<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[x] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Ambassador Apartments, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
77 WEST WACKER DRIVE
SUITE 4040
CHICAGO, ILLINOIS 60601
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Ambassador Apartments, Inc., which will be held at the Union League Club of
Chicago, 65 West Jackson Boulevard, fifth floor, Chicago, Illinois on Thursday,
May 15, 1997, at 12:00 noon (local time).
At the Annual Meeting, stockholders will be asked to elect a total of
four directors, three of whom will be elected by the holders of the Common
Stock and the Class A Preferred Stock voting together as single class (two for
three-year terms and one for a one-year term) and one of whom will be elected
by the holders of the Class A Preferred Stock (for a three-year term). The
stockholders will also be asked to approve an amendment to the Company's 1994
Stock Incentive Plan, to approve the Company's 1996 Stock Incentive Plan and to
approve the Company's 1997 Stock Incentive Plan. Information about the
nominees and the additional proposals is contained in the attached Proxy
Statement.
The Company's management would greatly appreciate your attendance at
the Annual Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, IT IS MOST IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly,
please sign, date and return the enclosed proxy card which will indicate your
vote on the election of directors, approval of the amendment to the 1994 Stock
Incentive Plan, approval of the 1996 Stock Incentive Plan and approval of the
1997 Stock Incentive Plan. If you do attend the meeting and desire to vote in
person, you may do so by withdrawing your proxy at that time.
I sincerely hope you will be able to attend the Annual Meeting and look
forward to seeing you on May 15, 1997.
Sincerely,
/s/ David M. Glickman
-----------------------
David M. Glickman
Chief Executive Officer
April 21, 1997
<PAGE> 3
AMBASSADOR APARTMENTS, INC.
77 WEST WACKER DRIVE
SUITE 4040
CHICAGO, ILLINOIS 60601
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1997
The Annual Meeting of Stockholders of Ambassador Apartments, Inc. (the
"Company") will be held on Thursday, May 15, 1997, at 12:00 noon (local time)
at the Union League Club of Chicago, 65 West Jackson Boulevard, fifth floor,
Chicago, Illinois for the following purposes:
(1) To elect a total of four directors, three of whom will be elected by the
holders of the Common Stock and the Class A Preferred Stock voting
together as a single class (two for three-year terms and one for a
one-year term) and one of whom will be elected by the holders of the Class
A Preferred Stock (for a three-year term).
(2) To approve an amendment to the 1994 Stock Incentive Plan.
(3) To approve the 1996 Stock Incentive Plan.
(4) To approve the 1997 Stock Incentive Plan.
(5) To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on March 31, 1997,
will be entitled to notice of, and to vote at, the Annual Meeting or at any
adjournment thereof. Each stockholder, even though he or she may presently
intend to attend the Annual Meeting, is requested to execute and date the
enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any stockholder present at the Annual Meeting may withdraw his or
her proxy card and vote in person on each matter properly brought before the
Annual Meeting.
Because two classes of stock of the Company are outstanding, a separate
form of proxy has been prepared with respect to each class of stock: a white
proxy which relates to the Company's Common Stock and a blue proxy which
relates to the Company's Class A Preferred Stock. Stockholders who own of
record shares of only one class of stock are being furnished only with the
proxy relating to that class. Stockholders who own of record shares of both
classes of stock are being furnished with both proxies (in separate mailings,
each of which also includes a copy of this notice and proxy statement). Please
sign, date and mail the enclosed proxy promptly in the enclosed envelope, so
that your shares of stock may be represented at the Annual Meeting.
Stockholders who receive both proxies must complete, sign and return both
proxies in order for the shares of both classes to be voted by proxy.
By Order of the Board of Directors,
/s/ Thomas J. Coorsh
--------------------
Thomas J. Coorsh
Secretary
April 21, 1997
Chicago, Illinois
<PAGE> 4
AMBASSADOR APARTMENTS, INC.
77 WEST WACKER DRIVE
SUITE 4040
CHICAGO, ILLINOIS 60601
-------------------------
PROXY STATEMENT
---------------
GENERAL
This Proxy Statement is furnished to the stockholders of Ambassador
Apartments, Inc., a Maryland corporation (the "Company"), in connection with
the solicitation of proxies for use at the Company's Annual Meeting of
Stockholders to be held on Thursday, May 15, 1997, at 12:00 noon (local time)
and at any adjournment thereof (the "Annual Meeting"). The Annual Meeting will
be held at the Union League Club of Chicago, 65 West Jackson Boulevard, fifth
floor, Chicago, Illinois.
This solicitation is being made on behalf of the Board of Directors of
the Company, whose principal executive offices are located at 77 West Wacker
Drive, Suite 4040, Chicago, Illinois 60601, telephone (312) 917-1600. This
Proxy Statement, the applicable proxy card, the Notice of Annual Meeting of
Stockholders and the Company's 1996 Annual Report were first mailed to
stockholders on or about April 21, 1997.
The shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), and the Company's Class A Senior Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Class A Preferred Stock")
represented by a proxy in the form enclosed with this Proxy Statement, if such
proxy is properly executed and is received by the Company prior to or at the
Annual Meeting, will be voted in accordance with the specifications made
thereon. Proxies on which no specification has been made by the stockholder
will be voted in the election of directors in favor of the persons named in the
following tables as nominees for election by such classes of stock (all of whom
are now serving as directors) and in favor of the other proposals listed in
this Proxy Statement and on the applicable proxy.
Any proxy given by a stockholder may be revoked at any time before its
exercise by sending a subsequently dated proxy or by giving written notice of
revocation to the Company, in each case, to Thomas J. Coorsh, Secretary, at the
address set forth above. Stockholders who attend the Annual Meeting may
withdraw their proxies at any time before their shares are voted by voting
their shares in person.
Stockholders of record at the close of business on March 31, 1997, are
entitled to notice of and to vote at the Annual Meeting. On March 31, 1997,
there were 9,176,180 shares of Common Stock and 1,351,351 shares of Class A
Preferred Stock issued and outstanding. Each share of Common Stock is entitled
to one vote per share (9,176,180 votes in the aggregate) and each share of
Class A Preferred Stock is entitled to approximately 0.926 votes per share
(1,251,251 votes in the aggregate) with respect to the election of the three
Common Directors (as defined below), the approval of the amendment to the 1994
Stock Incentive Plan, the approval of the 1996 Stock Incentive Plan, the
approval of the 1997 Stock Incentive Plan and each other matter which may
properly come before the Annual Meeting or any adjournment thereof. In
addition, each share of Class A Preferred Stock is entitled to one vote per
share (1,351,351 votes in the aggregate) with respect to the election of the
Class A Director (as defined below). The presence at the Annual Meeting, in
person or by proxy, of the holders of Common Stock and Class A Preferred Stock
entitled to cast at least a majority of the votes which such shares are
entitled to vote at the Annual Meeting on matters other than the election of
the Class A Director is required in order to establish a quorum of the purpose
of considering such matters, and the presence at the Annual Meeting, in person
or by proxy, of the holders of at least a majority of the Class A Preferred
Stock is required in order to establish a quorum for the purpose of electing
the Class A Director.
1
<PAGE> 5
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Board of Directors (the "Board") currently consists of eight
members who are divided into three classes generally serving staggered three-
year terms. One class consists of three directors whose current term expires in
1997 (all of whom will be nominated for an additional three- year term for
election at the Annual Meeting), one class consists of two directors whose term
expires in 1998 (one of whom was appointed by the Board to fill a vacancy and
who must be elected for a one-year term at the Annual Meeting to remain a
director) and one class consists of three directors whose term expires in 1999.
Four directors are to be elected at the Annual Meeting, three of whom
will be elected by the holders of the Common Stock and the Class A Preferred
Stock voting together as a single class (the "Common Directors") and one of
whom will be elected by the holders of the Class A Preferred Stock (the "Class
A Director"). Two of the Common Directors and the Class A Director will be
elected for three-year terms, and one of the Common Directors will be elected
for a one-year term, in each case, serving until their respective successors
are elected and qualified. The Company's Articles of Incorporation provide
that so long as Five Arrows Realty Securities L.L.C. ("Five Arrows") or an
affiliate or successor is the holder of at least 675,675 shares of Class A
Preferred Stock or an amount of Class A Preferred Stock which if converted into
Common Stock would exceed 5% of the Common Stock on a fully diluted basis, the
holders of the Class A Preferred Stock shall have the special right, voting
separately as a single class, to elect one director or two directors if certain
dividend or earnings levels are not met. As of the record date, Five Arrows
owned more than 675,675 shares of Class A Preferred Stock and such dividend and
earnings levels have been satisfied, and thus the holders of the Class A
Preferred Stock are entitled, voting separately as a single class, to elect one
Class A Director. The remainder of the directors are to be elected by the
holders of the Common Stock and the Class A Preferred Stock voting together as
a single class.
The election of the Common Directors will require the affirmative vote
of the holders of a plurality of the Common Stock and the Class A Preferred
Stock, voting together as a single class, whose holders are present in person
or represented by proxy, and the election of the Class A Director will require
the affirmative vote of the holders of a plurality of the Class A Preferred
Stock present in person or represented by proxy. Except to the extent that
stockholders voting in a particular class indicate otherwise on their proxies
solicited by the Board relating to such class, the holders of such proxies
intend to vote such proxies in the election of directors for the persons named
in the following tables as nominees for election by such class, provided that
if any of the nominees for election by such class shall be unable or if a
nominee should decide not to be a candidate for election as a director at the
Annual Meeting, the proxies solicited will be voted in favor of the remaining
nominees listed in the tables below and may be voted for a substitute nominee
in accordance with the best judgment of the person acting under such proxies.
The Board does not know of any reason why any of the listed nominees would fail
to be a candidate at the Annual Meeting and accordingly does not have any
substitute nominees. The information below concerning each nominee and
director has been furnished to the Company by such nominee or director.
The information below sets forth, as of April 7, 1997, (i) each nominee
for election and (ii) each director not standing for re-election this year, in
each case including such nominee/director's name, business experience during
the past five years, other directorships held, age, the year such
nominee/director was first elected a director of the Company and the year such
nominee/director's term expires or would expire if elected at the Annual
Meeting as described in this Proxy Statement.
2
<PAGE> 6
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM BY THE
HOLDERS OF THE COMMON STOCK AND THE CLASS A
PREFERRED STOCK VOTING TOGETHER AS A SINGLE CLASS
(COMMON DIRECTORS)
<TABLE>
<CAPTION>
Year First
Elected a Term
Age Director Expires
Name of Nominee Business Experience <C> <C> <C>
<S> <C>
NORMAN R. BOBINS Director of the Company since August 1994. 54 1994 2000
Mr. Bobins has served as President
and Chief Executive Officer of LaSalle
National Bank since April 1, 1991. From
1983 to 1990, Mr. Bobins was President of
Exchange Bankcorp, Inc. During that
time, he was also Vice Chairman of Exchange
National Bank, at which he was a
Senior Executive Vice President from
1981 to 1983. Mr. Bobins is a director of
LaSalle National Corporation, LaSalle National
Trust, N.A., Transco, Inc. and
Midwestern University, is a trustee of DePaul
University and is on the Illinois
Economic Development Board.
MICHAEL W. RESCHKE Director of the Company since August 1994 and 41 1994 2000
the Chairman of the Board of Directors of the
Company from August 1994 to March 1995. Mr. Reschke
founded The Prime Group, Inc. ("Prime Group") in 1981
and, since that time, has served as its Chairman of
the Board and Chief Executive Officer. Mr. Reschke also
is the Chairman of Prime Group's Executive Committee
and is Chairman of the Board of Prime Retail, Inc.,
a real estate investment trust that develops and owns
factory outlet malls. Mr. Reschke is a licensed attorney
in the State of Illinois and is a Certified Public Accountant.
</TABLE>
3
<PAGE> 7
NOMINEE FOR ELECTION FOR A ONE-YEAR TERM BY THE
HOLDERS OF THE COMMON STOCK AND THE CLASS A
PREFERRED STOCK VOTING TOGETHER AS A SINGLE CLASS
(COMMON DIRECTOR)
<TABLE>
<CAPTION>
Year First
Elected a Term
Name of Nominee Business Experience Age Director Expires
- --------------- ------------------- --- -------- -------
<S> <C> <C> <C> <C>
DEBRA A. CAFARO Director and President of the Company since 39 1997 1998
April 1997, appointed to fill the vacancy
created by the resignation of Richard F.
Cavenaugh. Ms. Cafaro was an initial
member of the Chicago law firm of
Barack Ferrazzano Kirschbaum Perlman
and Nagelberg, becoming a partner in 1987,
where her areas of concentration
were finance (including tax-exempt debt)
and real estate. Ms. Cafaro is
admitted to the Bar in Illinois and
Pennsylvania. She is a member of NAREIT
and both the American and Chicago Bar
Associations.
</TABLE>
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM BY
THE HOLDERS OF THE CLASS A PREFERRED STOCK
(CLASS A DIRECTOR)
<TABLE>
<CAPTION>
Year First
Elected a Term
Name of Nominee Business Experience Age Director Expires
- --------------- ------------------- --- --------- -------
<S> <C> <C> <C> <C>
33 1996 2000
MATTHEW W. Director of the Company since August 1996.
KAPLAN Appointed to fill the vacancy created by
the issuance of the Class A Preferred Stock.
Since 1992, Mr. Kaplan has been employed as
a Senior Vice President of Rothschild Realty,
Inc. ("Rothschild Realty") where he is responsible
for its securities investment activities.
Mr. Kaplan is also a manager of Rothschild Realty
Investors II L.L.C. ("Rothschild Investors"),
the sole managing member of Five Arrows. From
1990 to 1992, Mr. Kaplan served in the Corporate
Finance Department of Rothschild Realty's affiliate
Rothschild, Inc. From 1988 until 1990, Mr.
Kaplan was a management consultant with Touche
Ross & Co.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF THE
NOMINEES LISTED ABOVE.
4
<PAGE> 8
MEMBERS OF THE BOARD OF DIRECTORS NOT
STANDING FOR RE-ELECTION THIS YEAR
<TABLE>
<CAPTION>
Year First
Elected a Term
Age Director Expires
Name of Director Business Experience <C> <C> <C>
- ---------------- ------------------- --- -------- -----
<S> <C> 45 1994 1999
David M. Glickman Chairman of the Board since
March 1995 and Chief
Executive Officer and
Director of the Company since
August 1994. From May 1992
to August 1994, Mr. Glickman
served as Executive Vice
President of Prime Group and
was a member of Prime Group's
Executive Committee. For more
than 20 years prior to joining
Prime Group, Mr. Glickman was
employed by Heitman Financial
Ltd., and from 1983 to 1992 served
as President and as a director
of Heitman Advisory Corporation,
a registered investment advisor
specializing in real estate asset
management on behalf of tax-exempt
and other institutional investors
David B. Heller Director of the Company since August 64 1994 1999
1994. Mr. Heller has served as President
and as a director of Advisory Research,
Inc., an investment advisory firm, since
1973. Mr. Heller is a director of Land's
End, Inc. and was a Governor of the Midwest
Stock Exchange and the Chicago Board of the
Central Market Advisory Committee to the
Securities and Exchange Commission.
Richard F. Levy Director of the Company since August 66 1994 1999
1994. Mr. Levy's professional corporation
was, until May 1996, a partner in the law
firm of Kirkland & Ellis, Chicago, Illinois.
In May 1996, Mr. Levy's professional
corporation became a partner in the law firm
of Altheimer & Gray, Chicago, Illinois. Mr.
Levy is a director of Amalgamated Investments
Company, the parent of Amalgamated Bank of
Chicago.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
Year First
Elected a Term
Name of Director Business Experience Age Director Expires
- ---------------- ------------------- --- --------- -------
<S> <C> <C> <C> <C>
Jane R. Patterson Director of the Company since 38 1994 1998
August 1994. Ms. Patterson has
been Executive Director of the
Illinois State Board of Investment
since 1991. Ms. Patterson was
Director of Corporate Finance and
Director of Investments of Sara
Lee Corporation from 1991 and 1988,
respectively, until 1991. From
1987 to 1988, Ms. Patterson was
Director of Pensions and Investments
at CBS Records, Inc. and from 1985 to
1987 was Manager of Investment
Administration and then Director of
Equity Planning at CBS, Inc.
</TABLE>
DIRECTORS' COMPENSATION
Common Directors who are not employees of the Company receive cash or,
at the director's election, pursuant to the Company's deferred compensation
plan (as described below) a deferred amount equal to an annual fee of $10,000,
plus a fee of $2,500 for each meeting of the Board attended in person, a fee of
$500 for each committee meeting attended in person, and out-of-pocket expenses
for each Board or committee meeting attended in person. The deferred
compensation plan for non-employee directors of the Company funds, for
bookkeeping purposes only, amounts otherwise payable as cash compensation into
a deferred compensation cash account ("Cash Account") through which directors
can purchase shares of the Company's Common Stock in their deferred
compensation stock account ("Stock Account"). The directors may purchase
shares in the Stock Account on the 10th calendar day following each calendar
quarter at the current market price of the Company's Common Stock on that date.
The Stock Account is increased for any dividends deemed to be paid on the stock
in the same manner as dividends are paid on the Company's Common Stock. The
foregoing accounts are for bookkeeping purposes only and do not represent
actual cash or shares of the Company's Common Stock. All distributions from
the deferred compensation plan are made in cash at the expiration of the
director's term or other such date as the director may request. Two of the
non-employee directors (Mr. Heller and Mr. Levy) are participants in the
deferred compensation plan for non-employee directors.
Pursuant to the Company's 1994 Stock Incentive Plan, each non-employee
director (other than Mr. Reschke and Mr. Kaplan) received an option to acquire
up to 7,500 shares of Common Stock upon his or her initial election to the
Board. Mr. Reschke received an option to acquire 90,000 shares of Common Stock
upon his election to the Board. All of these options are exercisable at a
price of $16.00 per share, vest in installments at a rate of 33-1/3% per year
over the three-year period commencing August 31, 1995 (33-1/3% on August 31,
1995 and 1/12 of 33- 1/3% monthly thereafter), and have a term of ten years.
See "Compensation of Executive Officers -- Stock Incentive Plans."
On December 19, 1996, pursuant to the 1996 Stock Incentive Plan, the
Plan Committee awarded each non-employee director (other than Mr. Kaplan),
subject to stockholder approval of such plan, an option to acquire up to 7,500
shares of Common Stock. All of these options are exercisable at a price of
$22.00 per share, vest in equal installments at a rate of 25% per year over the
four-year period commencing December 19, 1996 (1/48 monthly), and have a term
of ten years.
6
<PAGE> 10
BOARD OF DIRECTORS MEETINGS
In 1996, the Board of Directors held 10 special meetings to approve
acquisitions and financings and 6 regular meetings. During 1996, each director
attended at least 75% of all meetings of the Board and of each committee of
which such director is a member.
BOARD COMMITTEES
In accordance with the By-Laws of the Company, the Board of Directors
has established an Executive Committee, an Audit Committee, a Compensation and
Benefits Committee, a Nominating Committee and a Plan Committee. No member of
these committees, other than the Executive Committee, is an employee of the
Company.
The EXECUTIVE COMMITTEE is currently composed of Messrs. Glickman,
Heller and Kaplan. The function of the Executive Committee is to exercise all
the powers and authority of the Board. However, no action may be taken by the
Executive Committee unless it unanimously certifies, concurrently with the
taking of such action, that in its opinion an emergency exists that makes it
impossible or impracticable to submit to the entire Board the issue requiring
such action. The Executive Committee did not meet in 1996.
The AUDIT COMMITTEE is currently composed of Ms. Patterson, Mr. Kaplan
and Mr. Reschke. The functions of the Audit Committee are to recommend to the
Board the independent public accountants to be engaged by the Company; to
review with the independent public accountants the plans and results of the
audit engagement; to approve professional services provided by the independent
public accountants and review their independence; and to consider the range of
audit and non-audit fees and review any recommendations made by the Company's
auditors regarding the Company's accounting methods and the adequacy of its
systems of internal control. No member of the Audit Committee is an employee
of the Company. The Audit Committee met once in 1996.
The COMPENSATION AND BENEFITS COMMITTEE is currently composed of
Messrs. Bobins, Kaplan and Levy. The functions of the Compensation and
Benefits Committee are to make recommendations to the Board with respect to
compensation of executive officers of the Company, to administer the Company's
bonus plans and to make recommendations to the Board with respect to the
Company's compensation policies. No member of the Compensation and Benefits
Committee is an employee of the Company. The Compensation and Benefits
Committee met twice in 1996.
The NOMINATING COMMITTEE is currently composed of Messrs. Heller,
Kaplan, Reschke and Ms. Patterson. The function of the Nominating Committee is
to nominate persons for election to the Board. The Nominating Committee will
consider nominees recommended by stockholders but has not established any
procedure heretofore. No member of the Nominating Committee is an employee of
the Company. The Nominating Committee met once during 1996.
THE PLAN COMMITTEE is currently composed of Ms. Patterson, Mr. Bobins
and Mr. Kaplan. The function of the Plan Committee is to administer the
Company's stock incentive plans. No member of the Plan Committee is an
employee of the Company. The Plan Committee met once in 1996.
7
<PAGE> 11
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Compensation and Benefits Committee of the Board (the "Committee")
consists of three directors, Messrs. Bobins, Kaplan and Levy, who are not
employees of the Company. The Committee reviews and makes recommendations to
the Board regarding the Company's compensation policies, including the
compensation of the Company's executive officers, and administers the Company's
employee benefit and incentive compensation plans other than the Stock
Incentive Plans, which are administered by the Plan Committee consisting of Mr.
Bobins, Mr. Kaplan and Ms. Patterson. The Committee has general review
authority over compensation levels of all corporate officers and key management
personnel and also considers and recommends new benefit programs from time to
time. However, the Board has the sole authority to set officers' compensation
and to adopt new benefit plans.
This Report describes the principal elements of the Company's
compensation policies and practices as administered by the Committee and
reviews the factors that affected the annual and long-term compensation of the
Company's executive officers, including Mr. Glickman as chief executive
officer, during 1996. The Report also describes certain compensation-related
matters that were reviewed by the Committee and acted on by the Board after
1996 but before this Report was prepared.
OVERALL POLICY
The key elements of the Company's executive compensation program
consist of base salary, bonuses and long-term incentive opportunities,
including stock options. The program is intended to enable the Company to
attract, motivate and retain senior management by providing a fully competitive
total compensation package based on both individual and corporate performance,
taking into account both annual and long-term performance goals, and
recognizing individual initiative and achievements. It includes what the
Committee believes are competitive base salaries which reflect individual
performance; annual variable performance incentive opportunities payable in
cash; and a program contingent on the Company's long-term performance. The
Committee believes that stock ownership by management and stock-based
performance compensation arrangements aid in aligning management's and
stockholders' interests and in enhancing stockholder value. Accordingly, these
elements play an important role in the total compensation packages for the
Company's executive officers.
The compensation policy of the Company is that a portion of the annual
compensation of each officer relates to and must be contingent upon the
performance of the Company, as well as the individual contribution by each
officer. As a result, a portion of an executive officer's annual compensation
is variable according to corporate and individual performance.
ANNUAL COMPENSATION PROGRAM
Annual total cash compensation for senior management consists of base
salary and bonuses.
Base salaries for the Named Executives who were employed by the
Company at the beginning of 1996, including Mr. Glickman, were determined
initially in accordance with the compensation levels set forth in the Company's
prospectus dated August 24, 1994 ("Prospectus"), issued in connection with the
Company's initial public offering (the "Offering"), and as reflected in the
employment agreements the Company had with each such officer. See "Executive
Employment Agreements" in this Report below and "Compensation of Executive
Officers -- Employment Agreements" elsewhere in this Proxy Statement.
Mr. Coorsh joined the Company as Senior Vice President in June 1996
and the Company has recently hired Ms. Cafaro as its President. The base
salaries for these individuals were determined on the basis of the
responsibilities of their respective positions for which they were hired, the
nature and extent of their previous business experience and the competitive
nature of the marketplace for executive talent in the real estate industry.
The Committee anticipates that similar factors would be considered with respect
to the employment of other executives in the future.
Salary adjustments have been and may in the future be determined by
evaluating the performance of the Company and of each executive officer, and
have and will also take into account changing responsibilities of particular
8
<PAGE> 12
individuals. The Committee considers non-financial performance measures,
including, where appropriate, such elements as contribution to corporate goals
regarding employee morale and team-building, efficient use of corporate
resources, public opinion/corporate image, employee retention and leadership
development, and successful tenant and vendor relations. Based on the
foregoing, Mr. Peterson's base salary was increased from $125,000 per year to
$140,000 per year in January 1996. In addition, in January 1997, the Company
increased the annual base salaries for Mr. Glickman from $200,000 to $250,000,
for Mr. Peterson from $140,000 to $150,000 and for Mr. Coorsh from $130,000 to
$140,000.
The performance element of annual compensation for the Company's
senior management is provided through bonuses. See "Compensation of Executive
Officers -- Bonuses." The amount of any such bonus is based in part on the
performance of the Company and of the executive officer, including the
non-financial performance measures discussed above. During 1996, the Company
paid bonuses of $150,000 to Mr. Glickman, $75,000 to Mr. Cavenaugh and $50,000
to Mr. Peterson. In January 1997, the Company paid bonuses of $200,000 to Mr.
Glickman, $100,000 to Mr. Peterson and $30,000 to Mr. Coorsh.
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for senior management consists of
options granted under the 1994 Stock Incentive Plan (the "1994 Stock Incentive
Plan"), as amended, the 1996 Stock Incentive Plan (the "1996 Stock Incentive
Plan") and the 1997 Stock Incentive Plan (the "1997 Stock Incentive Plan").
The 1994 Stock Incentive Plan, the 1996 Stock Incentive Plan and the 1997 Stock
Incentive Plan are referred to collectively in this Report and elsewhere in
this Proxy Statement as the "Stock Incentive Plans." All of the senior
executive officers and all other employees are entitled to participate in the
Stock Incentive Plans, which are described elsewhere in this Proxy Statement.
See "Summary of the Stock Incentive Plans."
During 1996, the Committee reviewed the availability of shares for the
grant of options under the 1994 Stock Incentive Plan and determined that there
were insufficient shares available to meet the Company's goals of providing
significant stock-based incentives to senior management. Indeed, due to
insufficient availability of shares, the Board granted 44,000 stock options
under the 1994 Stock Incentive Plan, subject to stockholder approval of an
amendment to increase the shares available under that Plan. Accordingly, the
Committee recommended adoption of the 1996 Stock Option Plan. As originally
proposed to and approved by the Board, the 1996 Stock Incentive Plan would have
provided for the issuance of up to 200,000 options, subject to stockholder
approval of such Plan; this number was increased to 250,000 in March 1997 in
connection with the Committee's ongoing review of the sufficiency of available
stock options. In addition, in March 1997, the Committee recommended and the
Board approved, subject to stockholder approval, the 1997 Stock Incentive Plan,
which provides for the grant of options with respect to up to 1,600,000 shares
of Common Stock.
In making the foregoing recommendations, the Committee reviewed and
considered the compensation environment in the real estate industry, including
the compensation arrangements and the amount of stock options as a percent of
total capital authorized at certain other real estate investment trusts. The
companies used for this comparison purpose were not the same as those
constituting the industry group index used for the Comparison of Cumulative
Total Returns set forth elsewhere in this Proxy Statement.
EXECUTIVE EMPLOYMENT AGREEMENTS
In April 1997, the Company entered into new employment agreements with
Mr. Glickman, Mr. Peterson and Mr. Coorsh which replace existing agreements.
In addition, the Company entered into an employment agreement with Ms. Cafaro
in connection with her recent employment by the Company. These employment
agreements establish employment terms expiring December 31, 1999, and provide,
among other things, for payments to be made to the executives in the event of a
change of control of the Company. The employment agreements are described
elsewhere in this Proxy Statement. See "Compensation of Executive Officers --
Employment Agreements."
9
<PAGE> 13
The Committee reviewed the terms of the executive employment
agreements and recommended them to the Board of Directors. In that regard, the
Committee reviewed and considered the compensation environment for executives
in the real estate industry and placed considerable emphasis on the desire to
retain the current senior executives during a time of uncertainty that could
occur during a change in control of the Company. The Committee considered the
impact of provisions of the Internal Revenue Code that limit the Company's
ability to deduct certain compensation payments for federal income tax purposes
unless certain conditions are met. In general, the Committee sought to develop
employment terms which result in the full deductibility of compensation
payments that the Company makes. However, particularly in the event of a
change in control, it is possible that some portion of the compensation paid to
executives under the employment agreements would not be deductible. The
Committee took into consideration that the Company, as a real estate investment
trust, is allowed a deduction for dividends paid to stockholders, which enables
the Company to avoid paying income taxes, although a disallowance of the
Company's compensation deductions would increase the amount of the Company's
"earnings and profits," and hence would increase the amount of distributions to
stockholders that are treated as taxable dividends (as opposed to a return of
capital) for federal income tax purposes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Levy practices law through a professional corporation which, until
May 1996, was a partner in the law firm of Kirkland & Ellis. Kirkland & Ellis
has in the past and is expected in the future to render legal services to the
Company. In May 1996, Mr. Levy's professional corporation became a partner in
the law firm of Altheimer & Gray. Altheimer & Gray has in the past and is
expected in the future to render legal services to the Company. Matthew W.
Kaplan is a Senior Vice President of Rothschild Realty and a Manager of
Rothschild Investors, the sole managing member of Five Arrows. Mr. Reschke
served as a member of the Committee during 1996. Mr. Reschke currently is a
member of the Board of Directors and the principal equity owner of Prime Group
(one of the Company's largest stockholders assuming exchange for Common Stock
of all Common Units held by Prime Group and its affiliates) and served as
Chairman of the Board of the Company from August 1994 until March 1995. See
"Certain Transactions."
Respectfully submitted,
Richard F. Levy, Chairman
Norman R. Bobins
Matthew W. Kaplan
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the cash
compensation paid by the Company for services rendered during the fiscal years
ended December 31, 1996 and 1995, and the period from inception (August 1994)
to December 31, 1994, to Mr. Glickman, the Company's Chief Executive Officer,
and the Company's other executive officers (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- ------------------------------------
AWARDS PAYOUTS
----------- -----------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS COMPENSA- AWARDS OPTIONS/SARS (#) PAYOUTS SATION
PRINCIPAL POSITION YEAR $(1) ($) TION ($)(2) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David M. Glickman 1996 200,000 150,000 -- -- 80,000(3) -- --
Chief Executive Officer 1995 200,000 -- -- -- -- -- --
1994 66,667 -- -- 90,000 -- --
Richard F. Cavenaugh (4) 1996 175,000 75,000 -- -- 25,000 -- 75,000
President, Chief Operating 1995 175,000 -- -- -- -- -- --
Officer 1994 58,333 -- -- -- 90,000 -- --
Adam D. Peterson 1996 140,000 50,000 -- -- 45,000(5) -- --
Executive Vice President, 1995 118,000 -- -- -- -- -- --
Chief Financial Officer 1994 33,333 -- -- -- 42,000 --
--
Thomas J. Coorsh (6) 1996 65,000 -- -- -- 25,000(7) -- --
Senior Vice President, 1995 -- -- -- -- -- -- --
Secretary 1994 -- -- -- -- -- -- --
</TABLE>
(1) Effective as of January 1, 1997, the 1997 annual salaries of Messrs.
Glickman, Peterson and Coorsh were increased to $250,000, $150,000 and
$140,000 per year, respectively. See "Employment Agreements."
(2) Excludes perquisites and other personal benefits, securities or property;
the aggregate amount of such compensation received by any Named Executive
did not exceed the lesser of $50,000 or 10% of the total of annual salary
and bonus for such officer.
(3) Includes 61,000 options granted subject to approval by the stockholders.
(4) Mr. Cavenaugh resigned effective December 20, 1996. Reflects $75,000 of a
total of $175,000 of other compensation paid to Mr. Cavenaugh in
connection with his resignation. The $100,000 balance was paid to Mr.
Cavenaugh in January 1997. On March 6, 1997, Mr. Cavenaugh exercised his
options.
(5) Includes 25,000 options granted subject to approval by the stockholders.
(6) Mr. Coorsh joined the Company as Senior Vice President effective June 24,
1996, at an annual salary of $130,000.
(7) Includes 25,000 options granted subject to approval by the stockholders.
<PAGE> 15
The following table sets forth the number of shares of Common Stock
subject to options granted to the Named Executives during the last fiscal year
and certain related information.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------------------ Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options/SARs Price Appreciation for
Underlying Granted to Option Term
Options/SARs Employees in Exercise or Base Expiration -------------------
Name Granted Fiscal Year Price Date 5% 10%
- ---- ------------ ----------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
David M. Glickman 30,000 (1) 15.5% $18.65 01/23/06 $351,900 $ 891,600
50,000 (2) 25.9% 22.00 12/19/06 692,000 1,753,000
Richard F. Cavenaugh(3) 25,000 12.9% 18.65 01/23/06 293,250 743,000
Adam D. Peterson 20,000 10.4% 18.65 01/23/06 234,600 594,400
25,000 (2) 13.0% 22.00 12/19/06 346,000 876,500
Thomas J. Coorsh 15,000 (2) 7.8% 17.56 05/31/06 165,600 419,850
10,000 (2) 5.2% 22.00 12/19/06 138,400 350,600
</TABLE>
(1) Includes 11,000 options subject to approval by the stockholders.
(2) All of these options are subject to approval by the stockholders.
(3) Mr. Cavenaugh resigned effective December 20, 1996. On March 6,
1997, Mr. Cavenaugh exercised his options.
The following table sets forth the number of shares of Common Stock
subject to options exercised by the Named Executives during the last fiscal
year and the number and value of unexercised options as of the end of the last
fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number
of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/ SARs
Fiscal Year-End at Fiscal Year-
(#) (1) End($) (1) (2)
------------ --------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ----- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
David M. Glickman -0- -- 74,750/95,250 557,382/359,369
Richard F. Cavenaugh (3) -0- -- 115,000/0 810,625/0
Adam D. Peterson -0- -- 37,667/49,333 273,960/186,414
Thomas J. Coorsh -0- -- 0/25,000 0/107,225
</TABLE>
(1) Options categorized as unexercisable at fiscal year-end were either
unvested or were subject to approval by the stockholders. On April 7,
1997, in connection with the execution of new employment agreements,
all unvested options for Messrs. Glickman, Peterson and Coorsh became
vested.
(2) Market value of underlying securities at year-end ($23-5/8 per share)
price minus the exercise price.
(3) Mr. Cavenaugh's options became fully vested effective upon his
resignation from the Company on December 20, 1996. On March 6, 1997,
Mr. Cavenaugh exercised his options.
12
<PAGE> 16
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with each of Messrs.
Glickman, Cavenaugh and Peterson on August 31, 1994, in connection with the
Offering, and with Mr. Coorsh on May 21, 1996. The agreements establish base
salaries of $200,000, $175,000, $100,000 and $130,000 for Messrs. Glickman,
Cavenaugh, Peterson and Coorsh, respectively. Peterson's salary was increased
to $125,000 per year effective March 20, 1995 and to $140,000 per year on
January 23, 1996. The employment agreements provided for an initial three-year
term for Messrs. Glickman and Cavenaugh, an initial two-year term for Mr.
Peterson and an initial six- month term for Mr. Coorsh. The term of each
agreement would have automatically extended for an additional year after
expiration of the initial term and any extension period unless either the
Company or the executive officer provided the other with at least 120 days'
prior written notice that such term shall not be extended. If the agreements
were terminated by the Company "without cause" or are terminated by the
executive after a "Change of Control" or for "Good Reason" (as such terms are
defined in the agreements), the executive would have been entitled to a lump
sum payment. With regard to Messrs. Glickman and Cavenaugh, such payment would
have been an amount equal to the greater of such executive's annual base salary
of 50 percent of the remaining aggregate base salary due the executive under
his employment agreement. With regard to Messrs. Peterson and Coorsh, such
payment would have been an amount equal to 50 percent of such executive's
annual base salary.
On December 20,1996, Mr. Cavenaugh resigned from the Company. In
connection with his resignation, the Company paid Mr. Cavenaugh $75,000 in
December 1996 and $100,000 in January 1997; the unvested options with respect
to 36,250 shares of Common Stock were vested; he was released from certain
indemnification obligations (see "Certain Transactions -- Transactions between
the Company and Prime Group -- Prime Contribution Agreement -- Representations
and Warranties; Indemnification Obligations"); and he was released from the
noncompetition provisions of his employment agreement. In addition, as a
result of his resignation, the lock-up period restriction on Mr. Cavenaugh's
Common Stock terminated.
On April 7, 1997, the Company entered into a new employment agreement
with Mr. Glickman, the Company's Chief Executive Officer, terminating his
existing employment agreement executed in August 1994, which was scheduled to
expire on August 31, 1997. The new employment agreement provides for an
initial term ending December 31, 1999, and extends automatically for additional
one-year periods unless terminated by either the Company or the executive with
at least 180 days' prior written notice. The employment agreement provides for
a salary of not less than $250,000 in 1997, increasing each year thereafter by
10% per year over the prior year's minimum, bonuses to be paid at the
discretion of the Board and the immediate vesting of all his outstanding
unvested options. In the event there is a Change of Control (as defined in the
employment agreement) during the term of his employment or within 6 months
after the termination of his employment by the Company without Cause or for
Disability or by the executive for Good Reason (each as defined in the
employment agreement), whether or not his employment is terminated in
connection therewith, Mr. Glickman shall receive a lump sum payment equal to
the lesser of $2,590,000 and 2.99 times his "base amount" as defined by Section
280G of the Internal Revenue Code (generally equal to his prior five-year
average compensation), and in the event such payment is subject to excise tax
under Section 4999, an additional amount such that the actual net after-tax
amount received including such excise tax is equal to the hypothetical amount
that he would have received if there were no excise tax imposed and he did not
receive the additional payment. In such event the Company would lose the
deduction for income tax purposes for amounts paid to Mr. Glickman in
connection with the Change of Control in excess of his base amount. In
addition, if Mr. Glickman's employment is terminated by the Company without
Cause or for Disability or by the executive for Good Reason, he shall receive a
lump sum termination payment equal to his annual base salary then in effect for
a period equal to the greater of six months or one-half of the remaining
employment term, unless he has received or within seven months after the date
of termination receives the Change of Control payment described above. Upon
termination of his employment, Mr. Glickman will receive a lump sum payment
equal to $900,000, for which he has agreed during the one-year period following
such termination not to compete with the Company in its principal markets and
to provide the Company with consulting services. The Company's sole recourse
if Mr. Glickman breaches his non-compete or consulting arrangements is
liquidated damages in the amount of $75,000 for each month remaining in such
one-year period after such breach.
13
<PAGE> 17
On April 7, 1997, the Company also entered into new employment
agreements with each of Adam D. Peterson, the Company's Executive Vice
President and Chief Financial Officer, and Thomas J. Coorsh, the Company's
Senior Vice President and Secretary. The new employment agreements of Mr.
Peterson and Mr. Coorsh are substantially identical to the employment agreement
of Mr. Glickman except that the initial minimum salary for Mr. Peterson is
$150,000 and for Mr. Coorsh is $140,000; the amount of the Change of Control
compensation shall not exceed $310,000 for Mr. Peterson and $385,000 for Mr.
Coorsh and neither is entitled to gross-up payments in the event that such
payment would be subject to excise tax; and the noncompete/consulting services
payment is $440,000 for Mr. Peterson (in addition, Mr. Peterson's consulting
period is eighteen months) and $215,000 for Mr. Coorsh.
On April 7, 1997, the Company entered into an employment agreement
with Debra A. Cafaro, the Company's new President. The employment agreement
provides for an initial term ending December 31, 1999, and extends
automatically for additional one-year periods unless terminated by either the
Company or the executive with at least 180 days' prior written notice. The
employment agreement provides for a salary of not less than $225,000 in 1997,
increasing each year thereafter by 10% per year over the prior year's minimum;
a bonus in 1997 of 90% of the bonus paid to Mr. Glickman for 1997 and bonuses
at the discretion of the Board thereafter; and options to purchase 47,010
shares of Common Stock which vest one-fourth each six months and immediately
upon a Change of Control or termination of her employment as a result of her
death, by the Company without Cause or for Disability or by the executive for
Good Reason (each as defined in the agreement). The employment agreement also
provides that the Company will lend to Ms. Cafaro $700,000 in connection with
the purchase of 32,990 of Common Units in Ambassador Apartments, L.P. (the
"Operating Partnership"), of which the Company is the sole general partner, at
a price of $24.25 per Common Unit. The loan bears interest at 6.49% and
matures on the earlier of June 30, 2000, and six months after the termination
of her employment with the Company other than as a result of her death, by the
Company without Cause or for Disability or by executive for Good Reason and is
extended for so long as she is prohibited from exchanging her Common Units and
publicly selling the Common Stock received in exchange for such Common Units,
but not later than June 30, 2000. In the event there is a Change of Control
(as defined in the employment agreement) during the term of her employment or
within 6 months after the termination of her employment by the Company without
Cause or for Disability or by the executive for Good Reason whether or not her
employment is terminated in connection therewith, Ms. Cafaro shall receive a
lump sum payment equal to $700,000 if the Change of Control occurs in 1997 and
twice her annualized prior year's salary and bonus if the Change of Control
occurs thereafter. In addition, if Ms. Cafaro's employment is terminated by
the Company without Cause or for Disability or by the executive for Good
Reason, she shall receive a lump sum payment equal to either $375,000 if such
termination occurs during 1997 or a lump sum payment her equal to annual base
salary then in effect for a period equal to the greater of six months or
one-half of the remaining employment term unless she has received or within
seven months after the date of termination receives the Change of Control
payment described above. Upon termination of her employment other than without
Cause, for Good Reason or for Disability, Ms. Cafaro has agreed during the
one-year period following such termination not to compete with the Company in
its principal markets for which she will receive no additional compensation.
Ms. Cafaro may shorten the duration of her noncompetition period by up to ten
months in exchange for $36,000 per month. In addition, Ms. Cafaro has the
option of canceling a portion of the Change of Control payment and accepting in
lieu thereof the termination compensation she otherwise would have received or
extending the term of her noncompetiton period and receiving additional
noncompetition payments in an amount equal to $24,000 for each of the first
twelve months of such extension and $12,000 for each of the second twelve
months of such extension.
In addition, the current employment agreements of Mr. Glickman and Ms.
Cafaro provide that each will be nominated for election to the Board.
BENEFIT PLANS
The Company's employee incentive programs include the Stock Incentive
Plans and the 401(k) plan.
STOCK INCENTIVE PLANS
The Company has three stock option plans. The 1994 Stock Incentive
Plan for Officers, Directors and Key Employees of Ambassador Apartments, Inc.,
Ambassador Apartments, L.P. and Subsidiaries, as originally adopted by
14
<PAGE> 18
the Board and approved by the stockholders in 1994, provided for the
issuance of options with respect to up to 425,000 shares of Common Stock. In
1996, the Board approved an amendment to this plan (as so amended, the "1994
Stock Incentive Plan"), subject to approval of the stockholders, that would
increase the number of shares of Common Stock with respect to which options may
be granted thereunder to 469,000. As of April 7, 1997, the Board has, subject
to approval of the amendment by the stockholders, granted options with respect
to the 44,000 shares of Common Stock covered by the amendment. The 1996 Stock
Incentive Plan for Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries, was originally
adopted by the Board in December 1996, subject to approval by the stockholders,
and provided for the issuance of options with respect to up to 200,000 shares
of Common Stock. In March 1997, prior to its approval by the stockholders, the
Board amended this plan, subject to approval by the stockholders, to cover
250,000 shares of Common Stock (such plan, as amended, the "1996 Stock
Incentive Plan"). As of April 7, 1997, the Board has granted options with
respect to 169,510 shares of Common Stock under the 1996 Stock Incentive Plan
that are subject to approval of the 1996 Stock Incentive Plan by the
stockholders. The 1997 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries (the "1997 Stock Incentive Plan" and, together with the 1994 Stock
Incentive Plan and the 1996 Stock Incentive Plan, the "Stock Incentive Plans"),
was adopted, subject to approval of the stockholders, by the Board in March
1997 and provides for the issuance of options with respect to up to 1,600,000
shares of Common Stock. As of April 7, 1997, the Board has not granted any
options under the 1997 Stock Incentive Plan. The amendment to increase the
maximum number of options issuable under the 1994 Stock Incentive Plan and each
of the grants made pursuant to the amendment to the 1994 Stock Incentive Plan,
the 1996 Stock Incentive Plan and each of the grants made pursuant to the 1996
Stock Incentive Plan, and the 1997 Stock Incentive Plan are subject to approval
by the stockholders as described elsewhere in this Proxy Statement. For
additional information regarding the Stock Incentive Plans, see "Proposal No.
2: Approval of the Amendment to the 1994 Stock Incentive Plan," "Proposal No.
3: Approval of the 1996 Stock Incentive Plan," "Proposal No. 4: Approval of
the 1997 Stock Incentive Plan" and "Summary of the Stock Incentive Plans."
In August 1994, 90,000 options were granted to Messrs. Glickman and
Cavenaugh and 42,000 options were granted to Mr. Peterson. These options,
which were granted pursuant to the 1994 Stock Incentive Plan, have a ten-year
term, carry an exercise price of $16.00 per share and vest in installments at a
rate of 33-1/3% per year over the three-year period commencing August 31, 1995
(33-1/3% on August 31, 1995 and 1/12 of 33-1/3% monthly thereafter).
In January of 1996, pursuant to the terms of the 1994 Stock Incentive
Plan, the Board granted a total of 75,000 options to the Chief Executive
Officer and the other Named Executives. These options have an exercise price
of $18.65 per share, have a ten-year term, and vest ratably over a four-year
term. Mr. Glickman received 30,000 options (11,000 of which are subject to
approval of the amendment to the 1994 Stock Incentive Plan described in this
Proxy Statement), Mr. Cavenaugh received 25,000 options and Mr. Peterson
received 20,000 options.
On May 31, 1996, pursuant to the terms of the 1994 Stock Incentive
Plan, but subject to stockholder approval of the amendment to such plan as
discussed in this Proxy Statement, options to purchase 15,000 shares of Common
Stock were granted to Mr. Coorsh in connection with his joining the Company as
its Senior Vice President. The options granted to Mr. Coorsh have a ten-year
term, carry an exercise price of $17.56 per share and became fully vested on
December 31, 1996.
In 1996, options to purchase an aggregate of 18,000 shares of Common
Stock were granted to non-executive key employees of the Operating Partnership.
The exercise price of the foregoing options was $16.95 per share, they have a
term of five to ten years and vest in certain cases immediately or up to two
years.
On December 19, 1996, pursuant to the terms of the 1996 Stock
Incentive Plan, but subject to stockholder approval of such plan as discussed
in this Proxy Statement, the Board granted a total of 122,500 options to the
Chief Executive Officer, the Named Executives and certain non-employee
directors. These options have an exercise price of $22 per share, have a
ten-year term, and vest ratably over a four-year term. Mr. Glickman received
50,000 options, Mr. Peterson received 25,000 options and Mr. Coorsh received
10,000 options, and each non-employee director (other than Mr. Kaplan) received
7,500 options.
15
<PAGE> 19
On April 7, 1997, in connection with the execution of the new
employment agreements for Messrs. Glickman, Peterson and Coorsh, all of their
outstanding unvested options became fully vested. In addition, on April 7,
1997, pursuant to the terms of the 1996 Stock Incentive Plan, but subject to
approval of such plan as discussed in this Proxy statement, the Board granted
47,010 options to Ms. Cafaro in connection with the execution of her employment
agreement. The options granted to Ms. Cafaro have a ten-year term, carry an
exercise price of $24.25 per share and vest one-fourth in each six-month period
between April 7, 1997 and April 6, 1999.
BONUSES
A portion of the total compensation for the Named Executives consists
of bonuses awarded at the discretion of the Board. Such bonuses are intended
to identify and to reward superior performance and to provide a competitive
compensation component for attracting and retaining high quality managers.
On January 23, 1996, and January 4, 1997, the Company paid
discretionary bonuses pursuant to the Chief Executive Officer and the Named
Executives as follows:
<TABLE>
<CAPTION>
Bonus Paid Bonus Paid
in 1996 in 1997
------------ ------------
<S> <C> <C>
David M. Glickman, Chief Executive Officer $ 150,000 $ 200,000
Richard F. Cavenaugh, President and Chief Operating Officer $ 75,000 $ --
Adam D. Peterson, Senior Vice President
and Chief Financial Officer $ 50,000 $ 100,000
Thomas J. Coorsh, Senior Vice President and Secretary $ -- $ 30,000
</TABLE>
The Company has approved the grant of up to a total of 5,000 shares of
Common Stock to non-executive employees of the Company and its affiliates for
payment of bonuses. During 1996, 305 shares were granted to non-executive
officer employees.
16
<PAGE> 20
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following is a comparison of the cumulative total stockholder
return, including reinvestment of distributions, on a $100 investment in the
Company's Common Stock with the cumulative total return, including reinvestment
of dividends/distributions, of a $100 investment in (i) the NYSE Composite
Index and (ii) a peer group index for the period from August 24, 1994 (the day
the Common Stock commenced trading) through December 31, 1996.
INDEXED MONTHLY STOCKHOLDER RETURN ANALYSIS
(AUGUST 24, 1994 TO DECEMBER 31, 1996)
TOTAL RETURN PERFORMANCE - INDUSTRY AVERAGE
<TABLE>
<CAPTION>
Ambassador Industry NYSE
DATE Apartments, Inc. Average Composite
- ---- ---------------- -------- ---------
<S> <C> <C> <C>
08/24/94 100.00 100.00 100.00
09/30/94 96.97 99.97 99.11
12/31/94 97.41 101.77 98.03
03/31/95 95.99 96.39 106.62
06/30/95 97.78 102.69 115.59
09/30/95 101.96 106.96 124.86
12/31/95 125.45 114.26 132.18
03/31/96 128.81 117.50 139.81
06/30/96 119.36 120.68 145.59
09/30/96 129.34 127.67 149.75
12/31/96 174.16 148.31 160.85
</TABLE>
The industry average index includes the following companies which in
1994 comprised all publicly listed REITs that invest solely in apartments:
Ambassador Apartments, Inc., AMLI Residential Properties Trust, Apartment
Investment & Management Company, Associated Estates Realty Corporation, Avalon
Properties, Inc., BRE Properties, Inc., Bay Apartment Communities, Berkshire
Realty, Inc., Camden Property Trust, Columbus Realty Trust, Equity Residential
Properties Trust, Essex Property Trust, Evans Withycombe Residential, Gables
Residential Trust, Home Properties of New York, Irvine Apartment Communities,
Inc., Merry Land & Investment, Inc., Mid- America Apartment Community, Oasis
Residential, Inc., Pacific Gulf Properties, Paragon Group, Inc., Post
Properties, Inc., Property Trust America, Charles E. Smith Residential, South
West Property Trust, Inc., Summit Properties, Inc., Town & Country Trust, United
Dominion Realty Trust, Inc., Walden Residential Properties and Wellsford
Residential Property Trust. (Source: REALTY STOCK REVIEW)
17
<PAGE> 21
PROPOSAL NO. 2: APPROVAL OF THE AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN
The 1994 Stock Incentive Plan was adopted by the Company for the
purpose of attracting and retaining officers, directors and key employees. As
originally adopted by the Board and approved by the stockholders in 1994, the
1994 Stock Incentive Plan provided for the issuance of options with respect to
up to 425,000 shares of Common Stock. In 1996, the Board approved an amendment
to the 1994 Stock Incentive Plan (the "Amendment"), subject to approval by the
stockholders, that would increase the number of shares of Common Stock with
respect to which options may be granted under the 1994 Stock Incentive Plan to
469,000. As of April 7, 1997, the Board has, subject to approval of the
Amendment by the stockholders, granted options with respect to the 44,000
shares of Common Stock covered by the Amendment. The full text of the
Amendment and the 1994 Stock Incentive Plan are set forth in Exhibits A1 and
A2, respectively, to this Proxy Statement. For a summary description of the
1994 Stock Incentive Plan and the Amendment and options already granted
thereunder, see "Summary of the Stock Incentive Plans." The present members of
the Board and the Company's officers may benefit from the approval of the
Amendment to the extent they are entitled to receive options thereunder. David
M. Glickman, Chairman of the Board and Chief Executive Officer of the Company,
and Thomas J. Coorsh, Senior Vice President and Secretary of the Company, have
been granted options under the 1994 Stock Incentive Plan which are subject to
approval by the stockholders of the Amendment and therefore have an interest in
and will benefit from approval of the Amendment. The Board believes that the
benefits received by the Company as a result of the incentives created by the
1994 Stock Incentive Plan and the Amendment and the ability of the Company to
retain qualified individuals to serve on the Board and as officers and key
employees of the Company justify the benefit that may be derived by these
individuals. Approval of the Amendment will require the affirmative vote of
the holders of a majority of the Common Stock and Class A Preferred Stock
voting together as a single class whose holders are present in person or
represented by proxy at the Annual Meeting. In the event the Amendment is not
approved by the stockholders, the options with respect to the 44,000 shares of
Common Stock granted under the Amendment will terminate.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
PROPOSAL NO. 3: APPROVAL OF THE 1996 STOCK INCENTIVE PLAN
The 1996 Stock Incentive Plan was adopted by the Company, subject to
approval by the stockholders, for the purpose of attracting and retaining
officers, directors and key employees. The 1996 Stock Incentive Plan was
originally adopted by the Board in December 1996, subject to approval by the
stockholders, and provided for the issuance of options with respect to up to
200,000 shares of Common Stock. In March 1997, prior to its approval by the
stockholders, the Board amended the 1996 Stock Incentive Plan, subject to
approval by the stockholders, to cover 250,000 shares of Common Stock (such
plan, as amended, the "1996 Stock Incentive Plan"). As of April 7, 1997, the
Board has granted 169,510 options under the 1996 Stock Incentive Plan that are
subject to approval of the 1996 Stock Incentive Plan by the stockholders. The
form of the 1996 Stock Incentive Plan is set forth in Exhibit B to this Proxy
Statement. For a summary description of the 1996 Stock Incentive Plan and
options already granted thereunder, see "Summary of the Stock Incentive Plans."
The present members of the Board and the Company's officers may benefit from
the approval of the 1996 Stock Incentive Plan to the extent they are entitled
to receive options thereunder. David M. Glickman, Chairman of the Board and
Chief Executive Officer of the Company, Debra Cafaro, Director and President of
the Company, Adam D. Peterson, Executive Vice President and Chief Financial
Officer of the Company, Thomas J. Coorsh, Senior Vice President and Secretary
of the Company, and each of the other members of the Board (other than Mr.
Kaplan) have been granted options under the 1996 Stock Incentive Plan subject
to its approval by the stockholders and therefore have an interest in and will
benefit from approval of the 1996 Stock Incentive Plan. The Board believes
that the benefits received by the Company as a result of the incentives created
by the 1996 Stock Incentive Plan and the ability of the Company to retain
qualified individuals to serve on the Board and as officers and key employees
of the Company justify the benefit that may be derived by these individuals.
Approval of the 1996 Stock Incentive Plan will require the affirmative vote of
the holders of a majority of the Common Stock and Class A Preferred Stock
voting together as a single class whose holders are present in person or
represented by proxy at the Annual
18
<PAGE> 22
Meeting. In the event the 1996 Stock Incentive Plan is not approved by the
stockholders, the options with respect to the 169,510 shares of Common Stock
granted under the 1996 Stock Incentive Plan will terminate.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996 STOCK INCENTIVE PLAN.
PROPOSAL NO. 4: APPROVAL OF THE 1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan was adopted by the Company, subject to
approval by the stockholders, for the purpose of attracting and retaining
officers, directors and key employees. The 1997 Stock Incentive Plan was
adopted, subject to approval by the stockholders, by the Board in March 1997
and provides for the issuance of options with respect to up to 1,600,000 shares
of Common Stock. As of April 7, 1997, the Board has not granted any options
under the 1997 Stock Incentive Plan. The form of the 1997 Stock Incentive Plan
is set forth in Exhibit B to this Proxy Statement. For a summary description
of the 1997 Stock Incentive Plan, see "Summary of the Stock Incentive Plans."
The present members of the Board and the Company's officers may benefit from
the approval of the 1997 Stock Incentive Plan to the extent they are granted
options thereunder in the future. The Board believes that the benefits
received by the Company as a result of the incentives created by the 1997 Stock
Incentive Plan and the ability of the Company to retain qualified individuals
to serve on the Board and as officers and key employees of the Company justify
the benefit that may be derived by these individuals. Approval of the 1997
Stock Incentive Plan will require the affirmative vote of the holders of a
majority of the Common Stock and Class A Preferred Stock voting together as a
single class whose holders are present in person or represented by proxy at the
Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997 STOCK INCENTIVE PLAN.
SUMMARY OF THE STOCK INCENTIVE PLANS
The 1994 Stock Incentive Plan, the 1996 Stock Incentive Plan and the
1997 Stock Incentive Plan (together, the "Stock Incentive Plans") were adopted
to enable the Company, the Operating Partnership and their subsidiaries to
attract and retain the services of officers, directors and key employees
considered essential to the success of the Company by offering them an
opportunity to own stock in the Company which will reflect the growth,
development and financial success of the Company.
The full text of the Amendment and the 1994 Stock Incentive Plan are
set forth in Exhibits A1 and A2, respectively, to this Proxy Statement, and the
form of the 1996 Stock Incentive Plan and the 1997 Stock Incentive Plan is set
forth in Exhibit B to this Proxy Statement. The following summary is qualified
in its entirety by reference to Exhibits A1, A2 and B. Except for the
variations described in the following summary, the Stock Incentive Plans are
substantially identical. For additional information regarding the Stock
Incentive Plans, see "Proposal No. 2: Approval of the Amendment to the 1994
Stock Incentive Plan," "Proposal No. 3: Approval of the 1996 Stock Incentive
Plan," "Proposal No. 4: Approval of the 1997 Stock Incentive Plan" and
"Compensation of Executive Officers -- Stock Incentive Plans."
The 1994 Stock Incentive Plan, as originally adopted, provided for the
issuance of options with respect to up to 425,000 shares of Common Stock. In
1996, the Board approved an amendment to the 1994 Stock Incentive Plan, subject
to approval by the stockholders, that would increase the number of shares of
Common Stock with respect to which options may be granted thereunder to
469,000; the 1996 Stock Incentive Plan, subject to approval by the stockholders
provides for the issuance of options with respect to up to 250,000 shares of
Common Stock; and the 1997 Stock Incentive Plan, subject to approval of the
stockholders, provides for the issuance of options with respect to up to
1,600,000 shares of Common Stock. The amendment to increase the maximum number
of options issuable under the 1994 Stock Incentive Plan, the 1996 Stock
Incentive Plan and the 1997 Stock Incentive Plan and each of the grants made
pursuant to the amendment to the 1994 Stock Incentive Plan and the 1996 Stock
Incentive Plan are subject to approval by the stockholders of such amendment
and plans as described elsewhere in this Proxy Statement.
19
<PAGE> 23
Pursuant to the Stock Incentive Plans, key employees (including
officers, whether or not directors, and other employees) and, as described
below, non-employee directors of the Company, the Operating Partnership and
their subsidiaries may be offered the opportunity to acquire shares of Common
Stock through the grant of stock options ("Options"), including nonqualified
stock options ("NQSOs") and incentive stock options which are entitled to
qualify as incentive stock options within the meaning of Section 422 of the
Code ("ISOs"). Under current law, ISOs may only be granted to employees of the
Company itself (or of any corporate subsidiary of which it owns at least 50% of
the voting power), and cannot be granted to directors who are not employees or
to employees of the Operating Partnership (or any other noncorporate
subsidiary). The Plan Committee of the Board of Directors (the "Plan
Committee") may authorize the granting of such Options upon such terms and
conditions and for such periods, up to ten years from the date of the grant, as
it may in its discretion determine, except that under the terms of the 1994
Stock Incentive Plan, other than an initial grant of options with respect to
7,500 shares of Common Stock to each non- employee director at the time such
non-employee director becomes a director of the Company, no additional Options
may be granted to non- employee directors. Under the terms of the 1994 Stock
Incentive Plan, the 1996 Stock Incentive Plan and the 1997 Stock Incentive
Plan, no participant may be granted Options under such plan in any one year to
purchase more than 100,000 shares, 100,000 shares and 1,200,000 shares,
respectively, of Common Stock. In addition, pursuant to the terms of the 1997
Stock Incentive Plan, options may not be granted under the 1997 Stock Incentive
Plan in 1997 with respect to more than 450,000 shares of Common Stock and, in
the aggregate, in 1997 and 1998 with respect to more than 1,000,000 shares of
Common Stock.
As of April 7, 1997, options with respect to 469,000 shares of Common
Stock have been granted pursuant to the 1994 Stock Incentive Plan (44,000 of
which are subject to approval by the stockholders of the Amendment), options
with respect to 169,510 shares of Common Stock have been granted pursuant to
the 1996 Stock Incentive Plan (all of which are subject to approval by the
stockholders of the 1996 Stock Incentive Plan), and no options have been
granted pursuant to the 1997 Stock Incentive Plan. The following table sets
forth as of April 7, 1997, the name and position of such option holder, the
number of shares of Common Stock underlying such options, the market value of
such options, and other related information. For additional information
regarding such options, including the option term, see "Proposal No. 1:
Election of Directors -- Directors' Compensation" and "Compensation of
Executive Officers -- Stock Incentive Plans."
20
<PAGE> 24
OPTIONS GRANTED UNDER THE STOCK INCENTIVE PLANS
<TABLE>
<CAPTION>
1994 Stock Incentive Plan (1) 1996 Stock Incentive Plan (2)
No. of Exercise Market No. of Exercise Market
Shares Price Value Shares Price Value
Name and Position Underlying ($/Share) ($) (3) Underlying ($/Share) ($) (3)
Options (#) Options (#)
<S> <C> <C> <C> <C> <C> <C>
David M. Glickman 90,000 $16.00 $ 742,500 50,000 $22.00 $112,500
Chairman and Chief Executive 30,000 (4) 18.65 168,000
Officer -------- -------
120,000 (4) 910,500
Debra Cafaro -- -- -- 47,010 24.25 0
President
Adam D. Peterson 42,000 16.00 346,500 25,000 22.00 56,250
Executive Vice President 20,000 18.65 112,000
and ------ -------
Chief Financial Officer 62,000 458,500
Thomas J. Coorsh 15,000 (5) 17.56 100,350 10,000 22.00 22,500
Senior Vice President
All Current Executive 197,000 16.00-18.65 1,469,350 132,010 22.00 191,250
Officers
as a Group (four)
All Current Non-Executive 120,000 (6) 16.00 990,000 37,500 (7) 22.00 84,375
Officer Directors as a Group
(five)
All Non-Executive Officer 152,000 (8) 16.00-18.85 -- -- --
Employees as a Group
</TABLE>
(1) 44,000 options granted under the 1994 Stock Incentive Plan are subject
to approval by the stockholders of the Amendment. See footnotes (4),
(5) and (8).
(2) All options granted under the 1996 Stock Incentive Plan are subject to
approval by the stockholders of the 1996 Stock Incentive Plan.
(3) Market value based on common stock closing price on April 7, 1997 of
$24.25 minus the exercise price.
(4) Includes 11,000 options subject to approval by the stockholders of
the Amendment.
(5) Includes 15,000 options subject to approval by the stockholders of
the Amendment.
(6) Includes 90,000 options granted to Mr. Reschke and 7,500 options
granted to each of Messrs. Bobins, Heller and Levy and Ms. Patterson.
(7) Includes 7,500 options granted to each of Messrs. Bobins, Heller,
Levy and Reschke and Ms. Patterson.
(8) Includes 115,000 options granted to Richard F. Cavenaugh, the former
President of the Company, at a weighted exercise price of $16.54,
which have been exercised, and 18,000 options granted to non-executive
officers subject to approval by the stockholders of the Amendment.
The Stock Incentive Plans provide that option exercise prices may not
be less than the fair market value (as defined in the applicable plan) of the
shares of Common Stock on the date of the grant (110% of the fair market value
in the case of an ISO granted to an optionee that owns over 10% of the total
combined voting power of all classes of the Company's stock). The aggregate
fair market value (determined at the time an option is granted) of the shares
of Common Stock with respect to which ISOs are exercisable for the first time
by an option holder during any calendar year under all incentive stock option
plans of the Company (and any subsidiary corporations of the Company) may not
exceed $100,000. Any Option issued under the Stock Incentive Plans will not be
transferable by the holder thereof other than by will or the laws of descent
and distribution or to immediate family or to family partnerships and trusts
and, in the case of the 1996 Stock Incentive Plan and the 1997 Stock Incentive
Plan, to charitable organizations, and may be exercisable during such holder's
lifetime only by the holder or by such holder's guardian, legal representative
or permitted transferee.
With the exception of the grant of Options in connection which the
Company's initial public offering by Common Stock, the automatic grant of
options with respect to 7,500 shares of Common Stock to each non-employee
director at the time of becoming a non-employee director, and the limitation
that no additional grants may be made to non-employee directors under the 1994
Stock Incentive Plan, the Plan Committee selects the employees and directors to
whom Options will be granted and determines the terms of the Options and the
number of shares allocated to each
21
<PAGE> 25
such employee. The Committee may provide that Options issued under the Stock
Incentive Plans will be exercisable from time to time, in installments or
otherwise, and may authorize the granting of such Options upon such other terms
and conditions and for such periods (up to 10 years from the date of the grant)
as it may in its discretion determine. The exercise price for any Option is
generally payable in cash or, in certain circumstances, by the surrender, at the
fair market value on the date the Option is exercised, of shares of Common
Stock. All Options held by an optionee which have not become exercisable
generally will be forfeited automatically if the optionee leaves employment for
any reason other than a termination without Cause by the Company, for Good
Reason by the optionee or, in the case of the 1994 Stock Incentive Plan, a
Change of Control (all as defined in the Stock Incentive Plans), unless provided
otherwise in the award of such option. In addition, if an optionee dies or
becomes completely disabled while an employee or director, the optionee's
unvested options generally will become fully exercisable and remain outstanding
for one year thereafter.
Each of the Stock Incentive Plans will be in effect until the tenth
anniversary of its adoption. The Board of Directors may at any time amend or
terminate the Stock Incentive Plans; provided, however, that without the
consent of the stockholders, the Plan Committee may not materially increase the
maximum number of shares of Common Stock subject to Options, reduce the minimum
Option exercise price, extend the term of the plan or otherwise materially
increase the benefits accruing to participants, and termination will not affect
awards previously granted. Any Options which had vested prior to such a
termination will remain exercisable by the holder thereof until their
expiration date, unless forfeited earlier in accordance with their terms. The
Company registered under the Securities Act of 1933, as amended (the
"Securities Act"), 425,000 shares of Common Stock initially issuable in
connection with Options granted under the 1994 Stock Incentive Plan, and
expects to amend such registration to include an additional 44,000 shares of
Common Stock if the Amendment is approved, and to register under the Securities
Act the 250,000 and 1,600,000 shares of Common Stock issuable in connection
with the 1996 Stock Incentive Plan and the 1997 Stock Incentive Plan,
respectively, if such plans are approved. The Company also expects that
additional Options will be granted under the Stock Incentive Plans if they are
approved.
In the event of a stock dividend, stock split or combination or other
similar change in the number of issued shares of Common Stock, the Plan
Committee will make such adjustments to the Stock Incentive Plans with respect
to the number of unpurchased shares of Common Stock subject to such plans, the
number of shares of Common Stock subject to outstanding Options and the
exercise price specified in outstanding Options as may be determined to be
appropriate and equitable. Furthermore, the Plan Committee may provide that,
in the event of a merger, consolidation, reorganization, dissolution or sale or
exchange of substantially all of the Company's assets, the Options outstanding
will terminate, subject to adjustment by the Plan Committee or by the terms of
the plan or agreement of merger, consolidation, reorganization, dissolution or
sale or exchange of such assets.
Federal Income Tax Consequences. Under present law, upon the grant and
exercise of an ISO under the Stock Incentive Plans, an optionee will not
recognize taxable income for Federal income tax purposes. However, the amount
by which the fair market value of the shares of Common Stock at the time of
exercise exceeds the exercise price will be treated as an adjustment to taxable
income for alternative minimum tax purposes. If the optionee does not dispose
of the shares of Common Stock so acquired until more than one year after its
receipt (and until more than two years after the ISO was granted), gain or loss
recognized on the subsequent disposition of the shares of Common Stock will be
treated as long-term capital gain or loss. Such gain or loss is computed as
the difference between the exercise price and the sale price. If the shares of
Common Stock are disposed of prior to those times, the optionee will recognize
compensation income taxable as ordinary income for Federal income tax purposes
in an amount equal to the lesser of (i) the excess of the fair market value of
the shares of Common Stock on the date of exercise over the exercise price or
(ii) the amount of gain recognized if the disposition is a taxable sale or
exchange. To the extent individual optionees qualify for capital gain
treatment, the Company (or the applicable employer company) will not be
entitled to a deduction for Federal income tax purposes in connection with the
grant or exercise of the ISO. In other cases, the Company (or the employer
company) will be entitled to a Federal income tax deduction at the same time
and in the same amount that the optionee recognizes compensation income taxable
as ordinary income for Federal income tax purposes.
Currently, the maximum tax rate imposed on the net capital gains of
individuals, trusts and estates is 28%. Therefore, recognized net long-term
capital gains are taxed at the lesser of (i) the highest marginal tax rate
applied to the individual's income for such taxable year or (ii) 28%.
Notwithstanding the capital gains treatment described above,
22
<PAGE> 26
the amount by which the fair market value of the shares of Common Stock at the
time of exercise exceeds the exercise price of an ISO will be treated as an
adjustment to the optionee's taxable income for alternative minimum tax
purposes. This adjustment to taxable income may be significant to an optionee.
The optionee may be entitled to a credit against his or her regular tax
liability in subsequent years for the amount of alternative minimum tax
liability incurred in the year of exercise attributable to such adjustment.
Moreover, solely for the purpose of determining alternative minimum tax
liability, the basis of the shares of Common Stock will be increased by the
amount of such adjustment.
Upon the grant of an NQSO, an optionee will not recognize taxable
income for Federal income tax purposes. Upon the exercise of an NQSO, the
optionee will recognize compensation income taxable as ordinary income in an
amount equal to the excess of the fair market value of the shares acquired,
determined at the time of exercise, over the exercise price. The Company (or
the applicable employer company) will be entitled to a Federal income tax
deduction to the extent the optionee recognizes compensation income taxable as
ordinary income for Federal income tax purposes. Special rules govern the
recognition of income by optionees subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
For taxable years beginning on or after January 1, 1994, Section
162(m) of the Code provides that a publicly-held corporation may not deduct
compensation paid to any one of certain specified officers in excess of $1
million per year unless such compensation qualifies as "performance-based"
compensation within the meaning of that Section. Therefore, if the aggregate
taxable income recognized in any year by certain of the executive officers of
the Company, including any income recognized upon the exercise of Options and
any bonuses, exceeds $1 million, the excess generally will not be deductible by
the Company except to the extent that the excess qualifies as performance-based
compensation.
For financial accounting purposes, under GAAP as presently in effect,
the grant or exercise of an Option under the Stock Incentive Plans will not
result in a charge to the Company's net income because the exercise price will
be at least the fair market value of the shares of Common Stock subject thereto
at the date of grant.
23
<PAGE> 27
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth, as of April 7, 1997, certain
information regarding the ownership of shares of Common Stock of the Company
and common units ("Common Units") of the Operating Partnership. The Common
Units are exchangeable for shares of Common Stock on a one- for-one basis,
subject to adjustment in certain circumstances. If all Common Units had been
exchanged on April 7, 1997 (on a one-for-one basis) for shares of Common Stock,
the number of outstanding shares of Common Stock would have increased from
9,176,180 to 10,071,498.
The table sets forth the number of shares of Common Stock and Common
Units beneficially owned by each director of the Company, by each executive
officer of the Company and by all directors and executive officers of the
Company as a group. Unless otherwise indicated, the persons indicated below
have sole voting power and investment power with respect to the Common Stock
and Common Units shown as beneficially owned by them. Certain of these shares
of Common Stock and Common Units are subject to transfer restrictions through
August 31, 1997. See "Certain Transactions -- Lock-up Agreements."
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF COMMON COMMON UNITS PERCENT OF COMMON STOCK
STOCK BENEFICIALLY BENEFICIALLY COMMON STOCK (2) AND COMMON
BENEFICIAL OWNER OWNED (1) OWNED UNITS (3)
- ---------------- ------------------ ------------ ---------------- ------------
<S> <C> <C> <C> <C>
David M. Glickman (4) . . . . . . . . 268,350 156,250 2.84% 2.63%
Adam D. Peterson (5) . . . . . . . . 81,165 15,625 * *
Michael W. Reschke (6) . . . . . . . 765,546 633,046 7.74% 7.54%
Norman R. Bobins (7) . . . . . . . . 8,375 0 * *
Richard F. Levy (7) . . . . . . . . . 18,875 0 * *
Jane R. Patterson (7) . . . . . . . . . 7,875 0 * *
David B. Heller (7) . . . . . . . . . 26,875 0 * *
Debra A. Cafaro (8) . . . . . . . . . . 32,990 32,990 * *
All directors and executive officers 1,210,051 837,911 11.75% 11.69%
as a group (9 persons) (9)
</TABLE>
* Less than 1%
(1) Number of shares includes those options exercisable within 60 days of
April 7, 1997, beneficially owned by such person and includes the
exchange of Common Units beneficially owned by such person.
(2) Assumes exchange only of those Common Units beneficially owned by such
person and exercise of options exercisable within 60 days of April 7,
1997, beneficially owned by such person.
(3) Assumes exchange of all outstanding Common Units and only the exercise
of options exercisable within 60 days of April 7, 1997, beneficially
owned by such person.
(4) All of the 156,250 Common Units owned by Mr. Glickman are pledged to
the Operating Partnership to secure repayment of a $1.0 million loan
made by the Operating Partnership to Mr. Glickman to pay the taxes due
in connection with the transfer of such Common Units to him. See
"Certain Transactions -- Loan to Mr. Glickman." The number of shares
of Common Stock beneficially owned includes 109,000 shares of Common
Stock issuable upon the exercise of options that are exercisable prior
to June 7, 1997, and includes 156,250 shares of Common Stock issuable
upon the exchange of Common Units, but excludes 61,000 shares of
Common Stock issuable upon the exercise of options that are subject to
approval by the stockholders. Does not include 90,000 Common Units
which Mr. Glickman will receive if the Performance Criteria are met in
full. See "Certain Transactions -- Transactions between the Company
and Prime -- Prime Contribution Agreement -- Performance Criteria."
(5) All of the 15,625 Common Units owned by Mr. Peterson are pledged to
the Operating Partnership to secure repayment of a $250,000 loan made
by the Operating Partnership to Mr. Peterson to enable him to purchase
such Common Units. See "Certain Transactions -- Loan to Mr.
Peterson." The number of shares of Common
24
<PAGE> 28
Stock beneficially owned includes 62,000 shares of Common Stock
issuable upon the exercise of options that are exercisable prior to
June 7, 1997, and includes 15,625 shares of Common Stock issuable upon
the exchange of Common Units, but excludes 25,000 shares of Common
Stock issuable upon the exercise of options that are subject to
approval by the stockholders.
(6) The number of shares of Common Stock and number of Common Units
beneficially owned include the Common Units owned by Prime Group
(359,375 Common Units); and Prime Group IV, L.P. ("PGIV") (244,166
Common Units). During February 1996, Prime Group Limited Partnership
("PGLP") and PG IV sold 2,953 and 83,959 Common Units, respectively to
partners in PGLP and PGIV. PGLP and PGIV are affiliated with Prime
Group (and, collectively with Prime Group and its affiliates, referred
to as "Prime"), of which Mr. Reschke is Chairman, President and Chief
Executive Officer and owns 42.2% of the outstanding equity interests.
The number of shares of Common Stock beneficially owned includes
82,500 shares of Common Stock issuable upon the exercise of options
that are exercisable prior to June 7, 1997, and includes 633,046
shares of Common Stock issuable upon the exchange of Common Units, but
excludes 15,000 shares of Common Stock issuable upon the exercise of
options that are subject to approval by the stockholders or are not
exercisable prior to June 7, 1997. Does not include 351,000 Common
Units which Prime will receive if the Performance Criteria are met in
full. See "Certain Transactions -- Transactions between the Company
and Prime -- Prime Contribution Agreement -- Performance Criteria."
Includes 482,645 Common Units subject to pledges. See footnote (6) to
the table set forth under "Security Ownership of Certain Beneficial
Owners" below.
(7) Includes 6,875 shares of Common Stock issuable upon the exercise of
options that are exercisable prior to June 7, 1997, but excludes 8,125
shares of Common Stock issuable upon the exercise of options that are
subject to approval by the stockholders or are not exercisable prior
to June 7, 1997.
(8) All of the 32,990 Common Units owned by Ms. Cafaro are pledged to the
Operating Partnership to secure the repayment of a $700,000 loan made
by the Operating Partnership to Ms. Cafaro to enable her to purchase
such Common Units. See "Certain Transactions -- Loan to Ms. Cafaro."
The number of shares of Common Stock beneficially owned includes
32,990 shares of Common Stock issuable upon the exchange of Common
Units but excludes 47,010 shares of Common Stock issuable upon the
exercise of options that are subject to approval by the stockholders
or are not exercisable prior to June 7, 1997.
(9) Excludes 410,000 Common Units which will be issued if the Performance
Criteria are met in full. The number of shares of Common Stock
beneficially owned includes 281,000 shares of Common Stock issuable
upon the exercise of options that are exercisable prior to June 7,
1997, and includes 808,406 shares of Common Stock issuable upon the
exchange of Common Units, but excludes 195,510 shares of Common Stock
issuable upon the exercise of options that are subject to approval by
the stockholders (25,000 of which are held by Mr. Coorsh) or are not
exercisable prior to June 7, 1997. See footnotes (4) through (8)
above and "Compensation of Executive Officers -- Benefit Plans --
Stock Incentive Plan."
25
<PAGE> 29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best of the Company's knowledge, the following persons are the
only persons who are beneficial owners of more than five percent of the Common
Stock (assuming as to any person, exchange of Common Units held by such person
for shares of Common Stock) or Class A Preferred Stock as of April 7, 1997.
Unless otherwise indicated, the persons indicated below have sole voting power
and investment power with respect to the Common Stock and Common Units shown as
beneficially owned by them. Certain of these shares of Common Stock and Common
Units are subject to transfer restrictions through August 31, 1997.
<TABLE>
<CAPTION>
Number of Shares of Class A Percent of Percent of
Shares of Common Common Units Preferred Stock Class A Percent of Common Stock
Name and Business Stock Beneficially Beneficially Preferred Common and Common
Address of Beneficial Beneficially Owned Owned Stock Stock (2) Units (3)
Owner Owned (1)
-------------------- ------------- ------------ ------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Five Arrows Realty 1,251,251 (4) 0 1,351,351 100% 12.00% 11.05%
Securities L.L.C.
Rothschild Realty
Investors II L.L.C
1251 Ave. of the
Americas
New York, NY 10020
Fund Asset Management 860,000 0 0 0% 9.37% 8.54%
P.O. Box 9011
Princeton, NJ 08543
Cramer Rosenthal 731,950 0 0 0% 7.98% 7.27%
McGlynn, Inc.
520 Madison Avenue
New York, NY 10022
Michael W. Reschke (5) 765,546 633,046 0 0% 7.74% 7.54%
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
The Prime Group, Inc. 603,541 603,541 0 0% 6.17% 5.99%
(6)
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Iridian Asset Management 553,800 0 0 0% 6.04% 5.50%
276 Post Road West
Westport, CT 06880
Fidelity Management & 538,200 0 0 0% 5.87% 5.34%
Research
82 Devonshire St
Boston, MA 02109
</TABLE>
(1) Number of shares of Common Stock beneficially owned includes those
options exercisable within 60 days of April 7, 1997, conversion of
Class A Preferred Stock and the exchange of Common Units beneficially
owned by such person.
(2) Assumes exchange only of the Common Units beneficially owned by such
person and exercise of options exercisable within 60 days of April 7,
1997, beneficially owned by such person.
(3) Assumes exchange of all outstanding Common Units.
(4) The shares of Common Stock include 1,251,251 shares of Common Stock
issuable upon conversion of the 1,351,351 shares of Class A Preferred
Stock owned by Five Arrows. As the managing member of Five Arrows,
Rothschild Investors is also deemed to be the beneficial owner of such
1,351,351 shares of Class A Preferred Stock owned by Five Arrows and
the 1,251,251 shares of Common Stock issuable upon conversion of such
shares.
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<PAGE> 30
(5) The number of shares of Common Stock and the number of Common
Units beneficially owned include the 603,541 Common Units
owned by Prime and 29,505 Common Units owned by Michael W.
Reschke. The number of shares of Common Stock beneficially
owned also includes 82,500 shares of Common Stock issuable
upon the exercise of options that are exercisable prior to
June 7, 1997, but excludes 15,000 shares of Common Stock
issuable upon the exercise of options that are subject to
approval by the stockholders or are not exercisable prior to
June 7, 1997. Does not include 351,000 Common Units which
Prime will receive if the Performance Criteria are met in
full. See "Certain Transactions -- Transactions between the
Company and Prime -- Prime Contribution Agreement --
Performance Criteria." Includes 482,645 Common Units subject
to a pledge. See footnote (6) below.
(6) The number of shares of Common Stock and the number of Common Units
beneficially owned include Common Units owned by Prime Group (359,375
Common Units) and PGIV (244,166 Common Units). Does not include
45,000 shares of Common Stock and 52,839 Common Units owned by Edward
J. John who owns a 21.9% general partnership interest in PGLP nor does
it include 50,000 shares of Common Stock and 29,505 Common Units owned
by Michael W. Reschke who owns a 42.2% general partnership interest in
PGLP. Includes 345,979 and 136,666 Common Units held of record by
Prime that are pledged to Kemper Investor Life Insurance Company
("KILICO") and The Northern Trust Company ("Northern Trust"),
respectively. Unless and until KILICO or Northern Trust forecloses on
the pledged Common Units or such Common Units are transferred in lieu
of foreclosure, KILICO and Northern Trust will not have the direct or
indirect power to vote or dispose of the Common Units pledged to them.
KILICO and Northern Trust disclaim beneficial ownership of these
pledged Common Units. Does not include 351,000 Common Units which
Prime will receive if the Performance Criteria are met in full. See
"Certain Transactions -- Transactions between the Company and Prime --
Prime Contribution Agreement -- Performance Criteria."
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's 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 and changes in
ownership with the Securities and Exchange Commission (the "Commission") and
The New York Stock Exchange, as required. These persons are required by
regulation of the Commission to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the fiscal year
ended December 31, 1996, except as described below, the Company's officers,
directors and greater than ten percent beneficial owners complied with all
applicable Section 16(a) filing requirements. In connection with his becoming
an executive officer of the Company, Mr. Coorsh filed a Form 3, but it was not
filed within the ten-day time period required by Section 16(a). In addition,
in connection with the purchase of 1,351,351 shares of Class A Preferred Stock
by Five Arrows and the appointment of Mr. Kaplan as a director to fill the
vacancy created by the issuance of the Class A Preferred Stock, a Form 3 was
timely filed which identified Mr. Kaplan as the "reporting person." Such Form
3 contained information regarding the beneficial ownership of such shares of
Class A Preferred Stock by Five Arrows and Rothschild Realty, as well as such
appointment. However, Five Arrows and Rothschild Realty were not named as
"reporting persons" on such Form 3. Counsel to Five Arrows and Rothschild
Realty has informed the Company that such counsel believes that the filing of
the Form 3 by Mr. Kaplan conformed in all material respects to the filing
requirements under Section 16(a) for Five Arrows and Rothschild Realty with
respect to such beneficial ownership.
CERTAIN TRANSACTIONS
TRANSACTIONS BETWEEN THE COMPANY AND PRIME GROUP
PRIME CONTRIBUTION AGREEMENT
General
In connection with the formation of the Company (the "Formation"), the
Company entered into a contribution agreement (the "Prime Contribution
Agreement") under which Prime and Mr. Cavenaugh transferred the following
assets, among others, to the Operating Partnership: (i) direct and indirect
contractual, partnership and fee interests in 26 properties and (ii)
substantially all of the assets relating to the asset and property management
and development activities of the Multifamily Division of Prime Group (the
"Prime Multifamily Division"). In consideration for the transfer of the
foregoing assets to the Operating Partnership, Prime and Mr. Cavenaugh received
84,375 and 17,280 Common Units, respectively.
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<PAGE> 31
The value of the assets transferred to the Company by Prime and Mr.
Cavenaugh was not based on the appraised value of the properties. Instead, the
value of such assets was determined on the basis of the pro forma Funds from
Operations of the properties and the enterprise value of the Company as a going
concern. Of the assets transferred to the Operating Partnership, only a
portfolio of ten properties had been acquired by Prime within the two-year
period prior to the transfer to the Operating Partnership; Prime acquired these
properties from an unaffiliated third party seller in October 1993 for $61
million pursuant to an arm's-length agreement between Prime and such seller.
Pursuant to the Prime Contribution Agreement, the Operating Partnership also
paid, or reimbursed Prime Group for, the costs and expenses that either Prime
Group or its affiliates incurred in connection with the Formation and the
Offering.
Performance Criteria
In addition to the Common Units received upon the completion of the
Offering in connection with the Formation, Prime and Mr.Cavenaugh had the
right to receive an additional 441,000 and 9,000 Common Units,
respectively, if certain performance levels (the "Performance Criteria") were
met in full. Prime transferred its interest with respect to 90,000 of such
rights to Mr. Glickman upon the completion of the Offering. Mr. Cavenaugh's
rights with respect to his 9,000 Performance Units were terminated on December
20, 1996, effective with his resignation. There is a separate Performance
Criterion for each of the 12-month periods ending September 30, 1995, 1996 and
1997. These criteria require that, for each 12-month performance period, the
per share Funds from Operations (as defined; see footnote (1) to the following
table) on a fully diluted basis must increase at least 10% annually over the
base per share amount set at $1.91 for the twelve months ending June 30, 1995.
The Performance Criteria and the aggregate number of Common Units issuable upon
meeting the criteria are as follows:
IF THE PER SHARE FUNDS THE NUMBER OF ADDITIONAL
FROM OPERATIONS(1) IS AT LEAST: COMMON UNITS ISSUABLE IS:
- ------------------------------- -------------------------
PRIME GLICKMAN
----- --------
$2.10 for the 12 months ending 117,000 30,000
September 30, 1995
$2.31 for the 12 months ending 234,000* 60,000*
September 30, 1996
$2.54 for the 12 months ending 351,000* 90,000*
September 30, 1997
* less any additional Common
Units previously issued
(1) Funds from Operations is calculated in accordance with the computation
method used in the Prospectus and is defined as net income (loss)
computed in accordance with GAAP (income before minority interest and
extraordinary items), excluding gains or losses from debt
restructuring or sales of property, plus depreciation and amortization
and after adjustment for unconsolidated partnerships and joint
ventures.
The per share Funds from Operations will be calculated on a fully
diluted basis, giving effect to the exchange into Common Stock of all
outstanding Common Units, and to the issuance of the additional Common Units
issuable if the particular Performance Criterion is met. For the twelve month
periods ended September 30, 1995 and 1996, the Performance Criteria were not
met. The number of additional Common Units issuable if the Performance
Criterion is met for the preceding 12-month period is cumulative; if the
Performance Criterion is met for the 12-month period ending September 30, 1997,
the aggregate number of additional Common Units issuable effective October 1,
1997, would be 441,000. Any Common Units issuable upon meeting the Performance
Criteria will be deemed to have been issued on the October 1 following the
12-month performance period, notwithstanding any delay in determining if the
criteria have
28
<PAGE> 32
been met. The directors of the Company, other than Messrs. Glickman and
Reschke, will determine whether the Performance Criterion is met for any
twelve-month period.
Representations and Warranties; Indemnification Obligations
The Prime Contribution Agreement contains covenants, representations
and warranties in favor of the Operating Partnership concerning the operation
of certain of the transferred properties (or interests therein) and
environmental matters and other covenants, representations and warranties
customarily found in real estate purchase and sale agreements. Claims for
indemnification for any breach of the representations and warranties made by
Prime and Mr. Cavenaugh must be asserted within one year from discovery of the
breach by the Board, but in no event later than August 31, 1997. The Company
released Mr. Cavenaugh from such indemnification obligations upon his
resignation from the Company in December 1996.
The Prime Contribution Agreement limits the total aggregate liability
of Prime for any loss suffered as a result of any breach of any representation,
warranty or covenant of Prime set forth therein to a return of the Common Units
transferred to them pursuant to the Prime Contribution Agreement, excluding any
additional Common Units issued to Prime if the Performance Criteria are met.
However, the Company's right to indemnification exists only if the loss or
damage resulting from a breach (or breaches) under the Prime Contribution
Agreement with respect to property-related representations and warranties is in
excess of $1 million.
The Operating Partnership has the right to dilute Prime's ownership
interest in the Common Units issued to it pursuant to the Prime Contribution
Agreement (excluding the additional Common Units which will be issued if the
Performance Criteria are met) to secure and satisfy its indemnification
liability. The 156,250 Common Units which were transferred by Prime to Mr.
Glickman after completion of the Offering are subject to the Operating
Partnership's right to dilute such Common Units to satisfy Prime's
indemnification liability for breaches of its representations and warranties
and are subject to the transfer restrictions applicable to Prime. During
February 1996, PGLP and PGIV sold 2,933 and 83,959 Common Units, respectively,
to partners in PGLP and PGIV. These partners are subject to the Operating
Partnership's right to dilute such Common Units to satisfy Prime's
indemnification liability for breaches of its representations and warranties.
As of March 31, 1997, 345,979 and 136,666 Common Units were pledged to Kemper
Investor Life Insurance Company ("KILICO") and The Northern Trust Company
("Northern Trust"). This pledge is subject to the Operating Partnership's
right to dilute such Common Units to satisfy Prime's indemnification liability
for breaches of its representations and warranties and any such Common Units
acquired by KILICO and Northern Trust will be subject to the transfer
restrictions applicable to Prime.
WILLIAMSBURG PARTNERSHIP AGREEMENT
Prime sold a 50% partnership interest in the partnership that owns the
Williamsburg Apartments located in Chicago, Illinois (the "Williamsburg
Property"), to an executive officer of Prime and an entity affiliated with him;
the purchaser owns both general and limited partnership interests.
Simultaneously with such sale, Prime contributed its remaining 50% general
partnership interest in such partnership to the Operating Partnership in
connection with the Formation. The Operating Partnership is the managing
general partner; the purchaser has equal voting rights with respect to certain
significant decisions of the partnership, and has a 50% interest in the
partnership's profits and losses. Net cash flow will be distributed as
follows: First, to the Operating Partnership until the Operating Partnership
has received a cumulative return of $250,000 per year; and the balance pro rata
to the partners.
PROPERTY MANAGEMENT AGREEMENTS
Upon completion of the Offering, the Operating Partnership entered
into a property management agreement with the owner of Brookdale Village
Apartments, an apartment complex located in Chicago, Illinois, containing 252
apartments. Brookdale Village Apartments was developed by the Prime
Multifamily Division in 1986 and was sold in 1987 to a partnership in which an
affiliate of Kemper Corporation is the general partner. The Prime Multifamily
Division had managed this property since its opening. The Operating
Partnership entered into similar agreements with
29
<PAGE> 33
Prime with the unconsolidated partnerships that own the Williamsburg Property
and the Brook Run Apartments (a 182-apartment complex located in Arlington
Heights, Illinois) and are unconsolidated for financial reporting purposes.
Under these agreements, the Operating Partnership receives a
management fee equal to 5% of the gross revenues of the applicable property.
The property management services performed by the Operating Partnership include
leasing, data processing, maintenance, accounting, marketing and promotion.
During the fiscal years ended December 31, 1995 and 1996, the Company earned
fees of $369,000 and $391,101, respectively, pursuant to these property
management agreements. The Company does not intend to perform any asset or
property management services that would cause the Company to lose its status as
a REIT. The property management agreements provide that the applicable
property owner will indemnify the Operating Partnership and the Company for any
liability incurred in performing such services except in certain circumstances.
The agreements have terms of four to five years, subject to either party's
right to cancel upon at least 30 days' notice.
EXCHANGE RIGHTS AGREEMENT
Pursuant to the Exchange Rights Agreement, dated as of August 31, 1994
(the "Exchange Rights Agreement"), among the Company, the Operating Partnership
and each existing and future limited partners of the Operating Partnership (the
"Limited Partners"), and subject to certain conditions, following the first
anniversary of the completion of the Offering, each Common Unit held by a
Limited Partner may be exchanged for one share of Common Stock (subject to
adjustment) or, at the option of the Company, cash equal to the fair market
value of a share of Common Stock at the time of exchange. However, no Limited
Partner may exchange any Common Units into shares of Common Stock if such
Limited Partner's actual or constructive ownership of such shares of Common
Stock would violate the limitations on ownership with respect to the Common
Stock. Prime and Messrs. Glickman and Peterson have agreed not to exchange
their Common Units for a period of three years after completion of the Offering
(one year in the case of Common Units purchased by Mr. Peterson) without the
consent of the Company and the lead underwriter of the Offering.
Notwithstanding these restrictions, Prime and Messrs. Glickman and Peterson are
permitted to exchange their Common Units into Common Stock (or cash) (i) in
order to raise funds necessary to satisfy any tax obligations incurred in
connection with the Formation, (ii) if there is a change in control of the
Company, or (iii) in the case of Messrs. Glickman and Peterson, if their
employment by the Company is terminated. The Limited Partners have agreed not
to exchange their Common Units for Common Stock unless the Operating
Partnership receives an opinion of counsel reasonably satisfactory to the
Company that upon such exchange, the Operating Partnership will not cease to
qualify as a partnership for Federal income tax purposes. In March 1997, Mr.
Cavenaugh and LG Trust exchanged the 17,280 and 84,375 Common Units,
respectively, owned by them for an equal number of shares of Common Stock
pursuant to the terms of the Exchange Rights Agreement.
REGISTRATION RIGHTS AGREEMENT
Generally, persons who are "affiliates" of the Company under the
Securities Act (individuals or entities that control, are controlled by, or are
under common control with the Company, and may include certain officers,
directors and principal stockholders of the Company), are permitted to sell
their shares of Common Stock only pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act, such as the exemption afforded by Section
4(1) and Rule 144 thereunder. In general, under Rule 144 as currently in
effect, an affiliate (or affiliates whose shares are aggregated), and a person
who has beneficially owned restricted shares for at least two years (effective
later this year, this period will become one year), is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
1% of the then outstanding shares of the same class (for a sale of Common
Stock, approximately 91,762 shares) or the average weekly trading volume for
that class on all national securities exchanges or in the over-the-counter
market during the four calendar weeks preceding such sale. Sales under Rule
144 must be made in unsolicited "brokers' transactions" (as defined in Rule
144) and are also subject to certain manner of sale provisions, notice
requirements, and the availability of current public information about the
Company.
The Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") with Prime and Messrs. Reschke, Glickman,
Cavenaugh and Peterson in August 1994. The Registration Rights Agreement
grants them certain "demand" and "piggyback" registration rights with respect
to their respective shares of Common Stock
30
<PAGE> 34
owned by them or acquired by them upon exchange of Common Units for shares of
Common Stock. These registration rights become effective generally on August
31, 1997, except that the registration rights with respect to the shares of
Common Stock purchased directly from the Company by Prime and Mr. Reschke and
the Common Units purchased by Messrs. Cavenaugh and Peterson became effective
on August 31, 1995. See "Lock-up Agreements" below. The Registration Rights
Agreement grants Prime and Mr. Glickman the right to demand registration of all
or any portion of their restricted shares of Common Stock up to two times in
each calendar year and grants Prime and Messrs. Reschke, Glickman, Cavenaugh
and Peterson the right to have their restricted shares of Common Stock
registered incidentally to any registration being conducted by the Company of
Common Stock or of any securities of the Company substantially similar to
Common Stock. The Company will bear expenses arising from the exercise of
registration rights, except that the Company will not pay any underwriting
discounts or commissions, Securities and Exchange Commission and blue sky
registration fees and transfer taxes relating to such shares. Pursuant to the
terms of the Registration Rights Agreement, in March 1997, the Company
registered 101,655 shares of Common Stock owned directly and indirectly by Mr.
Cavenaugh that were issued upon exchange of Common Units.
LOCK-UP AGREEMENTS
In connection with the Formation, Prime and Messrs. Reschke, Glickman,
Cavenaugh and Peterson entered into certain lock-up agreements (the "Lock-up
Agreements"). The Lock-up Agreements contractually restrict Prime and Messrs.
Reschke, Glickman, Cavenaugh and Peterson from (i) transferring, except in
certain limited circumstances, the Common Units issued to them in connection
with the Formation (including any additional Common Units issued if the
Performance Criteria are met) and any shares of Common Stock obtainable upon
exchange of such Common Units, and (ii) exchanging their Common Units for
Common Shares (collectively, the "Lock-up Restrictions") without the consent of
the Company and the lead underwriter of the Offering. The Lock-up Restrictions
expire (i) August 31, 1997, with respect to all Common Units held by Prime
(including the Common Units pledged to KILICO and Northern Trust) and Mr.
Glickman and 17,280 of the Common Units held by Mr. Cavenaugh and (ii) August
31, 1995, with respect to all the Common Units held by Mr. Peterson and 84,375
of the Common Units held by Mr. Cavenaugh. Notwithstanding the Lock-up
Restrictions, Prime and Messrs. Reschke, Glickman, Cavenaugh and Peterson are
permitted to exchange their restricted Common Units into Common Stock (or cash)
and transfer their restricted Common Units or restricted Common Stock (a) to
the extent necessary to fund any tax obligations incurred by them in connection
with the Formation, (b) if there is a Change of Control (as defined) of the
Company, or, (c) in the case of Messrs. Glickman, Cavenaugh and Peterson, if
their employment by the Company is terminated. The Lock-up Agreement of Mr.
Cavenaugh terminated as a result of the termination of his employment with the
Company on December 20, 1996. After expiration of the relevant lock-up period,
Prime and Messrs. Glickman and Peterson will be able to sell shares of Common
Stock issuable in exchange for Common Units pursuant to registration rights
that have been granted by the Company or available exemptions from
registration. See "Registration Rights Agreement." The shares of Common Stock
purchased by Prime and Messrs. Reschke and Peterson in the Offering are not
subject to the Lock-up Restrictions.
LOAN TO MR. GLICKMAN
Upon completion of the Offering, the Operating Partnership made a
limited recourse loan of $1.0 million to Mr. Glickman, which he has used to pay
the taxes due in connection with the transfer by Prime to him of 156,250 Common
Units in consideration for his interest in Prime. The loan is secured by a
pledge of these Common Units (which pledge is subordinate to the Operating
Partnership's right to dilute such Common Units in the event of a breach of
certain representations and warranties contained in the Prime Contribution
Agreement). Interest on the loan accrues at a rate of 8% per annum, and is
payable only to the extent of any distributions paid by the Operating
Partnership in respect of the Common Units pledged by Mr. Glickman. The loan
matures in December 1999, which maturity will be extended automatically for any
period after August 31, 1997 during which Mr. Glickman is precluded under the
Securities Act from selling publicly the shares of Common Stock issuable upon
exchange of his Common Units. The largest aggregate principal amount
outstanding on such loan at any time during the Company's last fiscal year was
$1,000,000. As of March 31, 1997, the amount outstanding was $1,000,000.
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<PAGE> 35
LOAN TO MR. CAVENAUGH
In connection with the Formation, the Operating Partnership made a
recourse loan of $1.35 million to Mr. Cavenaugh. Mr. Cavenaugh used such loan
proceeds to acquire 84,375 Common Units at the Offering price of the Common
Stock. The loan is secured by a pledge of the Common Units acquired with the
proceeds thereof (the "Pledged Common Units"). Interest on the loan accrued at
a rate of 0.5% per annum above the prime rate announced, from time to time, by
The First National Bank of Chicago, and interest and principal were payable
prior to maturity to the extent of any distributions paid by the Operating
Partnership in respect of the Pledged Common Units. The loan matured on the
earlier to occur of (i) August 31, 2004 and (ii) the first anniversary of the
termination of Mr. Cavenaugh's employment with the Company for any reason. The
largest aggregate principal amount outstanding on such loan at any time during
the Company's last fiscal year was $1.35 million. On March 13, 1997, Mr.
Cavenaugh sold the 84,375 Pledged Common Units and used the proceeds to repay
the loan in full.
LOAN TO MR. PETERSON
In connection with the Formation, the Operating Partnership made a
recourse loan of $250,000 to Mr. Peterson. Mr. Peterson used such loan
proceeds to acquire 15,625 Common Units at the Offering price of the Common
Stock. The loan is secured by a pledge of the Common Units acquired with the
proceeds thereof (the "Peterson Pledged Units"). Interest on the loan accrues
at a rate of 0.5% per annum above the prime rate announced, from time to time,
by The First National Bank of Chicago, and interest and principal are payable
prior to maturity to the extent of any distributions paid by the Operating
Partnership in respect of the Peterson Pledged Units. The loan matures on the
earlier to occur of (i) August 31, 2004 and (ii) the first anniversary of the
termination of Mr. Peterson's employment with the Company for any reason. The
largest aggregate principal amount outstanding on such loan at any time during
the Company's last fiscal year was $250,000. As of March 31, 1997, the amount
outstanding was $247,000 and the interest rate was 8.75% per annum.
LOAN TO MS. CAFARO
In connection with her employment, on April 7, 1997, the Company made
a non-recourse loan of $700,000 to Ms. Cafaro. Ms. Cafaro used such loan
proceeds to acquire 32,990 Common Units of the Operating Partnership at a price
of $24.25 per Common Unit. The loan is secured by a pledge of the Common Units
acquired with the proceeds thereof (the "Cafaro Pledged Units"). Interest on
the loan accrues at the rate of 6.49% per annum. The loan matures on the
earlier to occur of (i) June 30, 2000 and (ii) six months after the termination
of Ms. Cafaro's employment with the Company other than as a result of her
death, by the Company without Cause or for Disability or by executive for Good
Reason (as defined in her employment agreement) and is extended for so long as
she is prohibited from exchanging her Common Units and publicly selling the
Common Stock received in exchange for such Common Units, but not later than
June 30, 2000. As of April 7, 1997, the principal amount outstanding on such
loan was $700,000.
RELATIONSHIP WITH MR. LEVY'S LAW FIRM
Mr. Levy's professional corporation was, until May 1996, a partner in
the law firm of Kirkland & Ellis. Kirkland & Ellis has in the past performed
and is expected in the future to continue to perform legal services for the
Company. In May, 1996, Mr. Levy's professional corporation became a partner in
the law firm of Altheimer & Gray. Altheimer and Gray has in the past performed
and is expected in the future to perform legal services for the Company.
RELATIONSHIPS WITH MR. KAPLAN
Mr. Kaplan is a Senior Vice President of Rothschild Realty.
Rothschild Realty has in the past performed and may in the future perform
investment banking services for the Company. During 1996, the Company paid
fees to Rothschild Realty in connection with investment banking services of
$500,000.
Mr. Kaplan is also a manager of Rothschild Investors, the sole
managing member of Five Arrows. On August 16, 1996, Five Arrows purchased from
the Company 1,351,351 newly issued shares of Class A Preferred Stock for $25
32
<PAGE> 36
million. In connection with such purchase, the Company agreed to appoint Mr.
Kaplan as a director of the Company and to appoint Mr. Kaplan or another Class
A Director to each committee of the Board.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31,
1996, including financial statements and a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, is being sent to
stockholders of record as of the close of business on March 31, 1997, together
with this Proxy Statement. The Annual Report is not a part of the proxy
solicitation materials.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP, the Company's independent public accountants, has
examined the Company's financial statements for the fiscal year ended December
31, 1996. The Company expects representatives of Ernst & Young LLP to be
present at the Annual Meeting. Such representatives will have the opportunity
to make a statement if they so desire and will be available to respond to
appropriate questions from stockholders.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers
and nominees should forward soliciting materials to the beneficial owners of
the stock held of record by such persons, and the Company will reimburse them
for their reasonable forwarding expenses. In addition to the use of the mails,
proxies may be solicited by directors, officers and regular employees of the
Company by personal interview or telephone.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than December 22, 1997, for inclusion in the
Company's proxy statement and form of proxy relating to the meeting.
VOTING PROCEDURES
The inspector of elections appointed by the Company will count all
votes cast, in person or by submission of a properly executed proxy, before the
closing of the polls at the Annual Meeting. Abstentions and "broker non-votes"
(nominees holding shares for beneficial owners who have not voted on a specific
matter) will be treated as present for purposes of determining whether a quorum
is present at the Annual Meeting. Abstentions and broker non-votes will have
no effect on the vote with respect to the election of directors because the
vote required is the affirmative vote of the holders of a plurality of the
shares entitled to be voted whose holders are present in person or represented
by proxy (assuming the presence of a quorum) and will have the practical effect
of a vote against the proposals with respect to the approval of the Amendment
to the 1994 Stock Incentive Plan, the approval of the 1996 Stock Incentive Plan
and the approval of the 1997 Stock Incentive Plan because the vote required is
the affirmative vote of the holders of a majority of the shares entitled to be
voted whose holders are present in person or represented by proxy and such a
vote is one less vote for approval.
OTHER MATTERS
The Board of Directors knows of no matters other than those described
in this Proxy Statement which are likely to come before the meeting. If any
other matters properly come before the meeting, the persons named in the
accompanying form of proxy intend to vote the proxies in accordance with their
best judgment.
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<PAGE> 37
EXHIBIT A1
AMENDMENT TO
THE 1994 STOCK INCENTIVE PLAN FOR
OFFICERS, DIRECTORS AND
KEY EMPLOYEES OF
AMBASSADOR APARTMENTS, INC.,
AMBASSADOR APARTMENTS, L.P.
AND SUBSIDIARIES
The 1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries was adopted, effective August 31, 1994 (the "1994 Plan"), for the
benefit of those officers, key employees and directors. The 1994 Plan is
hereby amended as follows:
1. Amendment. Section 2.1 of the 1994 Plan is hereby amended by
deleting the first sentence thereof in its entirety and substituting the
following therefor:
"The shares of stock subject to Options shall be shares of Common
Stock, and the aggregate number of such shares which may be issued
upon exercise of such Options shall not exceed 469,000."
2. No Further Amendment. Except as set forth above, the 1994
Plan shall continue in full force and effect without modification.
A1-1
<PAGE> 38
EXHIBIT A2
THE 1994 STOCK INCENTIVE PLAN FOR
OFFICERS, DIRECTORS AND
KEY EMPLOYEES OF
AMBASSADOR APARTMENTS, INC.,
AMBASSADOR APARTMENTS, L.P.
AND SUBSIDIARIES
The 1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries (the "Plan") was adopted, effective August 31, 1994, for the
benefit of those officers, key employees and directors. The purposes of the
plan are as follows:
(1) To provide an additional incentive for Independent
Directors of Ambassador Apartments, Inc., a Maryland corporation (the
"Company") and officers and key Employees of the Company, Ambassador
Apartments, L.P., a Delaware limited partnership (the "Operating Partnership")
and their Subsidiaries (as such terms are defined in the Plan) to further the
growth, development and financial success of the Company by personally
benefiting through the ownership of Company stock which will reflect such
growth, development and financial success.
(2) To enable the Company, the Operating Partnership and
the Subsidiaries to obtain and retain the services of such Independent
Directors and key Employees considered essential to their long range success by
offering them an opportunity to own stock in the Company which will reflect
their growth, development and financial success.
ARTICLE I
DEFINITIONS
1.1 GENERAL
Wherever the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 "AWARD LIMIT" shall mean 100,000 shares of Common Stock.
1.3 "BENEFICIARY" shall mean the person or persons properly
designated by the Optionee, including his spouse or heirs at law, to exercise
such Optionee's rights under this Plan in the event of the Optionee's death, or
if the Optionee has not designated such person or persons, or such person or
persons shall all have predeceased the Optionee, the executor or administrator
of the Optionee's estate. Designation, revocation and redesignation of
Beneficiaries must be made in writing in accordance with rules established by
the Committee and shall be effective, upon delivery of such writing to the
Committee.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAPITAL STOCK" shall mean all classes or series of stock of
the Company.
1.6 "CAUSE" shall mean any one or more of the following have
occurred:
(a) a finding by the Board that an Optionee has
materially harmed any Employer through an act of dishonesty or
material conflict of interest which relates to the performance of the
Optionee's duties as an Employee, under his employment agreement or
otherwise, or as a Director;
(b) an Optionee's conviction of a felony;
(c) an Optionee's failure to perform his duties as an
Employee, under his employment agreement or otherwise, or as a
Director (other than a failure due to disability) after written notice
specifying the failure and a reasonable opportunity to cure (it being
understood that if an Optionee's failure to perform is not of a type
requiring a single action to fully cure, then the Optionee may
commence the cure promptly after such written notice and thereafter
diligently prosecute such cure to completion); or
(d) the material breach by an Optionee of any of his
obligations under his employment agreement, if any, or any written
policies or directives of the Board as determined by the Board in good
faith in its sole discretion, and the failure of the Optionee to cure
such breach within 30 days after receipt by the Optionee of a written
notice specifying in reasonable detail the nature of the breach. 1.7
1.7 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any other Employer, (ii) a corporation owned directly or
indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the Common Stock, or controlled
directly or indirectly by the stockholders of the Company, or (iii)
David M. Glickman, Richard F. Cavenaugh, The
A2-1
<PAGE> 39
Prime Group, Inc. or Kemper Corporation, or any of their respective
affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by the
Company's then outstanding securities which vote generally in the
election of Directors (referred to herein as "Voting Securities");
(b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
and any new Directors whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) more than 50% of the total
voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets. 1.8
1.8 "CODE" shall mean the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder.
1.9 "COMMITTEE" shall mean the Compensation and Benefits
Committee of the Board, appointed as provided in Section 6.1, or the Board
until such Committee is appointed or if required so that the Plan and this
Agreement comply with the provisions of the exemptive rule under Section 16 of
the Exchange Act.
1.10 "COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share.
1.11 "COMMON UNITS" shall mean partnership units designated as
"Common Units" under the Amended and Restated Agreement of Limited Partnership
of the Operating Partnership.
1.12 "COMPANY" shall have the meaning set forth in the first
introductory paragraph.
1.13 "COMPANY CHARTER" shall mean the Articles of Amendment and
Restatement of the Articles of Incorporation of the Company, as amended from
time to time.
1.14 "COMPANY EMPLOYEE" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company or
of any entity which is then a Company Subsidiary.
1.15 "COMPANY SUBSIDIARY" shall mean any corporation, partnership
or other entity (other than the Company) in an unbroken chain beginning with
the Company if all of them in the aggregate, other than the last one in the
unbroken chain, then own stock or other interests possessing 50 percent or more
of the total combined economic interests or the total combined voting power of
all classes of stock or other interests in each of the others in such chain;
provided, however, that "Company Subsidiary" shall not include the Operating
Partnership or any Operating Partnership Subsidiary.
1.16 "DIRECTOR" shall mean a member of the Board.
1.17 "DISABILITY" shall mean a physical or mental condition
resulting from any medically determinable physical or mental impairment that
renders an Optionee incapable of engaging in any substantial gainful employment
and that can be expected to result in death or that has lasted and can be
expected to last for a continuous period of no less than six consecutive
months, as determined by the Committee in good faith in its sole discretion.
1.18 "EMPLOYEE" shall mean any Company Employee, Operating
Partnership Employee or Property Partnership Employee.
1.19 "EMPLOYER" shall mean the Company, a Company Subsidiary, the
Operating Partnership or an Operating Partnership Subsidiary.
1.20 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
1.21 "EXPIRATION DATE" shall mean the last day of the term of the
Option as established in Section 4.3.
1.22 "EXCHANGE FACTOR" shall have the meaning set forth in the
Exchange Rights Agreement, dated as of the date upon which Common Stock is
first issued in connection with the Offering, among the Company and all
existing limited partners of the Operating Partnership, as such agreement
may be amended from time to time, including but not limited to any amendment to
make a future limited partner of the Operating Partnership a party to such
agreement.
1.23 "FAIR MARKET VALUE" of a share of Common Stock shall mean the
per share value of the Common Stock as of a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading
on the New York Stock Exchange (or if not, on another national
securities exchange upon which the Common Stock is listed), the Fair
Market
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<PAGE> 40
Value of the Common Stock is the average of the closing quotations for
such stock based on composite transactions for the New York Stock
Exchange (or if not listed on it, such other national securities
exchange) for the five Trading Days ending at the close of business on
the day prior to such given date.
(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System (NASDAQ System) or
any similar system of automated dissemination of quotations of prices
in common use, the Fair Market Value of the Common Stock is the
average of the last sales price (if the stock is then listed as a
national market issue under the NASDAQ System) or the mean between the
closing representative bid and asked prices (in all other cases) for
the stock for the five Trading Days ending at the close of business on
the day preceding such given date as reported by the ASDAQ System (or
such similar quotation system).
(c) If neither clause (a) nor clause (b) of this
definition is applicable, or the Board determines in good faith that
the value determined in accordance with clause (a) or (b), as
otherwise applicable, does not represent the fair market value of the
shares within the meaning of Section 422 or Section 162(m) of the
Code, the Fair Market Value of the Common Stock is the fair market
value per share as of such valuation date, as determined by the Board
in good faith and in accordance with uniform principles consistently
applied.
(d) The term "Trading Day" as used in this Section shall
mean a day on which the principal national securities exchange on
which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, shall mean
any business day.
1.24 "GOOD REASON" shall mean:
(a) the breach by an Employer of any of its obligations
under any written employment agreement which may exist between an
Employer and an Employee and the failure of the Employer to cure such
breach within 60 days after receipt by the Employer of a written
notice from the Employee specifying in reasonable detail the nature of
the breach; or
(b) any material diminution in the scope of an Employee's
responsibilities and duties.
1.25 "INCENTIVE STOCK OPTION" shall mean an Option which conforms
to the applicable provisions of Section 422 of the Code and which is designated
as an Incentive Stock Option by the Committee.
1.26 "INDEPENDENT DIRECTOR" shall mean a member of the Board who is
not also an Employee.
1.27 "INITIAL GRANTS" shall have the meaning set forth in
Section 3.3
1.28 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option.
1.29 "OFFERING" shall mean the initial public offering of Common
Stock pursuant to the Securities Act.
1.30 "OPERATING PARTNERSHIP" shall have the meaning set forth in
the first introductory paragraph.
1.31 "OPERATING PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of the Code) of
the Operating Partnership or any entity which is then an Operating Partnership
Subsidiary (other than a Property Partnership Employee).
1.32 "OPERATING PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.4.
1.33 "OPERATING PARTNERSHIP SUBSIDIARY" shall mean each of the
Property Partnerships or any other corporation, partnership or other entity
(other than the Operating Partnership) in an unbroken chain beginning with the
Operating Partnership if all of them in the aggregate, other than the last one
in the unbroken chain, then own more than 50 percent of the total combined
economic interests or the total combined voting power of all classes of stock
or other interests in each of the others.
1.34 "OPTION" shall mean a stock option granted pursuant to this
Plan. An Option granted pursuant to this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and to
Employees who are not Employees of the Company or of a Subsidiary Corporation
shall be Non-Qualified Stock Options.
1.35 "OPTION AGREEMENT" shall have the meaning set forth in
Section 4.1.
1.36 "OPTIONEE" shall mean an Employee or Independent Director to
whom an Option is granted under the Plan.
1.37 "PLAN" shall mean The 1994 Stock Incentive Plan for Officers,
Directors and Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries, as amended from time to time.
1.38 "PROPERTY PARTNERSHIP" shall mean Ambassador Texas Partners,
L.P., Ambassador I, L.P., Ambassador II, L.P., each of which is a limited
partnership, and any other Operating Partnership Subsidiary designated as such
by the Board.
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<PAGE> 41
1.39 "PROPERTY PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of the Code) of
Property Partnership or any entity which is then a Property Partnership
Subsidiary.
1.40 "PROPERTY PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.5(a).
1.41 "PROPERTY PARTNERSHIP SUBSIDIARY" shall mean any corporation,
partnership, or other entity (other than a Property Partnership) in an unbroken
chain beginning with a Property Partnership if all of them in the aggregate,
other than the last one in the unbroken chain, then own more than 50 percent of
the total combined economic interests or total combined voting power of all
classes of stock or other interests in each of the others.
1.42 "RETIREMENT" shall mean (a) an Employee's Termination of
Employment upon or after attainment of age 65 and completion of five years of
service with the Company and/or any other Employer or at such earlier time with
the permission of the Committee, or (b) a Director's Termination of
Directorship upon or after attainment of age 65.
1.43 "RULE 16B-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.44 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
1.45 "STOCK OWNERSHIP LIMIT" shall mean (a) the "Common Stock
Ownership Limit" restrictions on ownership and transfer provided in the
Company Charter; (b) the "Aggregate Stock Ownership Limit" restrictions on
ownership and transfer provided in the Company Charter; and (c) any other
restrictions on ownership or transfer set forth in the Company Charter.
1.46 "SUBSIDIARY" shall mean a Company Subsidiary or an Operating
Company Subsidiary (including, without limitation, any Property Partnership and
Property Partnership Subsidiary).
1.47 "SUBSIDIARY CORPORATION" shall mean a Company Subsidiary that
qualifies as a subsidiary corporation within the meaning of Section 424(f) of
the Code.
1.48 "TEN PERCENT SHAREHOLDER" shall mean an Employee who owns (or
is deemed to own by reason of the attribution rules of Section 424(d) of the
Code) stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any Company Subsidiary that is a
Subsidiary Corporation.
1.49 "TERMINATION OF DIRECTORSHIP" shall mean the time when an
Optionee who was an Independent Director ceases to be a Director of the Company
for any reason.
1.50 "TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between the Optionee and an Employer is
terminated for any reason, other than (a) termination where there is a
simultaneous reemployment or continuing employment of an Optionee by another
Employer, and (b) at the sole and absolute discretion of the Committee, a
termination which results in a temporary severance of the employee-employer
relationship that does not exceed one year; provided, however, that, if an
Employer ceases to qualify as same under the Plan as a result of a sale of
stock or other interests or any similar event, a Termination of Employment of
the Optionees who were employed by such Employer immediately prior to such
cessation shall be deemed to have occurred. Subject to the terms of any
written employment agreement between an Employer and Employee, the Committee,
in its sole and absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
limited to, the question of whether a Termination of Employment resulted from a
discharge for Cause or a resignation by the employee for Good Reason, and all
questions of whether particular leaves of absence shall constitute Terminations
of Employment; provided, however, that, with respect to Incentive Stock
Options, a leave of absence shall constitute a Termination of Employment if,
and to the extent that, such leave of absence interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, an Employer has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or without
Cause, except to the extent expressly provided otherwise in writing.
1.51 GENDER AND NUMBER
Wherever the masculine gender is used it shall include the
feminine and neuter and wherever a singular pronoun is used it shall include
the plural, unless the context clearly indicates otherwise.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of
Common Stock, and the aggregate number of such shares which may be issued upon
exercise of such Options shall not exceed 469,000*. The shares of Common Stock
issuable upon exercise of an Option may be either previously authorized but
unissued shares or
A2-4
<PAGE> 42
issued shares which have been repurchased by the Company. Notwithstanding
anything herein to the contrary, no single Optionee may be granted Options in
any year to purchase shares of Common Stock which, in the aggregate, are more
than the Award Limit.
2.2 UNEXERCISED OPTIONS AND OTHER RIGHTS
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
the subject of an Option granted hereunder so long as the Optionee to whom such
Options had previously been granted received no benefits of ownership of the
underlying shares of Common Stock to which such Options related.
2.3 EFFECT OF CERTAIN EXERCISES
If any shares of Common Stock issuable pursuant to any Option
are surrendered as a payment for the price due on the exercise of said Option,
the number of shares of Common Stock issuable but so surrendered shall be
charged against the maximum number of shares of Common Stock that may be issued
under this Plan. In the event shares of Common Stock are withheld pursuant to
Section 7.6 hereof, the number of shares that would have been issuable but that
are withheld pursuant to the provisions of Section 7.6 shall be charged against
the maximum number of shares of Common Stock that may be issued under this
Plan.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY
Employees eligible to participate in the Plan are those full
or part-time officers and other Employees who are responsible for or contribute
to the management, growth or profitability of the Company and the other
Employers and who are selected from time to time by the Committee, in its sole
and absolute discretion. Independent Directors shall be eligible to be granted
Non-Qualified Stock Options at the times and in the amounts set forth in
Section 3.3 and Section 3.5.
3.2 QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option
when granted qualifies as an "incentive stock option" under Section 422 of the
Code, including, in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, the provisions of Section 422(c)(5) of the Code which
provides that an Incentive Stock Option granted to a Ten Percent Shareholder
must have an Option price of at least 110% of the Fair Market Value of the
stock subject thereto on the date of grant and cannot have a term longer than
five years. Options granted under the Plan to Employees who are not Employees
of the Company or of a Subsidiary Corporation do not qualify as "incentive
stock options" under Sections 422 of the Code. Unless the Committee in its
sole discretion provides otherwise in the Option Agreement, if all or any
portion of an Option that is intended to qualify as an "incentive stock option"
under Section 422 of the Code (a) does not qualify as such when granted, such
Option (or such portion) shall be treated as a Non-Qualified Option, and (b)
qualified as an "incentive stock option" when granted but later no longer
qualifies as such, such Option (or such portion) shall thereafter be treated as
a Non-Qualified Stock Option. To the extent that the aggregate Fair Market
Value of shares of Common Stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by an Optionee during
any calendar year (under the Plan and all other incentive stock option plans of
the Company and any Subsidiary Corporation) exceed $100,000, such Options shall
be treated as Non-Qualified Options to the extent required by Section 422 of
the Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For these
purposes, the Fair Market Value shall be determined as of the date of grant of
the Option.
A2-5
<PAGE> 43
3.3 INITIAL GRANTS
Subject to Section 7.5, effective on the date of the first
closing of the sale of Common Stock pursuant to the Offering, the Company shall
grant Non-Qualified Stock Options (the "Initial Grants") to the following
Company Employees and Directors in the respective amounts indicated:
<TABLE>
<CAPTION>
SHARES SUBJECT
TO OPTIONS
--------------
<S> <C> <C>
Michael W. Reschke Chairman of the Board 90,000
David M. Glickman Vice Chairman of the Board and Chief 90,000
Executive Officer
Richard F. Cavenaugh President and Chief Operating Officer 90,000
Adam D. Peterson Senior Vice President and Chief Financial 42,000
Officer
Warren H. John Vice President - Operations 10,000
Norman R. Bobins Director 7,500
David B. Heller Director 7,500
Richard F. Levy Director 7,500
Jane R. Patterson Director 7,500
</TABLE>
3.4 GRANTING OF OPTIONS TO KEY EMPLOYEES
(a) Subject to availability of shares as provided under
Section 2.1 and 7.2, the Committee shall from time to time, in its
absolute discretion:
(i) Determine which Employees are key Employees
and select from among the key Employees (including Employees
to whom Options have previously been granted under the Plan)
such of them as in its opinion should be granted Options;
(ii) Determine the number of shares to be subject
to such Options granted to the selected key Employees;
(iii) Subject to Section 3.2, determine whether
such Options are to be Incentive Stock Options or
Non-Qualified Stock Options; and
(iv) Determine the terms and conditions of such
Options, consistent with this Plan, including, but not limited
to, such terms and conditions as may be required by Section
162(m) of the Code.
(b) Upon the selection of a key Employee to be granted an
Option, the Committee shall instruct the Secretary (or other
authorized officer of the Company) to issue the Option and may impose
such conditions on the grant of the Option as it deems appropriate.
Without limiting the generality of the preceding sentence, to the
extent that ti does not violate the Award Limit, the Committee may, in
its sole and absolute discretion and on such terms as it deems
appropriate, require as a condition to the grant of an Option to an
Employee that the Employee surrender for cancellation some or all of
the unexercised Options which have been previously granted to such
Employee under this Plan. An Option, the grant of which is
conditioned upon such surrender, may have an Option price lower (or
higher) than the Option price of such surrendered Option, may cover
the same (or a lesser or greater) number of shares as such surrendered
Option, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option.
(c) Any Incentive Stock Option granted under this Plan
may be modified by the Committee to disqualify such Option from
treatment as an "incentive stock option" under Section 422 of the
Code; provided, however, that prior to such modification the Committee
must obtain a written consent of the Optionee relating to such
modification.
3.5 GRANTING OF OPTIONS TO INDEPENDENT DIRECTORS
Subject to the Award Limit and Stock Ownership Limit, when a
person is initially elected to the Board and is then an Independent Director,
such new Independent Director automatically shall be granted an Option
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<PAGE> 44
to purchase 7,500 shares of Common Stock (subject to adjustment as provided in
Section 7.3) on the date of his election to the Board. No additional grants of
Options may be made to such Independent Directors under this Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement
(the "Option Agreement"), which shall be executed by the Optionee and an
authorized officer of the Company (and in the case of an Option granted to an
Employee, his Employer, if different), and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Option
Agreements evidencing Incentive Stock Options shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section 422
of the Code.
4.2 OPTION PRICE
Subject to Section 3.2, the price per share of the shares
subject to each Option shall be set by the Committee; provided, however, that
the price of each share subject to (a) an Option granted as part of the Initial
Grants shall be equal to the initial public offering price of the shares of
Common Stock in the Offering, (b) any other Option granted to an Employee shall
not be less than 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted, and (c) any other Option granted to an
Independent Director shall equal 100% of the Fair Market Value of such shares
on the Date such Option is granted without variation hereunder.
4.3 OPTION TERM
Subject to Section 3.2, the term of an Option shall be set by
the Committee in its sole and absolute discretion; provided, however, that (a)
each Option granted as part of the Initial Grants shall have a term of ten
years, (b) any other Option granted to an Employee shall have a term of not
more than ten years from the date the Option is granted, and (c) each other
Option granted to an Independent Director shall have a term of ten years
without variation or acceleration hereunder. The last day of the terms of the
Option shall be the Option's Expiration Date.
4.4 OPTION VESTING
(a) No Option may be exercised in whole or in part until
it has vested or otherwise becomes exercisable in accordance with the
terms of this Plan or the Option Agreement pursuant to which such
Option was granted.
(b) Options granted as Initial Grants shall vest at the
following rates for service as an Employee, as applicable, following
the date of completion of the Offering:
<TABLE>
<CAPTION>
PERIOD OF SERVICE
FROM DATE OF COMPLETION
OF THE OFFERING PERCENT VESTED
----------------------- --------------
<S> <C>
Less than 1 year 0%
1 year 33-1/3%
Each additional month after 1 year 1/12 of 33-1/3%
After total of 3 years 100%
</TABLE>
(c) Options granted to Independent Directors under
Section 3.5, including Options granted as Initial Grants, shall vest
at the following rates for service as a Director following the date of
grant:
<TABLE>
<CAPTION>
PERIOD OF SERVICE
FROM DATE OF GRANT PERCENT VESTED
------------------ --------------
<S> <C>
Less than 1 year 0%
1 year 33-1/3%
Each additional month after 1 year 1/12 of 33-1/3%
After total of 3 years 100%
</TABLE>
A2-7
<PAGE> 45
(d) With respect to Options granted to Employees other
than Initial Grants, the period during which the right to exercise an
Option in whole or in part vests in the Optionee shall be determined
by the Committee and set forth in the Option Agreement, and the
Committee may determine that an Option may not be exercised in whole
or in part for a specified period after it is granted and that such
Option may vest in one or more installments; provided, however, that
no Option shall vest or become exercisable by any Optionee who is
then subject to Section 16 of the Exchange Act within the period
ending six months after the date the Option is granted. At any time
after grant of an Option to an Employee, the Committee may, in its
sole and absolute discretion and subject to whatever terms and
conditions it selects, accelerate the period during which all or any
portion of an Option granted to an Employee vests or becomes
exercisable.
(e) Subject to the terms of any written employment
agreement between an Employer and an Employee, upon an Employee's
Termination of Employment for Cause, any and all Options held by such
Employee (whether or not vested or exercisable) shall be forfeited and
shall immediately terminate effective with such Termination of
Employment; provide, however, that the Committee may in its sole
discretion provide that all or a part of any Option, to the extent
exercisable as of such date, can be exercised for a period of up to
one month from the date of Termination or the Expiration Date if
earlier.
(f) The portion of any Option granted to an Employee that
has not vested and become exercisable upon the Employee's Termination
of Employment shall be forfeited and shall immediately terminate
effective with such Termination of Employment; provided, however, that
in the sole discretion of the Committee, the Option Agreement with
respect to an Employee may provide that the unvested portion of any
Option shall immediately become vested and exercisable (in whole or in
part) in the event of a Change in Control, the Employee's Termination
of Employment by reason of his Disability, by the Employer not for
Cause, by the Employee for Good Reason, as a result of the Employee's
Retirement, or if the Employee dies while an Employee.
(g) The portion of any Option granted to an Independent
Director that has not vested and become exercisable upon the
Director's Termination of Directorship shall be forfeited and shall
immediately terminate effective with such Termination of Directorship;
provided, however, that the unvested portion of any Option granted to
an Independent Director shall immediately become vested and
exercisable in full in the event of a Termination of Directorship for
any reason other than Cause.
4.5 EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OR
DIRECTORSHIP
(a) An Option granted to an Employee is exercisable by
the Optionee only while he is an Employee; provided, however, that the
Committee may determine in its sole discretion and an Option Agreement
may provide that an Option granted to an Employee may be exercised by
the Optionee, to the extent that the Optionee could have done so
immediately preceding his Termination of Employment (and to the
extent, if any, such Option became exercisable under the Option
Agreement as a result of such termination), subsequent to such
Optionee's Termination of Employment, subject to the following
limitations:
(i) If the Optionee dies while an Employee, his
Beneficiary may exercise the Option not later than 12 months
after the Optionee's death; or
(ii) If the Optionee's Termination of Employment
is due to the Optionee's Disability or Retirement, the
Optionee (or his personal representative) may exercise the
Option no later than 12 months after such termination; or
(iii) If the Optionee's Termination of Employment
is for any reason other than those set forth in (i) or (ii)
above and is not for Cause, the Optionee may exercise the
Option within three months after such termination; or
(iv) If the Optionee dies during a period
described in clause (ii) or (iii) above for the exercise of an
Option after his Termination of Employment, his Beneficiary
may exercise such Option no later than the expiration of such
extended period; or
(v) If the Optionee's Termination of Employment
is for Cause, the Optionee may not exercise any portion of his
Option thereafter except to the extent and at the times
permitted by the Committee in accordance with Section 4.4(e);
and
(vi) Notwithstanding (i) through (v) above or
anything in an Option Agreement or the Plan to the contrary
(A) at any time after the grant of an Option to an Employee,
the Committee, in its sole and absolute discretion and subject
to whatever terms and conditions it selects, may provide that
the Option may be exercised after the relevant extended period
set forth above, and (B) no Option may be exercised later than
its Expiration Date in any circumstances.
(b) An Option granted to an Independent Director may be
exercised only while he is an Independent Director; provided, however,
that an Option Agreement evidencing a grant to an Independent
Director shall provide that the Option may be exercised, to the
extent that the Optionee could have done so
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immediately preceding his Termination of Directorship (and to the
extent, if any, such Option became exercisable under the Option
Agreement as a result of such termination), subsequent to such
Optionee's Termination of Directorship, subject to the following
limitations:
(i) If the Optionee dies while a Director, his
Beneficiary may exercise the Option within 12 months after the
Optionee's death; or
(ii) If the Optionee's Termination of Directorship
is due to Disability or Retirement, the Optionee (or his
personal representative) may exercise the Option no later than
12 months after such termination; or
(iii) If the Optionee's Termination of Directorship
is for any reason other than for Cause or for a reason set
forth in (i) or (ii) above, the Optionee may exercise the
Option within three months after such termination; or
(iv) If the Optionee dies during a period
described in clause (ii) or (iii) above for the exercise of an
Option after his Termination of Directorship, his Beneficiary
may exercise such Option no later than the expiration of such
extended period; or
(v) If the Optionee's Termination of Directorship
is for Cause, the Optionee may not exercise any portion of the
Option after such termination; and
(vi) Notwithstanding (i) through (v) above, no
Option may be exercised later than the Option's Expiration
Dated.
4.6 LIMITATION IN TERMS OF OPTION
The Company shall not grant an Option which, and no Option
shall be exercisable to the extent that it, will, or is likely to, result in a
violation of Section 5.11.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE
An exercisable Option may be exercised in whole or in part.
However, an Option shall not be exercisable with respect to fractional shares
and the Committee may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE
All or a portion of an exercisable Option shall be deemed
exercised upon:
(a) Delivery of all of the following to the Secretary of
the Company or his office (or his delegate):
(i) A written notice complying with the
applicable rules established by the Committee, stating that the
Option, or a portion thereof, is exercised. The notice shall
be signed by the Optionee or other person than entitled to
exercise the Option or a portion thereof, and a copy thereof
shall be delivered at the same time to the Operating
Partnership with respect to an Operating Partnership Employee
and to the Property Partnership with respect to a Property
Partnership Employee;
(ii) Such representations and documents as the
Committee, in its sole and absolute discretion, deems necessary
or advisable to effect compliance with all applicable
provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee or Board may, in
its absolute discretion, also takes whatever additional actions
it deems appropriate to effect such compliance including,
without limitation, placing legends on share certificates and
issuing stop-transfer notices to agents and registrars; and
(iii) In the event that the Option shall
be properly exercised by any person or persons other than the
Optionee, appropriate proof of the right of such person or
persons to exercise the Option.
(b) Full payment in cash, by certified or bank check or
other instrument acceptable to the Committee for the shares with
respect to which the Option, or portion thereof, is being exercised
to:
(i) the Secretary of the Company (with respect
to an Option of an Independent Director and a Company
Employee);
(ii) the Operating Partnership (with respect to
an Option of an Operating Partnership Employee); or
(iii) the Property Partnership (with respect to
Options of a Property Partnership Employee).
Notwithstanding the preceding sentence, at the sole and absolute
discretion of the Committee and subject to Section 5.7, the terms of
an Option granted to any Employee may:
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<PAGE> 47
(i) allow payment, in whole or in part, through
the delivery of shares of Common Stock owned by the Optionee
duly endorsed for transfer with a Fair Market Value on the
date of delivery equal to the aggregate exercise price of the
Option or the portion thereof intended to be paid through the
delivery of shares of Common Stock; or
(ii) allow payment, in whole or in part, through
the surrender of shares of Common Stock then issuable upon the
exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of
the Option or the portion thereof intended to be paid through
the delivery of shares of Common Stock, including a "cashless
exercise"; or
(iii) (x) allow a delay in payment up to 30 days
from the date the Option, or portion thereof, is exercised,
(y) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable
consideration, or (z) allow payment through any combination of
the consideration provided in clauses (i), (ii) and (iii).
5.3 TRANSFER OF SHARES TO A COMPANY EMPLOYEE OR INDEPENDENT
DIRECTOR
Subject to Section 5.8, as soon as practicable after receipt
by the Company, pursuant to Section 5.2(b)(i), of payment for the shares with
respect to which an Option, or portion thereof, is exercised by an Optionee who
is an Independent Director or a Company Employee (or any Beneficiary thereof),
the Company shall transfer to the Optionee the number of shares to which such
Optionee is entitled upon such exercise.
5.4 TRANSFER OF SHARES TO AN OPERATING PARTNERSHIP EMPLOYEE
Subject to Section 5.8, as soon as practicable after receipt
by the Operating Partnership pursuant to Section 5.2(b)(ii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is an Operating Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:
(a) the Company shall sell to the Operating Partnership
and the Operating Partnership shall purchase the number of shares for
which such Option is being exercised for an aggregate purchase price
(the "Operating Partnership Purchase Price") equal to the product of
(i) the number of such shares multiplied by (ii) the Fair Market Value
of a share of Common Stock on the date of the exercise; and
(b) the Operating Partnership shall sell such shares to
the Optionee in return for the amount of the payment made by the
Optionee to the Operating Partnership pursuant to Section 5.2(b).
5.5 TRANSFER OF SHARES TO A PROPERTY PARTNERSHIP EMPLOYEE
Subject to Section 5.8, as soon as practicable after receipt
by a Property Partnership, pursuant to Section 5.2(b)(iii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is a Property Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:
(a) the Company shall sell to the Property Partnership
and the Property Partnership shall purchase the number of shares of
Common Stock for which such Option is being exercised for an aggregate
purchase price (the "Property Partnership Purchase Prices") equal to
the product of (i) such number of shares multiplied by (ii) the Fair
Market Value of a share of Common Stock on the date of exercise; and
(b) the Property Partnership shall sell such shares to
the Optionee in return for the amount of the payment made by the
Optionee to the Property Partnership pursuant to Section 5.2(b).
5.6 TRANSFER OF PAYMENT TO THE PARTNERSHIP
As soon as practicable after receipt by the Company with
respect to the exercise of any Option, or portion thereof, of the amount
described in Section 5.2(b)(i), the Operating Partnership Purchase Price or the
Property Partnership Purchase Price, the Company shall transfer to the
Operating Partnership an amount of cash equal to such payment and the Operating
Partnership shall issue additional Common Units to the Company corresponding to
the number of shares of Common Stock issuable upon the exercise of the relevant
Option multiplied by a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
transfer.
5.7 CERTAIN TIMING REQUIREMENTS
At the sole and absolute discretion of the Committee, shares
of Common Stock issuable to the Optionee upon exercise of the Option may be
used to satisfy the Option exercise price or the tax withholding consequences
of such exercise (a) during the period beginning on the third business day
following the date of the release of the quarterly or annual summary statement
of sales and earnings of the Company and ending on the twelfth business day
following such date, or (b) pursuant to an irrevocable written election by the
Optionee to use shares of Common Stock issuable to the Optionee upon exercise
of the Option to pay all or part of the Option price or the withholding taxes
which election is made at least six months prior to the payment of such Option
price or withholding taxes.
5.8 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
No certificate or certificates for shares of stock purchased
upon the exercise of any Option, or portion thereof, shall be required to be
issued prior to fulfillment of all of the following conditions:
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<PAGE> 48
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under
the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body which the Committee shall,
in its sole and absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee shall, in
its sole and absolute discretion, determine to be necessary or
advisable;
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Committee may establish from time to
time for reasons for administrative convenience; and
(e) The receipt of full payment for such shares,
including payment of any applicable withholding tax in accordance with
Section 7.6.
5.9 RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued to such holders.
5.10 OWNERSHIP AND TRANSFER RESTRICTIONS
Shares acquired through the exercise of an Option shall be
subject to the restrictions on ownership and transfer set forth in the Company
Charter. The Committee, in its sole and absolute discretion, may impose such
additional restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate in order to
preserve the qualification of the Company as a real estate investment trust,
within the meaning of Sections 856 through 860 of the Code. The Committee may
require an Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
the later to occur of (a) two years from the date of granting such Option to
such Employee or (b) one year after the transfer of such shares to such
Employee. Any such restriction or notice requirement shall be set forth in the
respective Option Agreement and may be referred to on the certificates
evidencing such shares.
5.11 RESTRICTIONS ON EXERCISE OF OPTION
An Option is not exercisable if, in the sole and absolute
discretion of the Committee, the exercise of such Option would likely result in
any of the following:
(a) The Optionee's ownership of Capital Stock being in
violation of the Stock Ownership Limit; or
(b) Income to the Company that could impair the Company's
status as a real estate investment trust, within the meaning of
Sections 856 through 860 of the Code.
Notwithstanding any other provision of this Plan, the Optionee
shall have no rights under this Plan to acquire Common Stock which would
otherwise be prohibited under the Company Charter.
ARTICLE VI
ADMINISTRATION
6.1 COMMITTEE
The Committee shall consist of two or more Directors,
appointed by and holding office at the pleasure of the Board, each of whom is
not then an Employee and each of whom is both a "disinterested person" as
defined by Rule 16b-3 and an "outside director" within the meaning of Section
162(m) (4) (c) (ii) of the Code; provided, however, that if one or more of the
members of the Committee does not qualify as such a "disinterested person" or
"outside director" at the time any Option is granted, such Option nevertheless
shall be deemed to be properly authorized and issued under the Plan and shall
remain in full force and effect subject to the other terms and conditions
contained in the Plan and the relevant Option Agreement. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may be filled by the Board.
6.2 DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Options, and the Option
Agreements, and to adopt such rules for the administration, interpretation, and
application of this Plan as are consistent therewith and to interpret, amend or
revoke any such rules. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the
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<PAGE> 49
general administration of the Plan with respect to Options granted to
Independent Directors. Any such grant or award under this Plan need not be the
same with respect to each Optionee.
6.3 MAJORITY RULE
The Committee shall act by a majority of its members in
attendance at a meeting at which a quorum is present or by a memorandum or
other written instrument signed by all members of the Committee.
6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee or Board incur in connection with
the administration of this Plan shall be borne by the Company. The Committee
may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Board,
the Company and the Company's officers and Directors and all other persons
charged with responsibility for administering the Plan 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 or Board
in good faith shall be final and binding upon all persons, including the
Optionees and the Employers. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan, any Option, and all members of the Committee
and Board shall be fully protected by the Company in respect of any such
action, determination or interpretation.
6.5 DELEGATION OF AUTHORITY
The Committee may, in its sole and absolute discretion,
delegate to the Chief Financial Officer, the Secretary or any other proper
officer of the Company, or more than one of them, any or all of the
administrative duties and authority of the Committee under this Plan, other
than the authority to make grants or awards under this Plan to Employees who
are officers of the Company within the meaning of Rule 16(a)-1(b) of the
Exchange Act or whose total compensation is required to be reported to the
Company's stockholders under the Exchange Act, to determine the price, timing
or amount of such grants or awards or to determine any other matter required by
Rule 16b-3 or Code Section 162(m) to be determined in the sole and absolute
discretion of the Committee.
6.6 NO LIABILITY
No member of the Board or the Committee, or Director, officer
of the Company or other Employee shall be liable, responsible or accountable in
damages or otherwise for any determination made or other action taken or any
failure to act by such person with respect to this Plan so long as such person
is not determined to be guilty by a final adjudication of willful misconduct
with respect to such determination, action or failure to act.
6.7 INDEMNIFICATION
To the fullest extent permitted by law, each of the members of
the Board and the Committee and each of the Directors, officers of the Company
and the Employees shall be held harmless and be indemnified by the Company for
any liability, loss (including amounts paid in settlement), damages or expenses
(including reasonable attorneys' fees) suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act, in
connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 NOT TRANSFERABLE
Options under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution; provided, however, that, subject to the Stock Ownership Limit, an
Optionee may designate a Beneficiary to exercise his Option or other rights
under this Plan after his death, and, with respect to Non-Qualified Stock
Options granted to Employees, the Committee, in its sole discretion, may
provide in the Option Agreement that the Optionee may transfer, without
consideration of the transfer, all or a portion of his Options to members of
his immediate family (i.e., children, grandchildren or spouse), no trusts for
the benefit of immediate family members and to partnerships in which such
family members are the only parties. No Option or interest or right therein
shall be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.1 shall prevent transfers by will or by the applicable laws of
descent and distribution or to an immediate family member if provided in the
Option Agreement. Except as provided in this Section 7.1 and the Option
Agreement, an Option shall be exercised during the Optionee's lifetime only the
Optionee or his guardian or legal representative.
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<PAGE> 50
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
This Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Board. Notwithstanding the foregoing, the provisions of the Plan relating to
the grant of Options to Independent Directors and the terms of such Options
shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the respective rules thereunder. Furthermore, without approval
of the Company's stockholders given with 12 months before or after the action
by the Board, no action of the Board may, except as provided in Section 7.3,
materially increase the limits imposed in Section 2.1 on the maximum number of
shares which may be issued under this Plan, materially modify the eligibility
requirements of Section 3.1, reduce the minimum Option price requirements of
Section 4.2, materially increase the benefits accruing to Independent Directors
under Section 3.5, extend the limit imposed in this Section 7.2 on the period
during which Options may be granted or otherwise materially increase the
benefits accruing to participants under the Plan and no action of the Committee
or Board may be taken that would otherwise require stockholder approval as a
matter of applicable law, regulation or rule. No amendment, suspension or
termination of this Plan shall, without the consent of the holder of an Option,
alter or impair any rights or obligations under any Option theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No Option
may be granted or awarded during any period of suspension not after termination
of this Plan, and in no event may any Incentive Stock Option be granted under
this Plan after the first to occur of the following events:
(a) the expiration of ten years from the date the Plan is
adopted by the Board; or
(b) the expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 7.5.
7.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY
In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for cash or a different number of kind of
shares or other securities of the Company, by reason of recapitalization,
reclassification, stock split up, stock dividend, or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of shares of stock for the purchase of which Options may be granted, including
adjustments of the limitation in Section 2.1 (and to the extent permitted under
Section 162(m) of the Code, the Award Limit) on the maximum number and kind of
shares of stock which may be issued and adjustments in the number of shares
which may be automatically issued to Independent Directors pursuant to Section
3.5.
In the event of such a change or exchange other than by reason
of reorganization (and other than for stock or securities of another
corporation, which shall be subject to the provisions of Section 7.4, the
Committee shall also make an appropriate and equitable adjustment in the number
and kind of shares of stock as to which all outstanding Options, or portions
thereof then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares of stock, each
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option may include a
necessary or appropriate corresponding adjustment in Option exercise price, but
shall be made without change in the total price applicable to the Option, or
the unexercised portion thereof (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will be made in a
manner which will not be considered a "modification" under the provisions of
subsection 424(h)(3) of the Code.
In the event of a "spin-off" or other substantial distribution
of assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Common Stock, the Committee may, in its sole and absolute
discretion (or, in the case of Options granted to Independent Directors, if it
determines that no contravention of the requirements of Rule 16b-3(c)(2)(ii)
will result), make an appropriate and equitable adjustment to the Option price
to reflect such diminution.
7.4 MERGER OF THE COMPANY
In the event of the merger or consolidation of the Company
with or into another corporation or other entity, the exchange of all or
substantially all of the assets of the Company for the securities of another or
other entity, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:
(a) At the sole and absolute discretion of the Committee,
the terms of an Option may provide that it may not be exercised after
such event; and
(b) In its sole and absolute discretion, and on such
terms as it shall deem appropriate, the Committee may provide either
by the terms of such Option or by a resolution adopted prior to the
occurrence of such event that, for a specified period of time prior to
such event, such Option shall be exercisable as to all shares of stock
covered thereby, notwithstanding anything to the contrary in the Plan
or the Option Agreement evidencing such Option.
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<PAGE> 51
7.5 EFFECTIVE DATE; APPROVAL OF PLAN BY STOCKHOLDERS; COMPLETION
OF OFFERING
Subject to the approval of the Company's stockholders (by the
holders of a majority of the shares of the Company present or represented and
entitled to vote at the meeting at which the Plan is considered), the Plan
shall be effective as of August 31, 1994 and shall continue in effect
thereafter until terminated or suspended by the Committee. Options may be
granted prior to such stockholder approval; provided, however, that such
Options shall not be exercisable prior to the later of the time when this Plan
is approved by the stockholders or the completion of the Offering, and provided
further, that all Options granted under this Plan shall be canceled and become
null and void and of no effect, retroactive to the date of grant, and the Plan
shall be null and void and of no effect, retroactive to the date of Board
approval, upon the earlier to occur of (a) the Plan is not approved by
Company's stockholders prior to the first anniversary of its approval by the
Board, or (b) the expiration of the Offering without completion. The Company
shall take such actions with respect to the Plan as may be necessary to satisfy
the requirements of Rule 16b-3.
7.6 TAX WITHHOLDING
Each Optionee shall, no later than the date as of which the
value of any shares received upon the exercise of an Option first becomes
includable in gross income for federal income tax purposes, pay or make
arrangements satisfactory to the Committee regarding payment of any sums
required by federal, state or local tax law to be withheld with respect to such
Option. Subject to the timing requirements of Section 5.7, the Committee may,
in its sole and absolute discretion, allow such Optionee to elect to have
shares of Common Stock withheld (or allow the return of shares of Common Stock)
having a Fair Market Value equal to all or a portion of the sums required to be
withheld. If, as allowed by the Committee, the Optionee elects to have shares
of Common Stock withheld (or allow the return of shares of Common Stock) having
a Fair Market Value equal to all or a portion of the sums required to be
withheld, the value of the shares of Common Stock to be withheld (or returned
as the case may be) will equal to the Fair Market Value of such shares (less
any costs or taxes associated with the sale of such shares) on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
Elections by such persons to have shares of Common Stock withheld for this
purpose will be subject to the following restrictions: (a) the election must
be made on or prior to the Tax Date (or such earlier date as may be applicable
under Section 5.7), (b) the election must be irrevocable, (c) the election
shall be subject to the disapproval of the Committee, (d) if the person is an
officer of the Company within the meaning of Section 16 of the Exchange Act,
the election shall be subject to such additional restrictions as the Committee
may impose in an effort to secure the benefits of any regulations thereunder,
and (e) any stock ownership resulting from such withholding shall not violate
the Stock Ownership Limit set forth in the Company Charter.
7.7 LOANS
The Committee may, in its sole and absolute discretion, extend
one or more loans to key Employees in connection with the exercise of Options
granted under this Plan. The terms and conditions of any such loan shall be
set by the Committee.
7.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS
Notwithstanding any other provision of this Plan, any Option
granted to a key Employee who is then subject to Section 16 of the Exchange Act
shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) the compliance with which is necessary for the
application of such exemptive rule. Any such additional limitation shall be
set forth in an annex to this Plan, such annex to be incorporated herein by the
reference and made part of this Plan.
7.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other
compensation or incentive plans established by the Company, the Operating
Partnership, the Property Partnerships or any other Employer. Nothing in this
Plan shall be construed to limit the right of any of them, (a) to establish any
other forms of incentives or compensation for their employees and directors or
(b) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate or partnership purpose including but
not limited to 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, partnership, firm or association.
7.10 COMPLIANCE WITH LAWS
This Plan, the granting and vesting of Options under this Plan
and the issuance and delivery of shares of Common Stock upon the exercise of
Options granted hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Company,
provide such assurances and representations to the Company as the Company may
deem
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necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and Options
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
7.11 TITLES
Titles are provided herein for convenience only and are not
intended to be the basis for interpretation or construction of this Plan.
7.12 GOVERNING LAW
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Illinois
without regard to conflicts of laws thereof.
*As amended. The 1994 Stock Incentive Plan, as originally adopted, provided
for options with respect to a maximum of 425,000 shares of Common Stock.
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<PAGE> 53
Exhibit B
THE [1996](1) [1997](2) STOCK INCENTIVE PLAN FOR
OFFICERS, DIRECTORS AND
KEY EMPLOYEES OF
AMBASSADOR APARTMENTS, INC.,
AMBASSADOR APARTMENTS, L.P.
AND SUBSIDIARIES
The [1996](1) [1997](2) Stock Incentive Plan for Officers,
Directors and Key Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries (the "Plan") was adopted, effective [December
19, 1996,](1) [January 1, 1997,](2) for the benefit of those officers, key
employees and directors. The purposes of the plan are as follows:
(1) To provide an additional incentive for officers,
directors and key employees of Ambassador Apartments, Inc., a Maryland
corporation (the "Company"), Ambassador Apartments, L.P., a Delaware limited
partnership (the "Operating Partnership"), and their Subsidiaries (as such
terms are defined in the Plan) to further the growth, development and financial
success of the Company by personally benefiting through the ownership of
Company stock which will reflect such growth, development and financial
success.
(2) To enable the Company, the Operating Partnership and
the Subsidiaries to obtain and retain the services of such officers, directors
and key employees considered essential to their long term success by offering
them an opportunity to own stock in the Company which will reflect their
growth, development and financial success.
ARTICLE I
DEFINITIONS
1.1 GENERAL
Wherever the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly indicates
otherwise.
1.2 "AWARD LIMIT" shall mean [100,000](1) [1,200,000](2) shares of
Common Stock.
1.3 "BENEFICIARY" shall mean the person or persons properly
designated by the Optionee, including his spouse or heirs at law, to exercise
such Optionee's rights under this Plan in the event of the Optionee's death, or
if the Optionee has not designated such person or persons, or such person or
persons shall all have predeceased the Optionee, the executor or administrator
of the Optionee's estate. Designation, revocation and redesignation of
Beneficiaries must be made in writing in accordance with rules established by
the Committee and shall be effective, upon delivery of such writing to the
Committee.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAPITAL STOCK" shall mean all classes or series of stock of
the Company.
1.6 "CAUSE" shall mean any one or more of the following have
occurred:
(a) a finding by the Board that an Optionee has
materially harmed the Company or the Operating Partnership through an
act of dishonesty or material conflict of interest which relates to
the performance of the Optionee's duties as an Employee, under his
employment agreement or otherwise, or as a Director;
(b) an Optionee's conviction of a felony;
(c) an Optionee's failure to perform in any material
respect his duties as an Employee, under his employment agreement or
otherwise, or as a Director (other than a failure due to disability)
after written notice specifying the failure and a reasonable
opportunity to cure (it being understood that if an Optionee's failure
to perform is not of a type requiring a single action to fully cure,
then the Optionee may commence the cure promptly after such written
notice and thereafter diligently prosecute such cure to completion);
or
(d) the material breach by an Optionee of any of his
obligations under his employment agreement, if any, or any written
policies or directives of the Board as determined by the Board in good
faith in its sole discretion, and the failure of the Optionee to cure
such breach within 30 days after receipt by the Optionee of a written
notice specifying in reasonable detail the nature of the breach. 1.7
"CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any other Employer, (ii) a corporation owned directly or
indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the Common Stock, or controlled
directly or
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indirectly by the stockholders of the Company, or (iii) David M.
Glickman or any of his affiliates becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding securities
which vote generally in the election of Directors (referred to herein
as "Voting Securities"); or
(b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
and any new Directors whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 50% of the total
voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, and such transaction is consummated; or
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale,
assignment, conveyance, transfer, lease or other disposition by the
Company of (in one transaction or a series of transactions) all or
substantially all of the Company's assets, and such transaction is
consummated.
1.8 "CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
1.9 "COMMITTEE" shall mean a committee of the Board, appointed as
provided in Section 6.1, or the Board until such Committee is appointed or if
required so that the Plan and this Agreement comply with the provisions of the
exemptive rule under Section 16 of the Exchange Act.
1.10 "COMMON STOCK" shall mean the common stock of the Company, par
value $.01 per share.
1.11 "COMMON UNITS" shall mean partnership units designated as
"Common Units" under the Amended and Restated Agreement of Limited Partnership
of the Operating Partnership, as amended from time to time.
1.12 "COMPANY" shall have the meaning set forth in the first
introductory paragraph.
1.13 "COMPANY CHARTER" shall mean the Articles of Amendment and
Restatement of the Articles of Incorporation of the Company, as amended and
supplemented from time to time.
1.14 "COMPANY EMPLOYEE" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company or
of any entity which is then a Company Subsidiary.
1.15 "COMPANY SUBSIDIARY" shall mean any corporation, partnership
or other entity (other than the Company) in an unbroken chain beginning with
the Company if all of them in the aggregate, other than the last one in the
unbroken chain, then own stock or other interests possessing 50 percent or more
of the total combined economic interests or the total combined voting power of
all classes of stock or other interests in each of the others in such chain;
provided, however, that "Company Subsidiary" shall not include the Operating
Partnership or any Operating Partnership Subsidiary.
1.16 "DIRECTOR" shall mean a member of the Board.
1.17 "DISABILITY" shall mean a physical or mental condition
resulting from any medically determinable physical or mental impairment that
renders an Optionee incapable of engaging in any substantial gainful employment
and that can be expected to result in death or that has lasted and can be
expected to last for a continuous period in the aggregate of no less than four
consecutive months, as determined by the Committee in good faith in its sole
discretion.
1.18 "EMPLOYEE" shall mean any Company Employee, Operating
Partnership Employee or Property Partnership Employee.
1.19 "EMPLOYER" shall mean the Company, a Company Subsidiary, the
Operating Partnership or an Operating Partnership Subsidiary.
1.20 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
1.21 "EXPIRATION DATE" shall mean the last day of the term of the
Option as established in Section 4.3.
1.22 "EXCHANGE FACTOR" shall have the meaning set forth in the
Exchange Rights Agreement, dated as of August 31, 1994, among the Company and
certain limited partners of the Operating Partnership, as such agreement may
be amended from time to time, including but not limited to any amendment to
make a future limited partner of the Operating Partnership a party
to such agreement.
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1.23 "FAIR MARKET VALUE" of a share of Common Stock shall mean the
per share value of the Common Stock as of a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading
on the New York Stock Exchange (or if not, on another national
securities exchange upon which the Common Stock is listed), the Fair
Market Value of the Common Stock is the last reported sales price of
the Common Stock for composite transactions on the New York Stock
Exchange (or if not listed on the New York Stock Exchange, such other
national securities exchange) on such date or, if there were no sales
on such date, the last date on which there were sales.
(b) If the Common Stock is not traded on any national
securities exchange, but is quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System (the "NASDAQ
System") or any similar system of automated dissemination of
quotations of prices in common use, the Fair Market Value of the
Common Stock is (i) if the Common Stock is then listed as a national
market issue under the NASDAQ System, the last reported sales price of
the Common Stock on the NASDAQ System on such date or, if there were
no sales on such date, the last date on which there were sales or (ii)
if the Common Stock is then not listed as a national market issue
under the NASDAQ System, the mean between the closing representative
bid and asked prices for the Common Stock on the NASDAQ System (or
such similar quotation system) on such date.
(c) If neither clause (a) nor clause (b) of this
definition is applicable, or the Board determines in good faith that
the value determined in accordance with clause (a) or (b), as
otherwise applicable, does not represent the fair market value of the
shares within the meaning of Section 422 or Section 162(m) of the
Code, the Fair Market Value of the Common Stock is the fair market
value per share as of such valuation date, as determined by the Board
in good faith and in accordance with uniform principles consistently
applied.
1.24 "GOOD REASON" shall mean:
(a) the material breach by an Employer of its obligations
under any written employment agreement which may exist between an
Employer and the Employee and the failure of the Employer to cure such
breach within 30 days after receipt by the Employer of a written
notice from the Employee specifying in reasonable detail the nature of
the breach; or
(b) any material diminution in the scope of an Employee's
responsibilities and duties.
1.25 "INCENTIVE STOCK OPTION" shall mean an Option which conforms
to the applicable provisions of Section 422 of the Code and which is
designated as an Incentive Stock Option by the Committee.
1.26 "INDEPENDENT DIRECTOR" shall mean a member of the Board who is
not also an Employee.
1.27 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
designated as an Incentive Stock Option.
1.28 "OPERATING PARTNERSHIP" shall have the meaning set forth in
the first introductory paragraph.
1.29 "OPERATING PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of the Code) of
the Operating Partnership or any entity which is then an Operating Partnership
Subsidiary (other than a Property Partnership Employee).
1.30 "OPERATING PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.4.
1.31 "OPERATING PARTNERSHIP SUBSIDIARY" shall mean each of the
Property Partnerships or any other corporation, partnership or other entity
(other than the Operating Partnership) in an unbroken chain beginning with the
Operating Partnership if all of them in the aggregate, other than the last one
in the unbroken chain, then own more than 50 percent of the total combined
economic interests or the total combined voting power of all classes of stock
or other interests in each of the others.
1.32 "OPTION" shall mean a stock option granted pursuant to this
Plan. An Option granted pursuant to this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and to
Employees who are not Employees of the Company or of a Subsidiary Corporation
shall be Non-Qualified Stock Options.
1.33 "OPTION AGREEMENT" shall have the meaning set forth in
Section 4.1.
1.34 "OPTIONEE" shall mean an Employee or an Independent Director
to whom an Option is granted under the Plan.
1.35 "PLAN" shall mean The [1996]1 [1997]2 Stock Incentive Plan for
Officers, Directors and Key Employees of Ambassador Apartments, Inc.,
Ambassador Apartments, L.P. and Subsidiaries, as amended from time to time.
1.36 "PROPERTY PARTNERSHIP" shall mean Ambassador Texas Partners,
L.P., Ambassador I, L.P., Ambassador II, L.P., Ambassador III, L.P., Ambassador
IV, L.P., Ambassador V, L.P., Ambassador VI, L.P., Ambassador VII, L.P.,
Ambassador VIII, L.P., Ambassador IX, L.P., Ambassador X, L.P., Ambassador XI,
L.P.,
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each of which is a limited partnership, and any other Operating Partnership
Subsidiary designated as such by the Board.
1.37 "PROPERTY PARTNERSHIP EMPLOYEE" shall mean any officer or
other employee (as defined in accordance with Section 3401(c) of the
Code) of a Property Partnership or any entity which is then a Property
Partnership Subsidiary.
1.38 "PROPERTY PARTNERSHIP PURCHASE PRICE" shall have the meaning
set forth in Section 5.5(a).
1.39 "PROPERTY PARTNERSHIP SUBSIDIARY" shall mean any corporation,
partnership, or other entity (other than a Property Partnership) in an unbroken
chain beginning with a Property Partnership if all of them in the aggregate,
other than the last one in the unbroken chain, then own more than 50 percent of
the total combined economic interests or total combined voting power of all
classes of stock or other interests in each of the others.
1.40 "RETIREMENT" shall mean (a) an Employee's Termination of
Employment upon or after attainment of age 65 and completion of five years of
service with the Company and/or any other Employer or at such earlier time with
the permission of the Committee, or (b) an Independent Director's Termination
of Directorship upon or after attainment of age 65.
1.41 "RULE 16B-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.42 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
1.43 "STOCK OWNERSHIP LIMIT" shall mean (a) the "Common Stock
Ownership Limit" restrictions on ownership and transfer provided in
the Company Charter; (b) the "Aggregate Stock Ownership Limit" restrictions on
ownership and transfer provided in the Company Charter; and (c) any other
restrictions on ownership or transfer set forth in the Company Charter.
1.44 "SUBSIDIARY" shall mean a Company Subsidiary or an Operating
Company Subsidiary (including, without limitation, any Property Partnership and
Property Partnership Subsidiary).
1.45 "SUBSIDIARY CORPORATION" shall mean a Company Subsidiary that
qualifies as a subsidiary corporation within the meaning of Section 424(f) of
the Code.
1.46 "TEN PERCENT SHAREHOLDER" shall mean an Employee who owns (or
is deemed to own by reason of the attribution rules of Section 424(d) of the
Code) stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any Company Subsidiary that is a
Subsidiary Corporation.
1.47 "TERMINATION OF DIRECTORSHIP" shall mean the time when an
Optionee who was an Independent Director ceases to be a Director of the Company
for any reason.
1.48 "TERMINATION OF EMPLOYMENT" shall mean the time when the
employee-employer relationship between the Optionee and an Employer is
terminated for any reason, other than (a) termination where there is a
simultaneous reemployment or continuing employment of an Optionee by another
Employer, and (b) at the sole and absolute discretion of the Committee, a
termination which results in a temporary severance of the employee-employer
relationship that does not exceed one year; provided, however, that, if an
Employer ceases to qualify as same under the Plan as a result of a sale of
stock or other interests or any similar event, a Termination of Employment of
the Optionees who were employed by such Employer immediately prior to such
cessation shall be deemed to have occurred. The Committee, in its sole and
absolute discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment, including, but not limited to,
the question of whether a Termination of Employment resulted from a discharge
for Cause or a resignation by the employee for Good Reason, and all questions
of whether particular leaves of absence shall constitute Terminations of
Employment; provided, however, that, with respect to Incentive Stock Options, a
leave of absence shall constitute a Termination of Employment if, and to the
extent that, such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
an Employer has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without Cause, except
to the extent expressly provided otherwise in writing.
1.49 GENDER AND NUMBER
Wherever the masculine gender is used it shall include the
feminine and neuter and wherever a singular pronoun is used it shall include
the plural, unless the context clearly indicates otherwise.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of
Common Stock, and the aggregate number of such shares which may be issued upon
exercise of such Options shall not exceed [250,000](1) [1,600,000](2).
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Notwithstanding anything herein to the contrary, no single Optionee may be
granted Options in any year to purchase shares of Common Stock which, in the
aggregate, exceed the Award Limit[, and the aggregate number of shares of
Common Stock which may be issued upon exercise of Options granted in the first
year of this Plan shall not exceed 450,000 (excluding the portion of any Option
which has expired or has been canceled without having been fully exercised so
long as the Optionee to whom such Option had previously been granted received
no benefits of ownership of the underlying shares of Common Stock to which such
Option related) and in the first and second years of this Plan shall not exceed
1,000,000 (excluding the portion of any Option which has expired or has been
canceled without having been fully exercised so long as the Optionee to whom
such Option had previously been granted received no benefits of ownership of
the underlying shares of Common Stock to which such Option related)]2. The
shares of Common Stock issuable upon exercise of an Option may be either
previously authorized but unissued shares or issued shares which have been
repurchased by the Company.
2.2 UNEXERCISED OPTIONS AND OTHER RIGHTS
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
the subject of an Option granted hereunder so long as the Optionee to whom such
Options had previously been granted received no benefits of ownership of the
underlying shares of Common Stock to which such Options related.
2.3 EFFECT OF CERTAIN EXERCISES
If any shares of Common Stock issuable pursuant to any Option
are surrendered as a payment for the price due on the exercise of said Option,
the number of shares of Common Stock issuable but so surrendered shall be
charged against the maximum number of shares of Common Stock that may be issued
under this Plan and shall not be considered Options that the Optionee with
respect thereto received no benefits of ownership. In the event shares of
Common Stock are withheld pursuant to Section 7.6 hereof, the number of shares
that would have been issuable but that are withheld pursuant to the provisions
of Section 7.6 shall be charged against the maximum number of shares of Common
Stock that may be issued under this Plan and shall not be considered Options
that the Optionee with respect thereto received no benefits of ownership.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY
Employees eligible to participate in the Plan are those full
or part-time officers and other Employees who are responsible for or contribute
to the management, growth or profitability of the Company and the other
Employers and who are selected from time to time by the Committee, in its sole
and absolute discretion. Independent Directors shall be eligible to be granted
Non-Qualified Stock Options.
3.2 QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option
when granted qualifies as an "incentive stock option" under Section 422 of the
Code, including, in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, the provisions of Section 422(c)(5) of the Code which
provides that an Incentive Stock Option granted to a Ten Percent Shareholder
must have an Option price of at least 110% of the Fair Market Value of the
stock subject thereto on the date of grant and cannot have a term longer than
five years. Options granted under the Plan to Employees who are not Employees
of the Company or of a Subsidiary Corporation do not qualify as "incentive
stock options" under Sections 422 of the Code. Unless the Committee in its
sole discretion provides otherwise in the Option Agreement, if all or any
portion of an Option that is intended to qualify as an "incentive stock option"
under Section 422 of the Code (a) does not qualify as such when granted, such
Option (or such portion) shall be treated as a Non-Qualified Option, and (b)
qualified as an "incentive stock option" when granted but later no longer
qualifies as such, such Option (or such portion) shall thereafter be treated as
a Non-Qualified Stock Option. To the extent that the aggregate Fair Market
Value of shares of Common Stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by an Optionee during
any calendar year (under the Plan and all other incentive stock option plans of
the Company and any Subsidiary Corporation) exceed $100,000, such Options shall
be treated as Non-Qualified Options to the extent required by Section 422 of
the Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For these
purposes, the Fair Market Value shall be determined as of the date of grant of
the Option.
3.3 GRANTING OF OPTIONS
(a) Subject to availability of shares as provided under
Section 2.1 and 7.2, the Committee shall from time to time, in its
absolute discretion:
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(i) Determine which Employees are key Employees
and select from among the Independent Directors and the key
Employees (including Independent Directors and Employees to
whom Options have previously been granted under the Plan) such
of them as in its opinion should be granted Options;
(ii) Determine the number of shares to be subject
to such Options granted to the selected Independent Directors
and key Employees;
(iii) Subject to Sections 3.1 and 3.2, determine
whether such Options are to be Incentive Stock Options or Non-
Qualified Stock Options; and
(iv) Determine the terms and conditions of such
Options, consistent with this Plan, including, but not limited
to, such terms and conditions as may be required by Section
162(m) of the Code.
(b) Upon the selection of an Independent Director or a
key Employee to be granted an Option, the Committee shall instruct
the Secretary (or other authorized officer of the Company) to issue
the Option and may impose such conditions on the grant of the Option
as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its sole and absolute
discretion and on such terms as it deems appropriate, require as a
condition to the grant of an Option to an Independent Director or an
Employee that the Independent Director or Employee surrender for
cancellation some or all of the unexercised Options which have been
previously granted to such Independent Director or Employee under this
Plan. An Option, the grant of which is conditioned upon such
surrender, may have an Option price lower (or higher) than the Option
price of such surrendered Option, may cover the same (or a lesser or
greater) number of shares as such surrendered Option, may contain such
other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number
of shares, price, exercise period or any other term or condition of
such surrendered Option.
(c) Any Incentive Stock Option granted under this Plan
may be modified by the Committee to disqualify such Option from
treatment as an "incentive stock option" under Section 422 of the
Code; provided, however, that prior to such modification the Committee
must obtain a written consent of the Optionee relating to such
modification.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT
Each Option shall be evidenced by a written Option Agreement
(the "Option Agreement"), which shall be executed by the Optionee and an
authorized officer of the Company (and in the case of an Option granted to an
Employee, his Employer, if different), and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Option
Agreements evidencing Incentive Stock Options shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section 422
of the Code.
4.2 OPTION PRICE
Subject to Section 3.2, the price per share of the shares
subject to each Option shall be set by the Committee in its sole and absolute
discretion; provided, however, that such price shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date the Option is
granted.
4.3 OPTION TERM
Subject to Section 3.2, the term of an Option shall be set by
the Committee in its sole and absolute discretion; provided, however, that such
term shall not be more than ten years from the date the Option is granted. The
last day of the terms of the Option shall be the Option's Expiration Date.
4.4 OPTION VESTING
(a) No Option may be exercised in whole or in part until
it has vested or otherwise becomes exercisable in accordance with the
terms of this Plan and the Option Agreement pursuant to which such
Option was granted.
(b) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be determined by the
Committee in its sole and absolute discretion and set forth in the
Option Agreement, and the Committee may determine that an Option may
not be exercised in whole or in part for a specified period after it
is granted and that such Option may vest in one or more installments.
At any time after grant of an Option to an Optionee, the Committee
may, in its sole and absolute discretion and subject to whatever terms
and conditions it selects, accelerate the period during which all or
any portion of an Option granted to an Optionee vests or becomes
exercisable.
(c) Upon an Employee's Termination of Employment for
Cause, any and all Options held by such Employee (whether or not
vested or exercisable) shall be forfeited and shall immediately
terminate
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effective with such Termination of Employment; provide, however, that
the Committee may in its sole discretion provide that all or a part
of any Option, to the extent exercisable as of such date, can be
exercised for a period of up to one month from the date of Termination
of Employment.
(d) The portion of any Option granted to an Employee that
has not vested and become exercisable upon the Employee's Termination
of Employment shall be forfeited and shall immediately terminate
effective with such Termination of Employment; provided, however, that
in the sole discretion of the Committee, the Option Agreement with
respect to an Employee may provide that the unvested portion of any
Option shall immediately become vested and exercisable (in whole or in
part) in the event of a Change in Control, the Employee's Termination
of Employment by reason of his Disability, by the Employer not for
Cause, by the Employee for Good Reason, as a result of the Employee's
Retirement, or if the Employee dies while an Employee.
(e) Upon an Independent Director's Termination of
Directorship for Cause, any and all Options held by such Independent
Director (whether or not vested or exercisable) shall be forfeited and
shall immediately terminate effective with such Termination of
Directorship; provided, however, that the Committee may in its sole
discretion provide that all or a part of any Option, to the extent
exercisable as of such date, can be exercised for a period of up to
one month from the date of Termination of Directorship.
(f) The portion of any Option granted to an Independent
Director that has not vested and become exercisable upon the
Director's Termination of Directorship shall be forfeited and shall
immediately terminate effective with such Termination of Directorship;
provided, however, that in the sole discretion of the Committee, the
Option Agreement with respect to an Independent Director may provide
that the unvested portion of any Option shall immediately become
vested and exercisable (in whole or in part) in the event of a
Termination of Directorship for any reason other than Cause.
4.5 EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OR
DIRECTORSHIP
(a) An Option granted to an Employee may be exercised
only while the Optionee is an Employee; provided, however, that the
Committee may determine in its sole discretion and an Option Agreement
may provide that an Option granted to an Employee may be exercised, to
the extent that the Optionee could have done so immediately preceding
the Optionee's Termination of Employment (and to the extent, if any,
such Option became exercisable under the Option Agreement as a result
of such termination), subsequent to such Optionee's Termination of
Employment, subject to the following limitations:
(i) If the Optionee dies while an Employee, the
Optionee's Beneficiary may exercise the Option not later than
12 months after the Optionee's death; or
(ii) If the Optionee's Termination of Employment
is due to the Optionee's Disability or Retirement, the
Optionee (or the Optionee's personal representative) may
exercise the Option no later than 12 months after such
termination; or
(iii) If the Optionee's Termination of Employment
is for any reason other than those set forth in (i) or (ii)
above and is not for Cause, the Optionee may exercise the
Option within three months after such termination; or
(iv) If the Optionee dies during a period
described in clause (ii) or (iii) above for the exercise of an
Option after the Optionee's Termination of Employment, the
Optionee's Beneficiary may exercise such Option no later than
the expiration of such extended period; or
(v) If the Optionee's Termination of Employment
is for Cause, the Optionee may not exercise any portion of the
Option thereafter except to the extent and at the times
permitted by the Committee in accordance with Section 4.4(c);
and
(vi) Notwithstanding (i) through (v) above or
anything in an Option Agreement or the Plan to the contrary,
(A) at any time after the grant of an Option to an Employee,
the Committee, in its sole and absolute discretion and subject
to whatever terms and conditions it selects, may provide that
the Option may be exercised after the relevant extended period
set forth above, and (B) no Option may be exercised later than
its Expiration Date in any circumstances.
(b) An Option granted to an Independent Director may be
exercised only while the Optionee is an Independent Director;
provided, however, that the Committee may determine in its sole
discretion and an Option Agreement may provide that an Option granted
to an Independent Director may be exercised, to the extent that the
Optionee could have done so immediately preceding the Optionee's
Termination of Directorship (and to the extent, if any, such Option
became exercisable under the Option Agreement as a result of such
termination), subsequent to such Optionee's Termination of
Directorship, subject to the following limitations:
(i) If the Optionee dies while a Director, the
Optionee's Beneficiary may exercise the Option within 12
months after the Optionee's death; or
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(ii) If the Optionee's Termination of Directorship
is due to Disability or Retirement, the Optionee (or the
Optionee's personal representative) may exercise the Option no
later than 12 months after such termination; or
(iii) If the Optionee's Termination of Directorship
is for any reason other than those set forth in (i) or (ii)
above and is not for Cause, the Optionee may exercise the
Option within three months after such termination; or
(iv) If the Optionee dies during a period
described in clause (ii) or (iii) above for the exercise of an
Option after the Optionee's Termination of Directorship, the
Optionee's Beneficiary may exercise such Option no later than
the expiration of such extended period; or
(v) If the Optionee's Termination of Directorship
is for Cause, the Optionee may not exercise any portion of the
Option thereafter except to the extent and at the times
permitted by the Committee in accordance with Section 4.4(e);
and
(vi) Notwithstanding (i) through (v) above or
anything contained in an Option Agreement or the Plan to the
contrary, (A) at any time after the grant of an Option to an
Independent Director, the Committee, in its sole and absolute
discretion and subject to whatever terms and conditions its
selects, may provide that the Option may be exercised after
the relevant extended period set forth above, and (B) no
Option may be exercised later than its Expiration Date in any
circumstances.
4.6 LIMITATION IN TERMS OF OPTION
The Company shall not grant an Option which, and no Option
shall be exercisable to the extent that it, will, or is likely to, result in a
violation of Section 5.10.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE
An exercisable Option may be exercised in whole or in part.
However, an Option shall not be exercisable with respect to fractional shares
and the Committee may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE
All or a portion of an exercisable Option shall be deemed
exercised upon:
(a) Delivery of all of the following to the Secretary of
the Company or his office (or his delegate):
(i) A written notice complying with the
applicable rules established by the Committee, stating that the
Option, or a portion thereof, is exercised. The notice shall
be signed by the Optionee or other person then entitled to
exercise the Option or a portion thereof, and a copy thereof
shall be delivered at the same time to the Operating
Partnership with respect to an Operating Partnership Employee
and to the Property Partnership with respect to a Property
Partnership Employee;
(ii) Such representations and documents as the
Committee, in its sole and absolute discretion, deems
necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other
federal or state securities laws or regulations. The
Committee or Board may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends
on share certificates and issuing stop- transfer notices to
agents and registrars; and
(iii) In the event that the Option shall be
properly exercised by any person or persons other than the
Optionee, appropriate proof of the right of such person or
persons to exercise the Option.
(b) Full payment in cash, by certified or bank check or
other instrument acceptable to the Committee for the shares with
respect to which the Option, or portion thereof, is being exercised
to:
(i) the Secretary of the Company (with respect to
an Option of an Independent Director and a Company Employee);
(ii) the Operating Partnership (with respect to
an Option of an Operating Partnership Employee); or
(iii) the Property Partnership (with respect to
Options of a Property Partnership Employee).
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Notwithstanding the preceding sentence, at the sole and absolute
discretion of the Committee, the terms of an Option granted to any
Employee may with the approval of the Committee, in its sole and
absolute discretion:
(A) allow payment, in whole or in part, through
the delivery of shares of Common Stock owned by the Optionee
duly endorsed for transfer with a Fair Market Value on the
date of delivery equal to the aggregate exercise price of the
Option or the portion thereof intended to be paid through the
delivery of shares of Common Stock; or
(B) allow payment, in whole or in part, through
the surrender of shares of Common Stock then issuable upon the
exercise of the Option having a Fair Market Value on the date
of Option exercise equal to the aggregate exercise price of
the Option or the portion thereof intended to be paid through
the delivery of shares of Common Stock, including a "cashless
exercise"; or
(C) (x) allow a delay in payment up to 30 days
from the date the Option, or portion thereof, is exercised,
(y) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable
consideration, or (z) allow payment through any combination of
the consideration provided in clauses (A), (B) and (C).
5.3 TRANSFER OF SHARES TO A COMPANY EMPLOYEE OR INDEPENDENT
DIRECTOR
Subject to Section 5.7, as soon as practicable after receipt
by the Company, pursuant to Section 5.2(b)(i), of payment for the shares with
respect to which an Option, or portion thereof, is exercised by an Optionee who
is an Independent Director or a Company Employee (or any Beneficiary thereof),
the Company shall transfer to the Optionee the number of shares to which such
Optionee is entitled upon such exercise.
5.4 TRANSFER OF SHARES TO AN OPERATING PARTNERSHIP EMPLOYEE
Subject to Section 5.7, as soon as practicable after receipt
by the Operating Partnership pursuant to Section 5.2(b)(ii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is an Operating Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:
(a) the Company shall sell to the Operating Partnership
and the Operating Partnership shall purchase the number of shares for
which such Option is being exercised for an aggregate purchase price
(the "Operating Partnership Purchase Price") equal to the product of
(i) the number of such shares multiplied by (ii) the Fair Market Value
of a share of Common Stock on the date of the exercise; and
(b) the Operating Partnership shall sell such shares to
the Optionee in return for the amount of the payment made by the
Optionee to the Operating Partnership pursuant to Section 5.2(b). 5.5
TRANSFER OF SHARES TO A PROPERTY PARTNERSHIP EMPLOYEE
Subject to Section 5.7, as soon as practicable after receipt
by a Property Partnership, pursuant to Section 5.2(b)(iii), of payment for the
shares with respect to which an Option, or portion thereof, is exercised by an
Optionee who is a Property Partnership Employee (or any Beneficiary thereof),
with respect to each such exercise:
(a) the Company shall sell to the Property Partnership
and the Property Partnership shall purchase the number of shares of
Common Stock for which such Option is being exercised for an aggregate
purchase price (the "Property Partnership Purchase Prices") equal to
the product of (i) such number of shares multiplied by (ii) the Fair
Market Value of a share of Common Stock on the date of exercise; and
(b) the Property Partnership shall sell such shares to
the Optionee in return for the amount of the payment made by the
Optionee to the Property Partnership pursuant to Section 5.2(b).
5.6 TRANSFER OF PAYMENT TO THE PARTNERSHIP
As soon as practicable after receipt by the Company with
respect to the exercise of any Option, or portion thereof, of the amount
described in Section 5.2(b)(i), the Operating Partnership Purchase Price or the
Property Partnership Purchase Price, the Company shall transfer to the
Operating Partnership an amount of cash equal to such payment and the Operating
Partnership shall issue additional Common Units to the Company corresponding to
the number of shares of Common Stock issuable upon the exercise of the relevant
Option multiplied by a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
transfer.
5.7 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
No certificate or certificates for shares of stock purchased
upon the exercise of any Option, or portion thereof, shall be required to be
issued prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body which the Committee shall, in
its sole and absolute discretion, deem necessary or advisable;
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(c) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Committee shall, in
its sole and absolute discretion, determine to be necessary or
advisable;
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Committee may establish from time to
time for reasons of administrative convenience; and
(e) The receipt of full payment for such shares,
including payment of any applicable withholding tax in accordance with
Section 7.6.
5.8 RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued to such holders.
5.9 OWNERSHIP AND TRANSFER RESTRICTIONS
Shares acquired through the exercise of an Option shall be
subject to the restrictions on ownership and transfer set forth in the Company
Charter. The Committee, in its sole and absolute discretion, may impose such
additional restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate in order to
preserve the qualification of the Company as a real estate investment trust,
within the meaning of Sections 856 through 860 of the Code. The Committee may
require an Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
either of (a) two years from the date of granting such Option to such Employee
or (b) one year after the transfer of such shares to such Employee. Any such
restriction or notice requirement shall be set forth in the respective Option
Agreement and may be referred to on the certificates evidencing such shares.
5.10 RESTRICTIONS ON EXERCISE OF OPTION
An Option is not exercisable if, in the sole and absolute
discretion of the Committee, the exercise of such Option would likely result in
any of the following:
(a) The Optionee's ownership of Capital Stock being in
violation of the Stock Ownership Limit; or
(b) Income to the Company that could impair the Company's
status as a real estate investment trust, within the meaning of
Sections 856 through 860 of the Code.
Notwithstanding any other provision of this Plan, the Optionee
shall have no rights under this Plan to acquire Options or Common Stock which
would otherwise be prohibited under the Company Charter.
ARTICLE VI
ADMINISTRATION
6.1 COMMITTEE
The Committee shall consist solely of two or more Directors,
appointed by and holding office at the pleasure of the Board, each of whom is
not then an Employee and each of whom is both a "Non-Employee Director" as
defined by Rule 16b-3 and an "outside director" within the meaning of Section
162(m)(4)(C)(i) of the Code; provided, however, that if one or more of the
members of the Committee does not qualify as such a "Non-Employee Director" or
"outside director" at the time any Option is granted, such Option nevertheless
shall be deemed to be properly authorized and issued under the Plan and shall
remain in full force and effect subject to the other terms and conditions
contained in the Plan and the relevant Option Agreement. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may be filled by the Board.
6.2 DUTIES AND POWERS OF COMMITTEE; BOARD RATIFICATION OF GRANTS
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Options, and the Option
Agreements, and to adopt such rules for the administration, interpretation, and
application of this Plan as are consistent therewith and to interpret, amend or
revoke any such rules. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. Notwithstanding any other provision of this Plan to the contrary,
the Board, in establishing or authorizing any committee of the Board to act as
the Committee, may require that any or all of the grants of Options by the
Committee with respect to the Plan be subject to ratification by the Board
and/or another committee of the Board.
6.3 MAJORITY RULE
The Committee shall act by a majority of its members in
attendance at a meeting at which a quorum is present or by a memorandum or
other written instrument signed by all members of the Committee.
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6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee or Board incur in connection with
the administration of this Plan shall be borne by the Company. The Committee
may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Board,
the Company and the Company's officers and Directors and all other persons
charged with responsibility for administering the Plan 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 or Board
in good faith shall be final and binding upon all persons, including the
Optionees and the Employers. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan or any Option, and all members of the Committee
and Board shall be fully protected by the Company in respect of any such
action, determination or interpretation.
6.5 DELEGATION OF AUTHORITY
The Committee may, in its sole and absolute discretion,
delegate to the Chief Financial Officer, the Secretary or any other proper
officer of the Company, or more than one of them, any or all of the
administrative duties and authority of the Committee under this Plan, other
than the authority to make grants or awards under this Plan to Employees who
are directors or officers of the Company within the meaning of Rule 16(a)-1(b)
of the Exchange Act or whose total compensation is required to be reported to
the Company's stockholders under the Exchange Act, to determine the price,
timing or amount of such grants or awards or to determine any other matter
required by Rule 16b-3 or Code Section 162(m) to be determined in the sole and
absolute discretion of the Committee.
6.6 NO LIABILITY
No member of the Board or the Committee, Director, officer of
the Company or other Employee shall be liable, responsible or accountable in
damages or otherwise for any determination made or other action taken or any
failure to act by such person with respect to this Plan so long as such person
is not determined to be guilty by a final adjudication of willful misconduct
with respect to such determination, action or failure to act.
6.7 INDEMNIFICATION
To the fullest extent permitted by law, each of the members of
the Board and the Committee and each of the Directors, officers of the Company
and the Employees shall be held harmless and be indemnified by the Company for
any liability, loss (including amounts paid in settlement), damages or expenses
(including reasonable attorneys' fees) suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act, in
connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 NOT TRANSFERABLE
Options under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution; provided, however, that, subject to the Stock Ownership Limit, an
Optionee may designate a Beneficiary to exercise his Option or other rights
under this Plan after his death, and, with respect to Non-Qualified Stock
Options, the Committee, in its sole discretion, may provide in the Option
Agreement that the Optionee may transfer, without consideration of the
transfer, all or a portion of his Options to members of his immediate family
(i.e., children, grandchildren or spouse), to trusts for the benefit of
immediate family members, to partnerships in which such family members are the
only parties and to charitable institutions; provided, however, prior to any
such transfer, the Optionee shall deliver written notice to the Company
describing in reasonable detail the proposed transfer together with an opinion
of counsel which (to the Company's satisfaction) is knowledgeable in securities
law matters to the effect that such transfer and the ownership and exercise of
such Option by the proposed transferee, taking into account any covenants or
restrictions mutually agreeable to the Company, the Optionee and the proposed
transferee, may be effected without registration under the Securities Act of
the Option or the Common Stock issuable upon exercise thereof. No Option or
interest or right therein shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.1 shall prevent transfers by
will or by the applicable laws of descent and distribution or, if provided in
the Option Agreement, to an immediate family member, to trusts for the benefit
of immediate family members, to partnerships in which such family members are
the only
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parties and to charitable institutions, as provided above. Except as provided
in this Section 7.1 and the Option Agreement, an Option shall be exercised
during the Optionee's lifetime only the Optionee or his guardian or legal
representative.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
This Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time or from time to time by the
Board. Furthermore, without approval of the Company's stockholders given with
12 months before or after the action by the Board, no action of the Board may,
except as provided in Section 7.3, materially increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under this
Plan, materially modify the eligibility requirements of Section 3.1, reduce the
minimum Option price requirements of Section 4.2, extend the limit imposed in
this Section 7.2 on the period during which Options may be granted or otherwise
materially increase the benefits accruing to participants under the Plan and no
action of the Committee or Board may be taken that would otherwise require
stockholder approval as a matter of applicable law, regulation or rule. No
amendment, suspension or termination of this Plan shall, without the consent of
the holder of an Option, alter or impair any rights or obligations under any
Option theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Option may be granted or awarded during any period
of suspension nor after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:
(a) the expiration of ten years from the date the Plan is
adopted by the Board; or
(b) the expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 7.5.
7.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY
In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for cash or a different number or kind of
shares or other securities of the Company, by reason of recapitalization,
reclassification, stock split up, stock dividend, or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind
of shares of stock for the purchase of which Options may be granted, including
adjustments of the limitation in Section 2.1 (and, to the extent permitted
under Section 162(m) of the Code, the Award Limit) on the maximum number and
kind of shares of stock which may be issued.
In the event of such a change or exchange other than by reason
of reorganization (and other than for stock or securities of another
corporation, which shall be subject to the provisions of Section 7.4), the
Committee shall also make an appropriate and equitable adjustment in the number
and kind of shares of stock as to which all outstanding Options, or portions
thereof then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares of stock, each
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option may include a
necessary or appropriate corresponding adjustment in Option exercise price, but
shall be made without change in the total price applicable to the Option, or
the unexercised portion thereof (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices).
Where an adjustment of the type described above is made to an
Incentive Stock Option under this Section, the adjustment will be made in a
manner which will not be considered a "modification" under the provisions of
subsection 424(h)(3) of the Code.
In the event of a "spin-off" or other substantial distribution
of assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Common Stock, the Committee may, in its sole and absolute
discretion, make an appropriate and equitable adjustment to the Option price to
reflect such diminution.
7.4 MERGER OF THE COMPANY
In the event of the merger or consolidation of the Company
with or into another corporation or other entity, the exchange of all or
substantially all of the assets of the Company for the securities of another or
other entity, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:
(a) At the sole and absolute discretion of the Committee,
the terms of an Option may provide that it may not be exercised after
such event; and
(b) In its sole and absolute discretion, and on such
terms as it shall deem appropriate, the Committee may provide either
by the terms of such Option or by a resolution adopted prior to the
occurrence of such event that, for a specified period of time prior to
such event, such Option shall be exercisable as to all shares of stock
covered thereby, notwithstanding anything to the contrary in the Plan
or the Option Agreement evidencing such Option.
7.5 EFFECTIVE DATE; APPROVAL OF PLAN BY STOCKHOLDERS
Subject to the approval of the Company's stockholders (by the
holders of a majority of the shares of the Company present or represented and
entitled to vote at the meeting at which the Plan is considered), the Plan
shall be effective as of [December 19, 1996](1) [January 1, 1997](2) and shall
continue in effect thereafter until
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terminated or suspended by the Committee. Options may be granted prior to such
stockholder approval, provided, however, that such Options shall not be
exercisable prior to the time when this Plan is approved by the stockholders,
and provided further, that all Options granted under this Plan shall be
canceled and become null and void and of no effect, retroactive to the date of
grant, and the Plan shall be null and void and of no effect, retroactive to the
date of Board approval, in the event the Plan is not approved by Company's
stockholders prior to the first anniversary of its approval by the Board. The
Company shall take such actions with respect to the Plan as may be necessary to
satisfy the requirements of Rule 16b-3.
7.6 TAX WITHHOLDING
Each Optionee shall, no later than the date as of which the
value of any shares received upon the exercise of an Option first becomes
includable in gross income for federal income tax purposes, pay or make
arrangements satisfactory to the Committee regarding payment of any sums
required by federal, state or local tax law to be withheld with respect to such
Option. The Committee may, in its sole and absolute discretion, allow such
Optionee to elect to have shares of Common Stock withheld (or allow the return
of shares of Common Stock) having a Fair Market Value equal to all or a portion
of the sums required to be withheld. If, as allowed by the Committee, the
Optionee elects to have shares of Common Stock withheld (or allow the return of
shares of Common Stock) having a Fair Market Value equal to all or a portion of
the sums required to be withheld, the value of the shares of Common Stock to be
withheld (or returned as the case may be) will equal to the Fair Market Value
of such shares (less any costs or taxes associated with the sale of such
shares) on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). Elections by such persons to have shares of Common Stock
withheld for this purpose will be subject to the following restrictions: (a)
the election must be made on or prior to the Tax Date, (b) the election must be
irrevocable, (c) the election shall be subject to the disapproval of the
Committee, (d) if the person is an officer of the Company within the meaning of
Section 16 of the Exchange Act, the election shall be subject to such
additional restrictions as the Committee may impose in an effort to secure the
benefits of any regulations thereunder, and (e) any stock ownership resulting
from such withholding shall not violate the Stock Ownership Limit set forth in
the Company Charter.
7.7 LOANS
The Committee may, in its sole and absolute discretion, extend
one or more loans to Optionees in connection with the exercise of Options
granted under this Plan. The terms and conditions of any such loan shall be
set by the Committee.
7.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS
Notwithstanding any other provision of this Plan, any Option
granted to an Optionee who is then subject to Section 16 of the Exchange Act
shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act) the compliance with which is necessary for the
application of such exemptive rule. Any such additional limitation shall be
set forth in an annex to this Plan, such annex to be incorporated herein by the
reference and made part of this Plan.
7.9 EFFECT OF PLAN UPON OPTIONS AND OTHER COMPENSATION PLANS
The adoption of this Plan shall not affect any other
compensation or incentive plans established by the Company, the Operating
Partnership, the Property Partnerships or any other Employer. Nothing in this
Plan shall be construed to limit the right of any of them (a) to establish any
other forms of incentives or compensation for their employees and directors or
(b) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate or partnership purpose including but
not limited to 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, partnership, firm or association.
7.10 COMPLIANCE WITH LAWS
This Plan, the granting and vesting of Options under this Plan
and the issuance and delivery of shares of Common Stock upon the exercise of
Options granted hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Company,
provide such assurances and representations to the Company as the Company may
deem necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan and Options
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
7.11 TITLES
Titles are provided herein for convenience only and are not
intended to be the basis for interpretation or construction of this Plan.
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7.12 GOVERNING LAW
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Illinois
without regard to conflicts of laws thereof.
(1) Provision contained in the 1996 Stock Incentive Plan, as amended March 20,
1997
(2) Provision contained in the 1997 Stock Incentive Plan.
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[Form of Proxy Card for Common Stock]
PROXY
AMBASSADOR APARTMENTS, INC.
Proxy Solicied on behalf of the Board of Directors
Annual Meeting of Stockholders to be held May 15, 1997
I, the undersigned stockholder of Ambassador Apartments, Inc. (the "Company"),
hereby appoint David M. Glickman and Adam D. Peterson, or either of them, the
true and lawful attorney of the undersigned, and to vote as designated on the
reverse side of this proxy card, all the shares of Common Stock of the Company
at the Annual Meeting of Stockholders to be held on May 15, 1997 or any
adjournment(s) thereof as the undersigned might or could do if personally
present.
(Continued and To Be Signed on Reverse Side)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
AMBASSADOR APARTMENTS, INC.
May 15, 1997
[X] Please mark your votes as in this example.
1. Election of Directors.
FOR WITHHOLD For, except vote withheld from the
[ ] [ ] following nominee(s):
__________________________________
Nominees:
To elect each of the following nominees as directors of the Company to
the class whose term will expire in 2000:
Norman R. Bobins
Michael W. Reschke
To elect the following nominee as a director of the Company to the
class whose term will expire in 1998: Debra A. Cafaro
2. Approval of the Amendment to the 1994 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the 1996 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion on any other item of business as may properly come
before the Annual Meeting or any adjournment(s) thereof.
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4. This
proxy will be voted as directed, but where no direction is given, this proxy
will be voted FOR proposals 1, 2, 3 and 4.
SIGNATURE(S)____________________________ DATE________________
Note: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full titles as such.
<PAGE> 68
[Form of Proxy Card for Class A Preferred Stock]
PROXY
AMBASSADOR APARTMENTS, INC.
Proxy Solicied on behalf of the Board of Directors
Annual Meeting of Stockholders to be held May 15, 1997
I, the undersigned stockholder of Ambassador Apartments, Inc. (the "Company"),
hereby appoint David M. Glickman and Adam D. Peterson, or either of them, the
true and lawful attorney of the undersigned, and to vote as designated on the
reverse side of this proxy card, all the shares of Class A Preferred Stock of
the Company at the Annual Meeting of Stockholders to be held on May 15, 1997 or
any adjournment(s) thereof as the undersigned might or could do if personally
present.
(Continued and To Be Signed on Reverse Side)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
AMBASSADOR APARTMENTS, INC.
May 15, 1997
[X] Please mark your votes as in this example.
1. Election of Directors.
FOR WITHHOLD For, except vote withheld from the
[ ] [ ] following nominee(s):
__________________________________
Nominees:
To elect each of the following nominees as Common Directors of the
Company to the class whose term will expire in 2000:
Norman R. Bobins
Michael W. Reschke
To elect the following nominee as a Common Director of the Company to
the class whose term will expire in 1998:
Debra A. Cafaro
To elect the following nominee as a Class A Director of the Company to
the class whose term will expire in 2000:
Matthew W. Kaplan
2. Approval of the Amendment to the 1994 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the 1996 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion on any other item of business as may properly come
before the Annual Meeting or any adjournment(s) thereof.
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4. This
proxy will be voted as directed, but where no direction is given, this proxy
will be voted FOR proposals 1, 2, 3 and 4.
SIGNATURE(S)____________________________ DATE________________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full titles as such.
