<PAGE> 1
As filed with the Securities and Exchange Commission on January 30, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
AMBASSADOR APARTMENTS, INC.
(Exact name of registrant as specified in its charter)
Maryland 36-3948161
(State of incorporation) (I.R.S. Employer
Identification No.)
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
(312) 917-1600
(Address of principal executive offices)
THE 1994 STOCK INCENTIVE PLAN FOR
OFFICERS, DIRECTORS AND KEY EMPLOYEES
OF AMBASSADOR APARTMENTS, INC.,
AMBASSADOR APARTMENTS, L.P. AND SUBSIDIARIES
(Full title of the plans)
David M. Glickman
Chairman of the Board and Chief Executive Officer
77 West Wacker Drive, Suite 4040
Chicago, Illinois 60601
(312) 917-1600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Robert S. Osborne, P.C.
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Title of securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered price per share (1) aggregate offering registration
price (1) fee (1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 425,000 $16.37 $6,957,750 $2,109
value $0.01 per
share
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of computing the registration fee only. Pursuant to Rule
457(h), the proposed maximum offering price per share is based upon
the average exercise price per share ($16.371176) of outstanding
options for all 425,000 shares to be registered.
================================================================================
<PAGE> 2
PART II.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by Ambassador Apartments, Inc.
(the "Company") with the Securities and Exchange Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1996.
(c) The Company's Current Reports on Form 8-K dated May 29, 1996,
August 16, 1996 and December 18, 1996.
(d) The Company's description of its Common Stock contained in the
Registration Statement on Form 8-A filed on August 17, 1994
and any amendments or reports filed for the purpose of
updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in the registration statement and to be
part thereof from the date of filing such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this registration
statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Officers and Directors.
The Company's charter and bylaws authorize the Company to
indemnify its present and former directors and officers and to pay or reimburse
expenses for such individuals in advance of the final disposition of a
proceeding to the maximum extent permitted from time to time under Maryland
law. The Maryland General Corporation Law (the "MGCL") provides that
indemnification of a person who is a party, or threatened to be made a party,
to legal proceedings by reason of the fact such a person is or was a director,
officer, employee or agent of a corporation, or is or was serving as a
director, officer, employee or agent of a corporation or other firm at the
request of a corporation, against expenses, judgments, fines and amounts paid
in settlement, is mandatory in certain circumstances and permissive in others,
subject to authorization by the board of directors, so long as a person seeking
indemnification acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation, did not act with
active and deliberate dishonesty or receive an improper personal benefit in
money, property or services and, with respect to criminal proceedings, had no
reason to believe that his or her conduct was unlawful.
- 2 -
<PAGE> 3
The 1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments, L.P. and
Subsidiaries provides that, to the fullest extent permitted by law, each of the
directors and officers of the Company 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 such 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. The Company's
officers and directors are also indemnified pursuant to the Amended and
Restated Agreement of Ambassador Apartments, L.P., as amended, and their
respective indemnification and employment agreements.
The Company's charter provides that, to the fullest extent
permitted by Maryland law, a director or officer of the Company shall not be
personally liable to the Company or its stockholders for money damages. The
MGCL provides that a corporation formed in Maryland may include in its articles
of incorporation a provision eliminating or limiting the liability of its
directors and officers to the corporation or its stockholders for money damages
except for (i) active and deliberate dishonesty established by a final judgment
or (ii) actual receipt of an improper benefit or profit in money, property or
services.
The Company purchased an insurance policy which purports to
insure the officers and directors of the Company against certain liabilities
incurred by them in the discharge of their functions as such officers and
directors except for liabilities resulting from any deliberately dishonest or
fraudulent act or omission, or any criminal or malicious act or omission, or
any willful violation of law or based upon or attributable to their gaining in
fact any personal profit or advantage to which they were not legally entitled.
Insofar as indemnification by the Company for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 The 1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries.
4.2 Amended and Restated Articles of Incorporation of the Company,
as amended, incorporated by reference to Exhibit 3.3 to the
Company's Current Report on Form 8-K dated May 29, 1996.
4.3 Amended and Restated Bylaws of the Company, as amended,
incorporated by reference to Exhibit 3.4 to the Company's
Current Report on Form 8-K dated May 29, 1996.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll with respect to
the validity of the securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in
their opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on page 5 hereof).
- 3 -
<PAGE> 4
Item 9. Undertakings.
1. The undersigned registrant hereby undertakes (a) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement; (b) that,
for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (c) to remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of
the offering.
2. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
- 4 -
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-8 and have duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, and in the capacity indicated, in the City of Chicago, State of
Illinois, on the 30th day of January, 1997.
AMBASSADOR APARTMENTS, INC.
By: /s/ David M. Glickman
----------------------------------------------------
Name: David M. Glickman
Title: Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David M. Glickman and Adam D. Peterson,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
* * * * *
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement and power of attorney have been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ David M. Glickman Chairman of the Board and Chief January 30, 1997
- --------------------------------- Executive Officer
David M. Glickman
/s/ Adam D. Peterson Executive Vice President and January 30, 1997
- --------------------------------- Chief Financial and Accounting
Adam D. Peterson Officer
/s/ Norman R. Bobins Director January 30, 1997
- ---------------------------------
Norman R. Bobins
</TABLE>
- 5 -
<PAGE> 6
<TABLE>
<S> <C> <C>
/s/ David B. Heller Director January 30, 1997
- ------------------------------------
David B. Heller
/s/ Matthew W. Kaplan Director January 30, 1997
- ------------------------------------
Matthew W. Kaplan
/s/ Richard F. Levy Director January 30, 1997
- ------------------------------------
Richard F. Levy
/s/ Jane R. Patterson Director January 30, 1997
- ------------------------------------
Jane R. Patterson
/s/ Michael W. Reschke Director January 30, 1997
- ------------------------------------
Michael W. Reschke
</TABLE>
- 6 -
<PAGE> 7
INDEX TO EXHIBITS
Exhibit
No. Description of Exhibits
- ------- -----------------------
4.1 The 1994 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador
Apartments, L.P. and Subsidiaries.
4.2 Amended and Restated Articles of Incorporation of the Company,
as amended, incorporated by reference to Exhibit 3.3 to the
Company's Current Report on Form 8-K dated May 29, 1996.
4.3 Amended and Restated Bylaws of the Company, as amended,
incorporated by reference to Exhibit 3.4 to the Company's
Current Report on Form 8-K dated May 29, 1996.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll with respect to
the validity of the securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in
their opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on page 5 hereof).
<PAGE> 1
Exhibit 4.1
THE 1994 STOCK INCENTIVE PLAN FOR
OFFICERS, DIRECTORS AND
KEY EMPLOYEES OF
AMBASSADOR APARTMENTS, INC.,
AMBASSADOR APARTMENTS, L.P.
AND SUBSIDIARIES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Award Limit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 "Capital Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Cause" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Change in Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Common Units" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Company Charter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Company Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "Company Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 "Expiration Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 "Exchange Factor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 "Good Reason" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 "Incentive Stock Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.26 "Independent Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.27 "Initial Grants" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.28 "Non-Qualified Stock Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.29 "Offering" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.30 "Operating Partnership" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 "Operating Partnership Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.32 "Operating Partnership Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 "Operating Partnership Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 "Option Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.37 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.38 "Property Partnership" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 "Property Partnership Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.40 "Property Partnership Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.41 "Property Partnership Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.42 "Retirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.43 "Rule 16b-3" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.44 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.45 "Stock Ownership Limit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
1.46 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 "Subsidiary Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.48 "Ten Percent Shareholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.49 "Termination of Directorship" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.50 "Termination of Employment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.51 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Shares Subject to Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Unexercised Options and Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Effect of Certain Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
GRANTING OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Qualification of Incentive Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Initial Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Granting of Options to Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Granting of Options to Independent Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
TERMS OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Option Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Option Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Exercise of Option after Termination of Employment or Directorship . . . . . . . . . . . . . . . . . 15
4.6 Limitation in Terms of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
EXERCISE OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Transfer of Shares to a Company Employee or Independent Director . . . . . . . . . . . . . . . . . . 19
5.4 Transfer of Shares to an Operating Partnership Employee . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Transfer of Shares to a Property Partnership Employee . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Transfer of Payment to the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Certain Timing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Conditions to Issuance of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Rights as Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Ownership and Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.11 Restrictions on Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
6.2 Duties and Powers of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Majority Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Compensation; Professional Assistance; Good Faith Actions . . . . . . . . . . . . . . . . . . . . . 23
6.5 Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Not Transferable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Amendment, Suspension or Termination of this Plan . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Changes in Common Stock or Assets of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Merger of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Effective Date; Approval of Plan by Stockholders; Completion of Offering . . . . . . . . . . . . . . 27
7.6 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.8 Limitations Applicable to Section 16 Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Effect of Plan Upon Options and Compensation
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.11 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
iii
<PAGE> 5
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.
<PAGE> 6
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 "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 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");
2
<PAGE> 7
(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 "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.
3
<PAGE> 8
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:
4
<PAGE> 9
(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 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 NASDAQ 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.
5
<PAGE> 10
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.
6
<PAGE> 11
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.
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).
7
<PAGE> 12
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.
8
<PAGE> 13
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 425,000. 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.
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
9
<PAGE> 14
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.
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
10
<PAGE> 15
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.
11
<PAGE> 16
(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 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.
12
<PAGE> 17
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:
13
<PAGE> 18
<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>
(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
14
<PAGE> 19
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
15
<PAGE> 20
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 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
16
<PAGE> 21
(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
17
<PAGE> 22
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:
(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
18
<PAGE> 23
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
19
<PAGE> 24
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.
20
<PAGE> 25
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:
(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
21
<PAGE> 26
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
22
<PAGE> 27
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 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
23
<PAGE> 28
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
24
<PAGE> 29
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.
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.
25
<PAGE> 30
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
26
<PAGE> 31
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; 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
27
<PAGE> 32
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)
28
<PAGE> 33
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.
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.
29
<PAGE> 1
Exhibit 5.1
[BALLARD SPHAR ANDREWS & INGERSOLL LETTERHEAD]
January 29, 1997
Ambassador Apartments, Inc.
77 West Wacker Drive
Suite 4040
Chicago, Illinois 60601
Re: Ambassador Apartments, Inc. Registration Statement
on Form S-8 - 425,000 Shares of Common Stock,
Par Value - $.01 Per Share
Ladies and Gentlemen:
In connection with the registration of 425,000 shares of Common Stock,
par value $.01 per share (the "Stock") under the Securities Act of 1933, as
amended (the "Act"), by Ambassador Apartments, Inc., a Maryland corporation
(the "Corporation"), on the Registration Statement on Form S-8 filed or to be
filed with the Securities and Exchange Commission (the "Commission") on or
about January 29, 1997, you have requested our opinion with respect to the
matters set forth below.
We have acted as special Maryland corporate counsel for the Company in
connection with the matters described herein. In our capacity as special
Maryland corporate counsel to the Corporation, we have reviewed and are
familiar with the proceedings taken and proposed to be taken by the Corporation
in connection with the authorization, issuance and sale of the Stock and for
purposes of this Opinion, have assumed such proceedings will be timely
completed in the manner presently proposed. We have examined the Charter of
the Company (the "Charter"), represented by certified copies of the Articles of
Incorporation filed with the State Department of Assessment and Taxation of
Maryland (the "SDAT") on April 15, 1994, Articles of Amendment filed with the
SDAT on July 1, 1994, Articles of Amendment and Restatement filed with the SDAT
on August 16, 1994, Articles of Amendment filed with SDAT on May 29, 1996, and
Articles Supplementary filed with SDAT on August 16, 1996, the Amended and
Restated Bylaws of the Corporation and certain actions taken by the
Corporation's Board of Directors and Stockholders, including relevant
authorizations and approvals. We have also examined a copy of the 1994 Stock
Incentive Plan for Officers, Directors and Key Employees of Ambassador
Apartments, Inc., Ambassador Apartments, L.P. and Subsidiaries, as amended to
<PAGE> 2
BALLARD SPAHR ANDREWS & INGERSOLL
Ambassador Apartments, Inc.
January 29, 1997
Page
date (the "Plan"). We have assumed that the options pursuant to which the
Stock is to be issued are, or at the time of issuance of the corresponding
shares of Stock will be, validly issued and outstanding, and that such options
have not been and will not be transferred or issued to the holder thereof in
violation of the restrictions or limitations contained in the Charter. We also
examined such laws, records, documents, certificates, opinions and instruments
as we have deemed necessary to render this Opinion.
We have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to the originals
of all documents submitted to us as certified, photostatic, facsimile or
conformed copies. In addition, we have assumed that each person executing the
instrument, document or certificate referred to herein on behalf of any party
is duly authorized to do so, and that each certificate submitted to us as true
and accurate, both when given and as of the date hereof.
Based on the foregoing and subject to the assumptions and
qualifications set forth herein, it is our opinion that, as of the date of this
letter, the Stock has been duly authorized and will, upon issuance and delivery
in accordance with, and subject to, the terms and conditions of the Plan and as
described in the Registration Statement, be validly issued, fully paid and
non-assessable.
We consent to your filing of this Opinion as an exhibit to the
Registration Statement and to the reference to the name of our firm under the
heading "Legal Matters."
We are qualified to practice law in the State of Maryland and do not
express any opinions herein concerning any law other than the law of the State
of Maryland. Furthermore, the opinions presented in this letter are limited to
the matters specifically set forth herein and no other opinion shall be
inferred beyond the matters expressly stated.
The opinions expressed in this letter are solely for your use and may
not be relied upon by any person without our prior written consent.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form 8) pertaining to the Ambassador Apartments, Inc. (Formerly Prime
Residential, Inc.) Stock Incentive Plan of our report dated January 26, 1996,
except for Note 15, as to which the date is March 27, 1996, with respect to the
consolidated financial statements and schedule of Ambassador Apartments, Inc.,
included in its Annual Report (Form 10-K) for the year ended December 31, 1995,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
January 28, 1997
