSEA GCA REALTY, INC., a Maryland
corporation, hereby appoints David C. Bloom, Leslie T. Chao, Michael J. Clarke
and Denise M. Elmer, and each of them the proxies of the undersigned with full
power of substitution to vote at the Annual Meeting of Stockholders of the
Company to be held at 10:00 a.m. on June 11, 1998, and at any adjournment or
adjournments thereof (the "Meeting"), with all the power which the undersigned
would have if personally present, hereby revoking any proxy heretofore given.
The undersigned hereby acknowledges receipt of the proxy statement for the
Meeting and instructs the proxies to vote as directed on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
Please mark
/X/ vote as in this
example
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEE
LISTED BELOW, FOR THE APPROVAL OF THE CHELSA GCA 1998 EMPLOYEE STOCK PURCHASE
PLAN, FOR THE APPROVAL OF THE LONG TERM INCENTIVE PLAN, FOR THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998 AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO
ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
1. To elect one 2. To approve the Chelsea FOR AGAINST ABSTAIN
nominee for director: GCA 1998 Stock / / / / / /
Nominee: Brendan T. Byrne Purchase Plan
/ / FOR / / WITHHELD
3. To approve the Long FOR AGAINST ABSTAIN
/ /________________________ Term Incentive Plan. / / / / / /
For the nominee except as
noted above 4. To ratify the appoint- FOR AGAINST ABSTAIN
ment of Ernst & Young / / / / / /
as indepdent auditors for
the fiscal year ending December
31, 1998.
5. With discretionary FOR AGAINST ABSTAIN
authority upon such / / / / / /
other matters as
may properly come before
this meeting.
MARK HERE IF YOU PLAN / /
TO ATTEND THE MEETING
MARK HERE FOR ADDRESS / /
CHANGE AND NOTE AT LEFT
Please sign exactly as your name appears on
this proxy card. When signing as attorney,
executor, trustee or guardian, please give
your full title.
Signature_____________ Date_____ Signature____________________ Date____________
<PAGE>
CHELSEA GCA REALTY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
Chelsea GCA Realty, Inc., a Maryland corporation, hereby adopts this 1998
Employee Stock Purchase Plan (the "Plan") as of the Effective Date. The purposes
of this Plan are as follows:
(1) To assist employees of the Company and its Participating
Subsidiaries in acquiring a stock ownership interest in the Company
pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986,
as amended.
(2) To help employees provide for their future security and
to encourage them to remain in the employment of the Company and its
Participating Subsidiaries.
1. DEFINITIONS.
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless the
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as
amended.
(b) "Committee" means the committee appointed to administer
the Plan pursuant to paragraph 10.
(c) "Company" means Chelsea GCA Realty, Inc., a Maryland
corporation.
(d) "Dates of Exercise" means the dates as of which an Option
is exercised and the Stock subject to that Option is purchased. With
respect to any Option, the Dates of Exercise are the last day of
March, June, October and December on which Stock is traded on the New
York Stock Exchange during the Option Period in which that Option was
granted.
(e) "Date of Grant" means the date as of which an Option is
granted, as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation
received from the Company or a Participating Subsidiary as regular
compensation during an Option Period. By way of illustration, and not
by way of limitation, Eligible Compensation includes regular
compensation such as salary, wages, overtime, shift differentials,
bonuses, commissions, and incentive compensation, but excludes
relocation expense reimbursements, foreign service premiums, tuition
or other reimbursements, and income realized as a result of
participation in any stock option, stock purchase, or similar plan of
the Company or any Participating Subsidiary.
(g) "Effective Date" means ____________, 1998.
(h) "Eligible Employee" means any employee of the Company or
a Participating Subsidiary who meets the following criteria:
(1) the employee does not, immediately after the
Option is granted, own (within the meaning of Section
423(b)(3) and 424(d) of the Code) stock possessing five
percent or more of the total combined voting power or value of
all classes of stock of the Company or of a Subsidiary;
(2) the employee has completed at least five months
of employment for the Company or a Subsidiary;
(3) the employee's customary employment is more than
20 hours a week; and
(4) the employee is not a highly compensated employee
within the meaning of Section 414(q) of the Code who is also
an officer, director or beneficial owner of more than ten
percent of the Stock of the Company within the meaning of
Section 16 of the Securities Exchange Act of 1934.
(i) "Option" means an option granted under the Plan to an
Eligible Employee to purchase shares of Stock.
(j) "Option Period" means with respect to any Option the
period beginning upon the Date of Grant and ending on the March 31,
June 30, September 30 or December 31 immediately following the Date of
Grant, whichever is earlier, or ending on such other date as the
Committee shall determine. No Option Period may exceed 27 months from
the Date of Grant.
(k) "Option Price" with respect to any Option has the meaning
set forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied
with the provisions of paragraph 3(b).
(m) "Participating Subsidiary" means any present or future
Subsidiary that the Committee designates to be eligible to participate
in the Plan, and that elects to participate in the Plan.
(n) "Periodic Deposit Account" means the account established
and maintained by the Company to which shall be credited pursuant to
paragraph 3(c) amounts received from Participants for the purchase of
Stock under the Plan.
(o) "Plan" means this 1998 Employee Stock Purchase Plan.
(p) "Plan Year" means the calendar year.
(q) "Stock" means shares of common stock, par value $.01 per
share, of the Company.
(r) "Stock Purchase Account" means the account established
and maintained by the Company to which shall be credited pursuant to
paragraph 4(c) Stock purchased upon exercise of an Option under the
Plan.
(s) "Subsidiary" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the
Company, if at the time of the granting of the Option, each of the
corporations, other than the last corporation, in the unbroken chain
owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain.
2. STOCK SUBJECT TO PLAN.
Subject to the provisions of paragraph 8 (relating to adjustment upon
changes in the Stock), the Stock which may be sold pursuant to Options granted
under the Plan shall not exceed in the aggregate ____________________, and may
be newly issued shares or treasury shares or shares bought in the market, or
otherwise, for purposes of the Plan.
3. GRANT OF OPTIONS.
(a) GENERAL STATEMENT. The Company shall grant Options under
the Plan to all Eligible Employees on January 1, April 1, July 1
and/or October 1 of each Plan Year or on such other date as the
Committee shall designate. The term of each Option shall end on the
last day of the Option Period with respect to which the Option is
granted. With respect to each Option Period, each Eligible Employee
shall be granted an Option, on the Date of Grant, for as many full and
fractional shares of Stock as the Eligible Employee may purchase with
up to 10% of the Eligible Compensation he or she receives during the
Option Period (or during any portion of the Option Period as the
Eligible Employee may elect to participate).
(b) ELECTION TO PARTICIPATE. Each Eligible Employee who
elects to participate in the Plan shall communicate to the Company, in
accordance with procedures established by the Committee, an election
to participate in the Plan whereby the Eligible Employee designates a
stated whole percentage equaling at least 1%, but no more than 10%, of
his or her Eligible Compensation during the Option Period to be
deposited periodically in his or her Periodic Deposit Account under
subparagraph (c). The cumulative amount deposited in the Periodic
Deposit Account during a Plan Year with respect to any Eligible
Employee may not exceed the limitation stated in subparagraph (d). A
Participant's election to participate in the Plan shall continue in
effect during the current and subsequent Option Periods until changed
pursuant to paragraph 3(c).
(c) PERIODIC DEPOSIT ACCOUNTS. The Company shall maintain a
Periodic Deposit Account for each Participant and shall credit to that
account in U.S. dollars all amounts received under the Plan from the
Participant. No interest will be paid to any Participant or credited
to his or her Periodic Deposit Account under the Plan with respect to
such funds. All amounts credited to a Participant's Periodic Deposit
Account shall be used to purchase Stock under paragraph 4(c) and no
portion of a Participant's Periodic Deposit Account shall be refunded
to him or her.
Credits to an Eligible Employee's Periodic Deposit Account
shall be made by payroll deduction or by other alternate payment
arrangements, in accordance with rules and procedures established by
the Committee. An Eligible Employee may increase, decrease or
eliminate the periodic credits to his or her Periodic Deposit Account
for future periods by filing a new election amount at any time during
an Option Period. The change shall become effective in accordance with
the Committee's rules and procedures as soon as practicable after the
Company receives the election, but change will not affect the amounts
deposited with respect to Eligible Compensation sooner than the
Eligible Compensation payable with respect to the next pay period
after the Company receives the authorization.
(d) $25,000 LIMITATION. No Eligible Employee shall be
permitted to purchase Stock under the Plan or under any other employee
stock purchase plan of the Company or of any Subsidiary which is
intended to qualify under Section 423 of the Code, at a rate which
exceeds $25,000 in fair market value of Stock (determined at the time
the Option is granted) for each calendar year in which any such Option
granted to such Participant is outstanding at any time.
4. EXERCISE OF OPTIONS.
(a) GENERAL STATEMENT. On each Date of Exercise, the entire
Periodic Deposit Account of each Participant shall be used to purchase
at the Option Price whole and/or fractional shares of Stock subject to
the Option. Each Participant automatically and without any act on his
or her part will be deemed to have exercised his or her Option on each
such Date of Exercise to the extent that the amounts then credited to
the Participant's Periodic Deposit Account under the Plan are used to
purchase Stock.
(b) OPTION PRICE DEFINED. The Option Price per share of Stock
to be paid by each Participant on each exercise of his or her Option
shall be an amount in U.S. dollars equal to the lower of 85% of the
fair market value of a share of Stock as of the Date of Grant or the
applicable Date of Exercise. The fair market value of a share of Stock
as of an applicable Date of Grant or Date of Exercise shall be the
closing or last sale price of a share of Stock on the New York Stock
Exchange on such date.
(c) STOCK PURCHASE ACCOUNTS; STOCK CERTIFICATES. The Company
shall maintain a Stock Purchase Account for each Participant to
reflect the Stock purchased under the Plan by the Participant. Upon
exercise of an Option by a Participant pursuant to paragraph 4(a), the
Company shall credit to the Participant's Stock Purchase Account the
whole and/or fractional shares of Stock purchased at that time.
Except as provided in paragraph 5, certificates with respect to
Stock credited to a Participant's Stock Purchase Account shall be
issued only on request by the Participant for a distribution of whole
shares or when necessary to comply with the transaction requirements
outside the United States. Upon issuance of such a Stock certificate
to a Participant, the Participant's Stock Purchase Account shall be
adjusted to reflect the number of shares of Stock distributed to the
Participant.
5. RIGHTS ON RETIREMENT, DEATH, TERMINATION OF EMPLOYMENT.
If a Participant retires, dies, or otherwise terminates employment, or
if the corporation that employs a Participant ceases to be a Participating
Subsidiary, then to the extent practicable, no further amounts shall be credited
to the Participant's Periodic Deposit Account from any pay due and owing with
respect to the Participant after such retirement, death, or other termination of
employment. All amounts credited to such a Participant's Periodic Deposit
Account shall be returned to the Participant or used on the next Date of
Exercise in that Option Period to purchase Stock under paragraph 4, based upon
the election by the Participant or his or her personal representative. Such a
Participant's Stock Purchase Account shall be terminated, and Stock certificates
with respect to whole shares of Stock and cash with respect to fractional shares
of Stock shall be distributed as soon as practicable after such Date of
Exercise.
Notwithstanding anything in this Plan to the contrary and except to
the extent permitted under Section 423(a) of the Code, a Participant's Option
shall not be exercisable more than three months after the Participant retires or
otherwise ceases to be employed by the Company or a Participating Subsidiary,
including as a result of the corporation ceasing to be a Participating
Subsidiary.
6. RESTRICTION UPON ASSIGNMENT OF OPTIONS; RESTRICTION UPON DISPOSITION
OF STOCK.
An Option granted under the Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, and is exercisable during
the Participant's lifetime only by the Participant. The Company will not
recognize and shall be under no duty to recognize any assignment or purported
assignment by a Participant, other than by will or the laws of descent and
distribution, of the Participant's interest in the Plan or of his or her Option
or of any rights under his or her Option.
7. NO RIGHTS OF STOCKHOLDER UNTIL EXERCISE OF OPTION.
A Participant shall not be deemed to be a stockholder of the Company,
nor have any rights or privileges of a stockholder, with respect to the number
of shares of Stock subject to an Option. A Participant shall have the rights and
privileges of a stockholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the Participant's
Stock Purchase Account.
8. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION.
If, while any Options are outstanding, the outstanding shares of Stock
have increased, decreased, changed into, or been exchanged for a different
number or kind of shares of securities of the Company, or there has been any
other change in the capitalization of the Company, through reorganization,
merger, recapitalization, reclassification, stock split, reverse stock split,
spinoff or similar transaction, appropriate and proportionate adjustments may be
made by the Committee in the number and/or kind of shares which are subject to
purchase under outstanding Options and to the Option Exercise Price or prices
applicable to such outstanding Options, including, if the Committee deems
appropriate, the substitution of similar options to purchase shares of another
company (with such other company's consent). In addition, in any such event, the
number and/or kind of shares which may be offered in the Options shall also be
proportionately adjusted. No adjustments to outstanding Options shall be made
for dividends paid in the form of stock.
9. USE OF FUNDS; REPURCHASE OF STOCK.
All funds received or held by the Company under the Plan will be
included in the general funds of the Company free of any trust or other
restriction and may be used for any corporate purchase. The Company shall not be
required to repurchase from any Eligible Employee shares of Stock which such
Eligible Employee acquires under the Plan.
10. ADMINISTRATION BY COMMITTEE.
(a) APPOINTMENT OF COMMITTEE. The Board of Directors of the
Company, or its delegate, shall appoint a Committee, which shall be
composed of one or more members, to administer the Plan on behalf of
the Company. Each member of the Committee shall serve for a term
commencing on the date specified by the Board of Directors of the
Company, or its delegate, and continuing until he or she dies or
resigns or is removed from office by such Board of Directors, or its
delegate.
(b) DUTIES AND POWERS OF COMMITTEE. It shall be the duty of
the Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the power to:
(1) determine when the initial and subsequent
Option Periods will commence;
(2) interpret the Plan and the Options;
(3) adopt such rules for the administration,
interpretation, and application of the Plan as are consistent
with the Plan and Section 423 of the Code; and
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the Board of Directors of the Company may
at any time and from time to time exercise any and all rights and duties of the
Committee under the Plan. The Committee may delegate any of its responsibilities
under the Plan by designating in writing other persons who carry out any or all
of such responsibilities.
(c) MAJORITY RULE. The Committee shall act by a majority of
its members in office. The Committee may act either by vote at a
meeting or by a memorandum or other written instrument signed by a
majority of the Committee.
(d) Compensation; Professional Assistance; Good Faith
Actions. Each member of the Committee who is an employee of the
Company or a Subsidiary shall receive no additional compensation for
his or her services under the Plan. Each Committee member who is not
an employee of the Company or a Subsidiary shall receive such
compensation for his or her services under the Plan as may be
determined by the Board of Directors of the Company, or its delegate.
All expenses and liabilities incurred by members of the Committee in
connection with administration of the Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company, and
its officers and directors shall be entitled to rely upon the advice,
opinions, or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Participants, the Company and all
other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Options, and all members
of the Committee shall be fully protected by the Company in respect to
any such action, determination or interpretation.
11. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan nor any Option shall be construed to give any
person (including any Eligible Employee or Participant) the right to remain in
the employ of the Company or a Subsidiary or to affect the right of the Company
and Subsidiaries to terminate the employment of any person (including any
Eligible Employee or Participant) at any time with or without cause, to the
extent otherwise permitted under law.
12. TERM OF PLAN.
No Option may be granted during any period of suspension of the Plan
or after termination of the Plan, and in no event may any Option be granted
under the Plan after five years from the commencement of the initial Option
Period.
13. AMENDMENT OF THE PLAN.
The Board of Directors of the Company, or its delegate, may amend,
suspend, or terminate the Plan at any time; provided that approval by the vote
of the holders of more than 50% of the outstanding voting power present, or
represented by proxy, and entitled to vote shall be required to amend the Plan
to increase the number of shares of Stock reserved for the Options under the
Plan.
14. EFFECT UPON OTHER PLANS.
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary, except to the
extent required by law. Nothing in this Plan shall be construed to limit the
right of the Company or any Subsidiary (a) to establish any other forms of
incentives or compensation for employees of the Company or any Subsidiary or (b)
to grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
15. NOTICES.
Any notice to be given under the terms of the Plan to the Company
shall be addressed to the Company in care of the Committee and any notice to be
given to the Eligible Employee shall be addressed to the Eligible Employee at
his or her last address as reflected in the Company's records. By a notice given
pursuant to this paragraph, either party may hereafter designate a different
address for notices to be given to it or the Eligible Employee. Any notice which
is required to be given to the Eligible Employee shall, if the Eligible Employee
is then deceased, be given to the Eligible Employee's personal representative if
such representative has previously informed the Company of his or her status and
address by written notice under this paragraph. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office,
branch post office, or other depository regularly maintained by the United
States Postal Services.
16. TITLES.
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
