<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1997
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
RECKSON ASSOCIATES REALTY CORP.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):(1)
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
- -----------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
225 Broadhollow Road
Melville, New York 11747
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 22, 1997
------------------------
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of Reckson Associates Realty Corp. (the "Company") will be
held on Thursday, May 22, 1997 at 9:30 a.m. at the Omni, 333 Earl Ovington
Boulevard, Mitchel Field, New York, for the following purposes:
1. To elect three Class II directors of the Company to serve until the
2000 Annual Meeting of Stockholders and until their respective successors
are duly elected and qualified;
2. To ratify the selection of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1997;
3. To approve the Company's 1997 Stock Option Plan; and
4. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on March 28, 1997 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, $.01 par value per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
BY ORDER OF THE BOARD OF DIRECTORS
GREGG M. RECHLER
SECRETARY
Melville, New York
April 7, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
225 Broadhollow Road
Melville, New York 11747
------------------------
PROXY STATEMENT
------------------------
FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
to be held on May 22, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Reckson Associates Realty Corp. (the
"Company") for use at the 1997 Annual Meeting of Stockholders of the Company to
be held on Thursday, May 22, 1997, and at any adjournments or postponements
thereof (the "Annual Meeting"). At the Annual Meeting, stockholders will be
asked to vote upon (1) the election of three Class II directors of the Company,
(2) to ratify the selection of Ernst & Young LLP as the independent auditors of
the Company for the fiscal year ending December 31, 1997, (3) to approve the
Company's 1997 Stock Option Plan, and (4) to act upon any other matters that may
properly be brought before the Annual Meeting and at any adjournments or
postponements thereof.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about April 9, 1997. The Board
of Directors has fixed the close of business on March 28, 1997 as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). Only stockholders of record of the
Company's common stock, par value $.01 per share (the "Common Stock"), at the
close of business on the Record Date will be entitled to notice of and to vote
at the Annual Meeting. As of the Record Date, there were 17,136,502 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. Holders of
Common Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held by them on the Record Date. In February
1997, the Board of Directors declared a two-for-one stock dividend payable to
stockholders of record on April 4, 1997. Since the record date for the stock
dividend is subsequent to the Record Date, shares of Common Stock received in
such dividend will not be entitled to vote at the Annual Meeting. All references
to shares of Common Stock included in this Proxy Statement are presented on a
basis prior to the two-for-one stock dividend.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. The affirmative vote of the holders of a majority of the shares of
Common Stock cast at the Annual Meeting at which a quorum is present is required
for the election of Class II directors, the ratification of the Company's
auditors, the approval of the Company's 1997 Stock Option Plan, and the approval
of any other matters properly presented at the Annual Meeting for stockholder
approval. Under Maryland law, abstentions do not constitute a vote "for" or
"against" a matter and will be disregarded in determining "votes cast." Broker
"non-votes", or proxies from brokers or nominees indicating that such person has
not received instructions from the beneficial owner or other person entitled to
vote such shares on a particular matter with respect to which the broker or
nominee does not have discretionary voting power, will be treated in the same
manner as abstentions.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE
NOMINEES FOR CLASS II DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT,
FOR RATIFICATION OF THE BOARD OF DIRECTOR'S SELECTION OF ERNST & YOUNG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997
AND FOR THE APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN. IT IS NOT
ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE
<PAGE>
PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE
PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above, by filing a duly executed proxy
bearing a later date, or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1996 Annual Report, including financial statements for the
fiscal year ended December 31, 1996, has been previously mailed to stockholders.
The Annual Report, however, is not part of the proxy solicitation material.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine members and is
divided into three classes, with the directors in each class serving for a term
of three years and until their successors are duly elected and qualified. The
term of one class expires at each annual meeting of stockholders.
At the Annual Meeting, three directors will be elected to serve until the
2000 Annual Meeting and until their successors are duly elected and qualified.
The Board of Directors has nominated Mr. Donald J. Rechler, Mr. Mitchell D.
Rechler and Mr. Leonard Feinstein to serve as Class II directors (the
"Nominees"). Each of the Nominees is currently serving as a Class II director of
the Company. The Board of Directors anticipates that each of the Nominees will
serve, if elected, as a director. However, if any person nominated by the Board
of Directors is unable to accept election, the proxies will be voted for the
election of such other person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following table and biographical descriptions set forth certain
information with respect to the three Nominees for election as Class II
directors at the Annual Meeting, the continuing directors whose terms expire at
the annual meetings of stockholders in 1998 and 1999 and the executive officers
who are not directors, based upon information furnished to the Company by each
director and executive officer.
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
DIRECTOR OWNERSHIP(1) PERCENT
NAME AGE SINCE OF COMMON STOCK OF CLASS(2)
- ----------------------------------------------------------------- --- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
CLASS II NOMINEES FOR ELECTION AT 1997 ANNUAL MEETING (TERM TO
EXPIRE IN 2000)
Donald J. Rechler................................................ 62 1994 826,179(3) 4.01%
Mitchell D. Rechler.............................................. 37 1994 203,904(4) *
Leonard Feinstein................................................ 59 1995 8,000(5) *
CLASS III CONTINUING DIRECTORS (TERM EXPIRES IN 1998)
Roger Rechler.................................................... 54 1994 815,123(6) 3.95%
Harvey R. Blau................................................... 61 1995 4,000(5) *
John V.N. Klein.................................................. 65 1995 5,400(5) *
CLASS I CONTINUING DIRECTORS (TERM EXPIRES IN 1999)
Scott H. Rechler................................................. 29 1994 194,011(7) *
Herve A. Kevenides............................................... 58 1995 4,000(5) *
Conrad D. Stephenson............................................. 69 1995 4,000(5) *
</TABLE>
- ------------------------
* Less than one percent.
(1) All information has been determined as of March 15, 1997. For purposes of
this table a person is deemed to have "beneficial ownership" of the number
of shares of Common Stock that person has the right to acquire pursuant to
the exercise of stock options exercisable within sixty days or the
redemption of units (the "Units") of limited partnership interests in
Reckson Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership") (assuming the Company elects to issue Common Stock
rather than pay cash upon such redemption). See "Executive Compensation" for
a discussion of the vesting of stock options granted to directors and
officers. Pursuant to the terms of the Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as of June 2, 1995,
and as amended, after June 2, 1997 the Operating Partnership is obligated to
redeem Units for cash, or, at the option of the Company, shares of Common
Stock.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person, any shares of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option exercisable
within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percent ownership of any other
person.
(3) Includes (a) 181,050 shares of Common Stock, including 174,050 shares owned
directly, and 7,000 shares as the trustee of trusts for the benefit of a son
of Mr. Donald J. Rechler, (b) 10,000 exercisable options and (c) 635,129
Units, including 109,557 Units owned directly, 129,816 Units as the trustee
of trusts for the benefit of Mr. Donald J. Rechler's sons, and 395,756 Units
owned through corporations and partnerships.
(4) Includes (a) 16,184 shares of Common Stock, including 2,184 shares owned in
trust for Mr. Mitchell D. Rechler's children, (b) 24,000 exercisable options
and (c) 163,720 Units, including 68,471 Units owned directly, and 95,249
Units owned through corporations and partnerships.
(5) Includes options to purchase 4,000 shares of Common Stock.
(6) Includes (a) 183,140 shares of Common Stock, including 174,050 shares owned
directly, 7,000 shares as the trustee of trusts for the benefit of a son of
Mr. Roger Rechler and 2,090 shares owned by his wife, (b) no exercisable
options, and (c) 631,983 Units, including 106,932 Units owned directly,
129,816 Units as the trustee of trusts for the benefit of Mr. Roger
Rechler's sons and 395,235 Units owned through corporations and
partnerships.
3
<PAGE>
(7) Includes (a) 9,097 shares of Common Stock, including 1,097 shares owned in
trust for Mr. Scott H. Rechler's child, (b) 24,000 exercisable options and
(c) 160,914 Units, including 64,353 Units owned directly and 96,561 Units
owned through corporations and partnerships.
CLASS II NOMINEES FOR ELECTION AT 1997 ANNUAL MEETING--TERM TO EXPIRE IN 2000
DONALD J. RECHLER has served as Chairman of the Board, Chief Executive
Officer and a director of the Company since its formation. Mr. Rechler also
served as President of the Company from its formation until February 1997. Prior
to the initial public offering (the "IPO") in June 1995, Mr. Rechler was a co-
founder and general partner of Reckson Associates. He is a founder and former
President and Chairman of the Association For A Better Long Island, a founder of
the Long Island Commercial & Industrial Development Association, a member of the
Board of Directors of the Development Division of North Shore Hospital, a member
of the Board of Directors of the Long Island Philharmonic and a member of the
Council of Overseers of Long Island University, C.W. Post College. Mr. Rechler
is a graduate of the University of Miami. Mr. Rechler is the father of Mitchell
D. Rechler and the brother of Roger Rechler.
MITCHELL D. RECHLER has served as Executive Vice President and a director of
the Company since its formation. Mitchell D. Rechler also serves as the
President of Reckson Management Group, Inc. (the "Management Company"). From
1981 to 1985, he was employed by Reckson in various non-supervisory roles
including positions in property management, construction, acquisitions and
leasing. Since 1986, Mr. Rechler has served as an executive vice president of
Reckson, responsible for all leasing activities including the coordination of
leasing and marketing strategies and overseeing tenant relations. Mr. Rechler
has served as President of the Management Company, since its organization in
1991. Mr. Rechler serves on the executive committee of the Children's Medical
Fund of Schneider Children's Hospital of Long Island Jewish Medical Center and
as a member of the board of directors of the Long Island Friends of the Arts. He
is a graduate of Emory University. He is the son of Donald J. Rechler.
LEONARD FEINSTEIN has served as a director of the Company since 1995. Mr.
Feinstein is the co-founder and the president and co-chief executive officer of
Bed Bath & Beyond Inc., a New York Stock Exchange listed company. Mr. Feinstein
has served in such capacity since 1992. Mr. Feinstein served as co-chief
executive officer, treasurer and secretary of Bed Bath & Beyond Inc. from 1971
to 1992.
CLASS III CONTINUING DIRECTORS -- TERM TO EXPIRE IN 1998
ROGER RECHLER has served as Vice Chairman of the Board and a director of the
Company since its formation and as an Executive Vice President of Development
since February 1997. Prior to the IPO, Mr. Rechler was a co-founder and general
partner of Reckson Associates and supervised property construction,
architectural and design-services, interior construction and property
management. Mr. Rechler attended the University of Miami. Mr. Rechler is the
father of Scott H. Rechler and Gregg M. Rechler and the brother of Donald J.
Rechler.
HARVEY A. BLAU has served as a director of the Company since 1995. Mr. Blau
is a senior partner of the law firm of Blau, Kramer, Wachtler & Lieberman, P.C.
and has been associated with such firm (including its predecessors) since 1966.
Mr. Blau has served as the Chairman of the Board of Aeroflex, Incorporated since
1991, the Chairman of the Board of the Griffon Corporation and a Director of Nu
Horizons Electronics Corp. since 1984. Mr. Blau serves as a Trustee of Benjamin
N. Cardozo School of Law and as a Trustee of the Incorporated Village of Old
Westbury, New York. Mr. Blau holds a bachelor's degree from New York University,
a law degree from Columbia University School of Law and an advanced law degree
from New York University Graduate School of Law.
JOHN V.N. KLEIN has served as a director of the Company since 1995. Mr.
Klein has been the Managing Attorney of the law firm of Meyer, Suozzi, English &
Klein, P.C. since 1984. Mr. Klein served as a Director of Fleet Bank from 1980
to 1994 and is currently on the Advisory Board of Fleet Bank. Mr. Klein has also
been a member of the advisory board of St. Joseph's College, Patchogue, New York
since 1980. Mr. Klein
4
<PAGE>
has served in various government positions on Long Island, including County
Executive of Suffolk County, New York from 1972 to 1979. Mr. Klein holds a
bachelor's degree and a law degree from the University of Virginia.
CLASS I CONTINUING DIRECTORS--TERM TO EXPIRE IN 1999
SCOTT H. RECHLER has served as Chief Operating Officer and a director of the
Company since its formation and has served as President of the Company since
February 1997. In addition, until February 1997 Mr. Rechler served as Executive
Vice President of the Company since its formation. Mr. Rechler has been employed
at Reckson Associates, a predecessor to the Company ("Reckson"), since 1989.
Prior to the Company's initial public offering in June 1995 (the "IPO"), he
directed the financing of approximately $200 million of mortgage debt and the
acquisition of property having a value in excess of $100 million for Reckson. He
is a member of the Board of Directors of the Long Island Childrens Museum. Mr.
Rechler is a graduate of Clark University and received a Masters Degree in
Finance with a specialization in real estate from New York University. He is the
son of Roger Rechler and the brother of Gregg M. Rechler.
HERVE A. KEVENIDES has served as a director of the Company since 1995. Since
1996, Mr. Kevenides has served as the Director of Research for Landauer
Associates, a real estate consulting and valuation firm. Mr. Kevenides served
from 1995 to 1996 as the director of the Real Estate Products Group for Ceres
Financial Concepts, N.A. Mr. Kevenides is the president and director of research
of Metropolitan Analysis & Forecasting Corporation, an international real estate
economics and market research firm. Mr. Kevenides has served in this position
since 1988. Mr. Kevenides has served as an Adjunct Associates Professor of the
Masters in Real Estate Program of New York University since 1989. Mr. Kevenides
was a vice president and director of real estate economics and market research
for Chemical Bank from 1981 to 1988, and a vice president and manager of real
estate market research for Chase Manhattan Bank from 1972 to 1981. Mr. Kevenides
holds a Masters of Business Administration from New York University.
CONRAD D. STEPHENSON has served as a director of the Company since 1995. Mr.
Stephenson served as the chief executive officer of Pan Am Equities Inc., a
property ownership and management company from 1993 to 1996, and currently
serves as a consultant thereof. Mr. Stephenson was employed by The Comras
Company, a real estate company, from 1990 to 1993, and served as the vice
president in the tri-state and northeast real estate lending division of the
First National Bank of Chicago from 1987 to 1990. Mr. Stephenson was the vice
president in charge of all commercial real estate lending activities of The
Bowery Savings Bank from 1985 to 1987, and was a vice president of The Chase
Manhattan Bank from 1975 to 1985. Mr. Stephenson has served as a governor, vice
president and a member of the executive committee of the Real Estate Board of
New York. Mr. Stephenson holds a bachelor's degree from Fordham University and a
Masters of Business Administration from New York University. Mr. Stephenson is a
retired colonel of the U.S. Army Reserves, with which he served for 35 years.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
J. MICHAEL MATURO has served as an Executive Vice President, Chief Financial
Officer and Treasurer of the Company since 1995. Prior to joining the Company,
Mr. Maturo was a senior manager at E&Y Kenneth Leventhal Real Estate Group
(formerly Kenneth Leventhal & Company), a public accounting and consulting firm.
He specialized in diverse phases of real estate finance including corporate and
property debt financings and recapitalization transactions. Mr. Maturo is a
graduate of Seton Hall University with a degree in accounting and finance and is
a certified public accountant. Mr. Maturo is 35 years old.
JON L. HALPERN has served as an Executive Vice President of the Company and
President of the Westchester Division since February 1996. Prior to joining the
Company, Mr. Halpern was the President and Chief Operating Officer of Halpern
Enterprises, Inc., which owned, operated, leased and managed in
5
<PAGE>
excess of 1.7 million square feet of office and mixed-use properties and has
developed and constructed (through affiliates) in excess of 3.8 million square
feet of construction. Mr. Halpern is a member of the Board of Westchester County
Medical Center, the Executive Board of the Greyston Family Inn, a not-for-profit
organization working to provide housing for homeless families, and the Board of
the Westchester Land Trust. Mr. Halpern is a founding member and is currently
Vice President of the Westchester Business Partnership, a public/private
partnership working to promote and encourage business within Westchester County.
Mr. Halpern is a graduate of University of Colorado School of Business where he
earned a Bachelor of Science degree. Mr. Halpern is 34 years old.
GREGG M. RECHLER has served as an Executive Vice President and Secretary of
the Company since its formation. Mr. Rechler also serves as President of Reckson
Construction Group, Inc. From 1985 to 1988, Mr. Rechler held non-supervisory
roles at Reckson in the construction and property management areas. Beginning in
1989, as an executive vice president of Reckson, he served as the person
responsible for the construction of the Omni (a 575,000 square foot office
building) and supervised all construction aspects of this project. Mr. Rechler
is a member of the Board of Directors of the Long Island chapter of the Building
Owners and Managers Association. Mr. Rechler attended the New York Institute of
Technology. He is the son of Roger Rechler and the brother of Scott H. Rechler.
Mr. Rechler is 30 years old.
CHAIRMAN OF THE BOARD EMERITUS
WALTER GROSS has served as Chairman of the Board Emeritus of the Company
since its formation. For over 40 years, Mr. Gross has been actively involved in
the development and operation of industrial and office properties on Long
Island. Together with the late William Rechler, Mr. Gross conceived of and
developed Vanderbilt Industrial Park, the first planned industrial park built on
Long Island. He also owned and operated Walter J. Gross Construction Corp., a
general contracting firm, that has constructed in excess of 3,000,000 square
feet on behalf of clients including B.F. Goodrich, Sears and The Prudential
since 1970. Mr. Gross is 77 years old.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company is managed by a nine member Board of Directors, a majority of
whom are independent of the Company's management. The Board of Directors held
eight meetings during fiscal year 1996. Each of the directors attended at least
75% of the total number of meetings of the Board of Directors and of the
committees of the Company of which he was a member during 1996.
AUDIT COMMITTEE. The Audit Committee, which consists of Messrs. Feinstein
and Klein, makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagements, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls. The Audit Committee
held two meetings during fiscal year 1996.
EXECUTIVE COMMITTEE. Subject to the supervision and oversight of the Board
of Directors, the Executive Committee, which consists of Donald J. Rechler,
Scott H. Rechler, Herve Kevenides and Conrad D. Stephenson, has the authority to
approve the acquisition, financing and disposition of investments by the Company
and to authorize the execution of certain contracts and agreements, including
those relating to the borrowing of money by the Company and to exercise
generally all other powers of the Board of Directors, except for those which
require action by all Directors or the Independent Directors under the Articles
of Incorporation or By-Laws of the Company or under applicable law. The
Executive Committee held nine meetings during fiscal year 1996.
COMPENSATION COMMITTEE. The Compensation Committee, which consists of
Harvey R. Blau and Leonard Feinstein, makes recommendations and exercises all
powers of the Board of Directors in
6
<PAGE>
connection with compensation matters, including incentive compensation and
benefit plans. The Compensation Committee also has authority to grant awards
under the Company's 1995 Stock Option Plan (the "1995 Stock Option Plan") and
the 1996 Employee Stock Option Plan (the "1996 Employee Stock Option Plan"). The
Compensation Committee held six meetings during fiscal year 1996.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the functions of such a committee.
DIRECTOR COMPENSATION
Each of the non-employee directors of the Company receives an annual
director's fee of $15,000. Each non-employee director also receives $500 for
each regular quarterly meeting of the Board of Directors attended, $500 for each
special meeting of the Board of Directors attended, $250 for each special
telephonic meeting of the Board of Directors participated in and $500 for each
committee meeting attended. Each non-employee director appointed or elected for
the first time after the IPO will receive an initial option to purchase 3,000
shares of Common Stock at the market price of the Common Stock on the date of
grant. Under the 1995 Stock Option Plan, following each annual meeting of
stockholders each of the Company's non-employee directors will receive an option
to purchase 1,000 shares of Common Stock at the market price of the Common Stock
on the date of grant. All options granted to non-employee directors vest on the
date of grant. On May 30, 1996, each non-employee director was granted an option
under the 1995 Stock Option Plan to purchase 1,000 shares of Common Stock at
$31.25 per share.
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of the Company, upon the recommendation of the Audit Committee,
has selected the accounting firm of Ernst & Young LLP to serve as independent
auditors of the Company for the fiscal year ending December 31, 1997, subject to
ratification of this appointment by the stockholders of the Company. Ernst &
Young LLP has served as the Company's independent auditors since the Company's
formation in September 1994 and is considered by management of the Company to be
well qualified. The Company has been advised by that firm that neither it nor
any member thereof has any financial interest, direct or indirect, in the
Company or any of its subsidiaries in any capacity. A representative of Ernst &
Young LLP will be present at the Annual Meeting, will be given the opportunity
to make a statement if he or she so desires and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF THE INDEPENDENT AUDITORS.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the base compensation
awarded for the past two fiscal years to each of the five most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") whose base salary, on an annualized basis exceeded $100,000
during the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------
<S> <C> <C> <C> <C> <C>
SALARY(1) BONUSES LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(2) ($)
- -------------------------------------------------------- --------- ---------- ---------- ----------- -------------
Donald J. Rechler....................................... 1996 $ 200,000 $ 200,000 -- --
Chief Executive Officer 1995 $ 200,000 -- 10,000 --
Scott H. Rechler........................................ 1996 $ 150,000 $ 150,000 --
President and Chief Operating Officer 1995 $ 150,000 -- 52,000 --
J. Michael Maturo....................................... 1996 $ 162,500(3) $ 162,500 -- --
Executive Vice President, Chief Financial 1995 $ 150,000 $ 25,000 40,000 --
Officer and Treasurer
Mitchell D. Rechler..................................... 1996 $ 150,000 $ 150,000 -- --
Executive Vice President and President of 1995 $ 150,000 -- 52,000 --
Reckson Management Group, Inc.
Gregg M. Rechler........................................ 1996 $ 150,000 $ 150,000 -- --
Executive Vice President and Secretary and 1995 $ 150,000 -- 52,000 --
President of Reckson Construction Group, Inc.
</TABLE>
- ------------------------
(1) The base salary of Donald J. Rechler, Scott H. Rechler, J. Michael Maturo
and Mitchell D. Rechler are paid by the Management Company and the base
salary of Gregg M. Rechler is paid by the Construction Company. The Company
and the Operating Partnership reimburse the appropriate subsidiary
corporation for time spent by the Named Executive Officer on the business of
the Company or the Operating Partnership, respectively.
(2) As of March 31, 1997, options to purchase 206,000 shares of Common Stock
have been granted to the Named Executive Officers.
(3) Excludes loan forgiveness in the amount of $100,000 pursuant to the terms of
Mr. Maturo's employment and noncompetition agreement with the Company.
No options were granted to the Named Executive Officers in respect of the
fiscal year ended December 31, 1996.
No options were exercised by the Named Executive Officers in 1996. The
following table sets forth the value of options held at the end of 1996 by the
Company's Named Executive Officers.
8
<PAGE>
AGGREGATED FISCAL YEAR-END 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Donald J. Rechler.......................... 10,000/0 $ 123,750/$0
Scott H. Rechler........................... 24,000/28,000 $ 375,750/$504,000
J. Michael Maturo.......................... 13,333/26,667 $ 239,994/$480,006
Mitchell D. Rechler........................ 24,000/28,000 $ 375,750/$504,000
Gregg M. Rechler........................... 24,000/28,000 $ 375,750/$504,000
</TABLE>
- ------------------------
(1) The value of unexercised in-the-money options at fiscal year-end based on
the fair market value for Common Stock, $42.25 per share, as of December 31,
1996.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Each of the Named Executive Officers have entered into employment and
noncompetition agreements with the Company.
The agreements with each of Donald J. Rechler, Scott H. Rechler, Mitchell D.
Rechler and Gregg Rechler will expire on the third anniversary of the closing of
the initial public offering (the "IPO") (I.E., June 2, 1998) and the agreement
with J. Michael Maturo will expire on June 15, 1998, unless in each case
otherwise extended. The agreements provide for certain benefits in the event of
termination of the employee by the Company without "Good Reason" (as such term
is defined in the agreement), resignation by the employee upon a material breach
of the agreement by the Company or a "Change in Control" of the Company followed
by a "Force Out" of the employee (as such terms are defined in the applicable
agreement). These benefits include the continued payment of the employee's base
salary during the remaining term of the employment period (200% of such amount
in the case of Mr. Maturo) as well as continued entitlement to receive other
benefits conferred under the applicable agreement for such remaining term. Under
the agreements, each employee is also entitled to certain specified benefits in
the event of his death or disability.
In addition, such employment and noncompetition agreements, subject to
certain exceptions, prohibit each such employee from engaging, directly or
indirectly, during the term of his employment, in any business which engages or
attempts to engage in, directly or indirectly, the acquisition, development,
construction, operation, management or leasing of any industrial office real
estate property anywhere within the Tri-State metropolitan area ("Competitive
Activities"). Pursuant to such agreements, each such employee is required to
devote substantially all of his business time to the Company. These employment
and noncompetition agreements also prohibit such persons from engaging, directly
or indirectly, during the Noncompetition Period in any Competitive Activities,
subject to certain limited exceptions. The Noncompetition Period for each such
employee is the period beginning on the date of the termination of employment
and ending on the latest of (i) three years from the closing of the IPO (in the
case of Donald J. Rechler, Scott H. Rechler, Mitchell D. Rechler and Gregg
Rechler) and June 15, 1998 (in the case of J. Michael Maturo), (ii) one year
from the termination of his employment with the Company and (iii) the date on
which the severance payments provided to him under his employment agreement
cease.
Pursuant to the employment and noncompetition agreement with Mr. Maturo,
upon execution of such agreement, the Company loaned to Mr. Maturo the amount of
$399,980 (the "Loan") in order to finance his purchase of an equity interest in
the Company. In that regard, Mr. Maturo has purchased and currently owns 16,494
Units (the "Restricted Units") (effectively purchased at a price per Unit of
$24.25, the closing
9
<PAGE>
price per share of Common Stock on the New York Stock Exchange on the date the
employment and noncompetition agreement was executed). The Loan will mature on
the fourth anniversary of its issuance and accrues interest at the rate of 8
1/2%. Subject to the limitations set forth below, on each of the first four
anniversaries of the Loan, $100,000 of the outstanding principal amount is
forgiven by the Company and the Company loans to Mr. Maturo a cash amount
equivalent to his resulting tax liability (a "Tax Loan") which in turn is
forgiven (together with accrued interest thereon and on the Loan) over the fifth
through eighth anniversaries of the date the Loan was made. Both the Loan and
the Tax Loans are recourse solely to the Restricted Units. Under the employment
and noncompetition agreement, if Mr. Maturo is terminated by the Company for
"Good Reason" (as defined in such agreement) or Mr. Maturo voluntarily
terminates his employment for reasons other than those expressly permitted under
such agreement, the maturity date of the Loan will accelerate to the date of
termination. In addition, such agreement provides for annual incentive cash
compensation determined with reference to annual increases in adjusted Funds
from Operations per share of Common Stock.
REPORT ON EXECUTIVE COMPENSATION
The following is a report by the Company's Compensation Committee regarding
the Company's executive compensation objectives, executive compensation program
and the compensation of the Company's chief executive officer:
EXECUTIVE COMPENSATION OBJECTIVES. The objective of the Company's executive
compensation program is to attract, retain and motivate talented executives that
will maximize stockholder value. In order to achieve this objective, in addition
to annual base salaries, the executive compensation program utilizes a
combination of long-term incentives through equity-based compensation and annual
incentives through cash bonuses. The program is intended to align the interests
of executives with those of the Company's stockholders by linking a portion of
executive compensation directly to increases in stockholder value. The Company
seeks to provide total compensation to its executive officers which is
competitive with total compensation paid by REITs similar to the Company.
PROCEEDINGS OF THE COMPENSATION COMMITTEE. The Compensation Committee
determines compensation for the Company's executive officers and is comprised of
two nonemployee directors, Mr. Blau and Mr. Feinstein. Final compensation
determinations for each fiscal year will generally be made after the end of the
fiscal year. At that time, base salaries for the following fiscal year will be
set, cash bonuses, if any, will be determined for the past year's performance,
and option grants, if any, will generally be made. At a meeting in February
1997, the Compensation Committee fixed the base salaries for the Named Executive
Officers for the fiscal year ending December 31, 1997 and determined incentive
compensation awards for such officers in respect of the fiscal year ended
December 31, 1996.
The Compensation Committee engaged FPL Associates ("FPL"), a consultant, to
advise the Compensation Committee regarding executive officer compensation
matters, including annual base salary, annual incentives and long-term
incentives. The Compensation Committee considered FPL's analysis in determining
base salaries and incentives.
In determining compensation for the Named Executive Officers, the
Compensation Committee noted several factors, including the Company's strong
performance for the 1996 fiscal year, both in terms of total shareholder return
(48.4%) as well as growth in Funds from Operations per share (10.3%) and the
fact that no cash incentive awards were made for the 1995 fiscal year (except
for a $25,000 cash bonus paid to J. Michael Maturo). Further, during the period
June 2, 1995 (commencement of operations as a public company) through December
31, 1996, the total return to shareholders (assuming the reinvestment of
dividends) amounted to 93%.
The Compensation Committee exercises independent discretion in respect of
executive compensation matters. With respect to the compensation of the Named
Executive Officers other than Mr. Donald J. Rechler, the Compensation Committee
reviews the recommendations of Mr. Donald J. Rechler.
10
<PAGE>
The following is a discussion of each element of the Company's executive
compensation:
ANNUAL BASE SALARY. Base salaries for each of the Named Executive Officers
are the subject of the employment and noncompetition agreement between the
Company and each such executive as indicated above. Each such agreement provides
that the base salary provided for under the respective agreement will be
reviewed no less frequently than annually. For 1996, base salaries for each
Named Executive Officer were determined based upon the base salary provided for
under the respective agreement. For the fiscal year ending December 31, 1997,
base salaries for the Named Executive Officers were determined by the
Compensation Committee based upon a review of the performance of each Named
Executive Officer and the report prepared by FPL. In that regard, base salaries
for the 1997 fiscal year for each of the named Executive Officers are as
follows: Donald Rechler--$325,000, Scott Rechler--$250,000, J. Michael
Maturo--$200,000, Mitchell Rechler--$200,000 and Gregg Rechler--$200,000.
ANNUAL INCENTIVES. Annual incentives are provided in the form of cash
bonuses to be paid if certain performance objectives are achieved. Cash bonuses
will also be subject to adjustment based upon the Compensation Committee's
evaluation of an executive's personal performance. Mr. Maturo's employment and
noncompetition agreement provides for an annual cash bonus based upon annual
increases in adjusted Funds from Operations per share of Common Stock.
The Compensation Committee awarded the following cash bonuses to the
following Named Executive Officers in February 1997 in respect of the fiscal
year ended December 31, 1996: Scott Rechler--$150,000, Mitchell
Rechler--$150,000, Gregg Rechler--$150,000 and J. Michael Maturo--$162,500. The
cash bonus award to Donald J. Rechler is discussed separately below. In
determining incentive compensation for 1996, the Compensation Committee
considered the factors described above regarding annual base salaries and also
considered the Company's performance during the seven months of operations in
1995, since none of the Company's Named Executive Officers (except for J.
Michael Maturo) received cash bonuses for this period.
LONG-TERM INCENTIVES. Long-term incentives may be provided through a
variety of means, including the grant of stock options, restricted stock awards
and stock loans. These awards are intended to align the executive's long-term
objectives with those of the Company's stockholders. The grant of stock options,
restricted stock awards and stock loans are made under the Company's stock
option plans which are administered by the Compensation Committee. The
Compensation Committee has the discretion to determine those individuals to whom
awards are made and the terms and conditions of the awards.
Pursuant to the Board's approval of recommendations made by the Compensation
Committee and upon shareholder approval of the Company's 1997 Stock Option Plan,
as a long-term incentive award for the fiscal year ended December 31, 1996, each
of the Company's Named Executive Officers will receive a loan from the Company
to purchase shares of Common Stock ("Stock Loans"). The principal amount of the
Stock Loans will be $600,000 in the case of Donald J. Rechler and $450,000 in
the case of each of Scott Rechler, Mitchell Rechler, Gregg Rechler and J.
Michael Maturo. Each Stock Loan will have a term of five years, accrue interest
at the Federal mid-term "Applicable Federal Rate" ("AFR") as in effect from time
to time, and will be secured by the Common Stock purchased and will otherwise be
non-recourse. Ten percent (10%) of each officer's Stock Loan (together with
accrued interest on the Stock Loan) will be forgiven each year during the term
of the Stock Loan provided that the officer is then employed by the Company and
the remaining outstanding principal balance of the Stock Loan will be due and
payable at maturity. The Company will also loan to the executive an amount equal
to his aggregate tax liability resulting from such forgiveness (the "Tax
Loans"). The Tax Loans will have a one year maturity, bear interest at the AFR
and be forgiven upon maturity (together with the interest thereon), provided
that the officer is then employed by the Company. In the event of a Change of
Control of the Company, an officer's death or permanent disability or
termination of his employment by the Company without cause, the outstanding
principal amounts of the applicable Stock Loan and Tax Loan will be forgiven in
full. In the event an officer leaves the employ of the Company or is terminated
with cause, the outstanding amount of the
11
<PAGE>
applicable loans will be immediately due and payable. In approving these loans
the Compensation Committee considered the same factors it considered in
determining the annual incentives, including the retention of the Named
Executive Officers. To the extent the 1997 Stock Option Plan is not approved at
the meeting, the Compensation Committee is authorized to amend the form of the
foregoing awards as the Compensation Committee may deem appropriate.
1996 CHIEF EXECUTIVE OFFICER COMPENSATION. Donald J. Rechler's base salary
for the year ended December 31, 1996 was the amount set forth in his employment
agreement with the Company that was entered into upon completion of the IPO in
June 1995. Pursuant to such agreement, Donald J. Rechler's 1996 base salary was
$200,000.
For the year ended December 31, 1996, the Compensation Committee awarded to
Donald J. Rechler a cash bonus of $200,000. Donald J. Rechler's cash bonus for
the year ended December 31, 1996 was determined by the Compensation Committee
substantially in accordance with the policies described above relating to all
Named Executive Officers of the Company. In making such determination the
Compensation Committee noted several factors, including the Company's
achievement of a 10.3% increase of Funds from Operations per share in 1996 over
levels achieved in 1995 and that the Company provided total shareholder returns
(assuming the reinvestment of dividends) of 48.4% and 93% for the year ended
December 31, 1996 and the period June 2, 1995 (commencement of operations of the
Company) through December 31, 1996, respectively. The Compensation Committee
also considered the successful completion of two public offerings of the
Company's Common Stock resulting in net proceeds of approximately $150 million.
In addition, the Compensation Committee considered the fact that the Company
increased the square footage of its portfolio of properties by over 50% through
acquisitions during 1996. In determining Donald J. Rechler's 1996 cash bonus,
the Compensation Committee also considered the Company's performance during the
seven months of operations during 1995 subsequent to the IPO and the fact that
Donald J. Rechler received no cash bonus for the seven months of operations in
1995.
The Compensation Committee determined Donald J. Rechler's Stock Loan for the
year ended December 31, 1996 substantially in accordance with the policies
described above relating to all Named Executive Officers of the Company. The
terms of such Stock Loan are described above under "--Long Term Incentives."
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), limits the deductibility on the
Company's tax return of compensation over $1 million to any of the named
executive officers of the Company unless, in general, the compensation is paid
pursuant to a plan which is performance-related, non-discretionary and has been
approved by the Company's stockholders. The Compensation Committee's policy with
respect to Section 162(m) is to make every reasonable effort to ensure that
compensation is deductible to the extent permitted while simultaneously
providing Company executives with appropriate compensation for their
performance. The Company did not pay any compensation during 1996 that would be
subject to the limitations set forth in Section 162(m).
Submitted by the Compensation Committee
of the Board of Directors:
Harvey R. Blau
Leonard Feinstein
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Common Stock for the period from May 26, 1995 (the
date upon which the Company's Common Stock commenced trading on the New York
Stock Exchange) to December 31, 1996 with the cumulative total return on the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") and the NAREIT
Equity REIT Total Return Index. Total return values were calculated based on
cumulative total return assuming (i) the investment of $100 in the Common Stock
on May 26, 1995 and in the S&P 500 and the NAREIT Equity REIT Total Return Index
on May 31, 1995 and (ii) reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RECKSON ASSOCIATES REALTY
CORP. S&P 500 NAREIT EQUITY REIT TOTAL RETURN INDEX
<S> <C> <C> <C>
May-95 100 100 100
6-30-95 100 102 102
9-30-95 110 110 106
12-31-95 127 117 111
3-31-96 133 123 113
6-30-96 146 129 118
9-30-96 167 133 126
12-31-96 193 144 150
</TABLE>
13
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock for
(i) each stockholder of the Company holding more than a 5% beneficial interest
in the Company, (ii) each executive officer of the Company who is not a director
of the Company and (iii) the directors and executive officers of the Company as
a group. Stock ownership of the Directors of the Company appears under the
heading "Information Regarding Nominees and Directors" in this Proxy Statement.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK AND UNITS
BENEFICIALLY OWNED
AS OF MARCH 15, 1997(1)
-------------------------------
<S> <C> <C>
NAME OF BENEFICIAL OWNERS NUMBER PERCENT OF TOTAL(2)
- ----------------------------------------------------------- ---------- -------------------
Jon L. Halpern............................................. 181,259(3) *
J. Michael Maturo.......................................... 33,847(4) *
Gregg M. Rechler........................................... 194,322(5) *
Cohen & Steers Capital Management Inc.(6).................. 1,676,500 8.13%
Fidelity Management & Research Corp.(7).................... 1,136,600 5.51%
All directors and executive officers as a group
(12 persons)............................................. 2,474,045 12.00%
</TABLE>
- ------------------------
* Less than one percent.
(1) All information has been determined as of March 15, 1997. Information
regarding Cohen & Steers Capital Management Inc. is based on a Schedule 13G
filed with the Securities and Exchange Commission reporting beneficial
ownership of shares of Common Stock. For purposes of this table a person is
deemed to have "beneficial ownership" of the number of shares of Common
Stock that person has the right to acquire pursuant to the exercise of stock
options within 60 days or upon the redemption of Units (assuming the Company
elects to issue Common Stock rather than pay cash upon such redemption). See
"Executive Compensation" for a discussion of the vesting of stock options
granted to directors and officers. Units are exchangeable for cash or, at
the option of the Company, on a one-for-one basis for shares of common
stock, subject to certain limitations. However, Units may not be exchanged
until June 2, 1997.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person, any shares of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option exercisable
within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purposes of computing the percent ownership of any other
person.
(3) Represents (a) 167,259 Units, 99,455 Units of which are held in a
partnership in which a corporation owned by Mr. Halpern is the general
partner and of which Mr. Halpern disclaims beneficial ownership and (b)
14,000 exercisable options.
(4) Represents (a) 20,494 Units, (b) 20 shares of common stock, and (c) 13,333
exercisable options.
(5) Includes (a) 9,928 shares of Common Stock, including 1,928 shares held in
trust for the child of Gregg M. Rechler and beneficial ownership of which is
disclaimed by Gregg M. Rechler, (b) 160,394 Units, including 64,353 Units
owned directly and 96,041 Units owned through corporations and partnerships,
and (c) 24,000 exercisable options.
(6) This information is based upon information reported by the stockholder in
filings made with the Securities and Exchange Commission. The address of
Cohen & Steers Capital Management Inc. is 757 Third Avenue, New York, New
York 10019.
14
<PAGE>
(7) This information is based upon information reported by the stockholder in
filings made with the Securities and Exchange Commission. The address of
Fidelity Management & Research Corp. is 82 Devonshire Street, Boston, MA
02109.
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders"), to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Officers, directors and 10% Holders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, all Section 16(a) filing requirements
applicable to its executive officers, directors and 10% Holders were satisfied
during 1996, except that the acquisition in September 1996 of 786 Units by Scott
Rechler, President, was reported late on a Form 5-Annual Statement of Beneficial
Ownership of Securities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE OPTION PROPERTIES
Upon completion by the Company of its IPO, two office properties and four
industrial properties owned by Reckson affiliates and four other properties in
which Reckson owns a non-controlling minority interest (the "Reckson Option
Properties") were not contributed to the Operating Partnership.
However, upon completion of the IPO, the Operating Partnership was granted
an option, exercisable over a 10 year period commencing upon closing of the IPO,
to acquire each of the Reckson Option Properties at a purchase price equal to
the lesser of (i) a fixed price established at the time of the IPO (the "Fixed
Price") and (ii) the Net Operating Income attributable to such property during
the 12 month period preceding exercise of the option by the Operating
Partnership divided by a capitalization rate of 11.5% (the "NOI Price");
provided that, in no event could the purchase price be less than the outstanding
balance of the mortgage debt encumbering the property on the acquisition date.
The terms of the option further provide that the portion of the purchase price
not required to repay mortgage debt shall be payable in limited partnership
units of the Operating Partnership ("Units"). The Units are to be valued based
on the market price of the common stock as of four business days prior to the
closing date. In addition, the Company is obligated to provide registration
rights to the sellers with respect to common stock obtained upon conversion of
Units.
On May 22, 1996, the Independent Directors (I.E., the Directors of the
Company who are neither officers of the Company nor affiliated with Reckson)
authorized the Operating Partnership to exercise its option to acquire 60
Charles Lindbergh Blvd. (an approximately 187,000 square foot office building
located in the Company's Nassau West Corporate Center in Mitchel Field, New
York) from a partnership owned by Donald Rechler and Roger Rechler (the Chairman
of the Board and Vice Chairman of the Board, respectively, of the Company) at
the Fixed Price of $20,726,400. The Operating Partnership subsequently acquired
such property in July 1996 for (i) approximately $17.0 million of cash used to
repay mortgage indebtedness encumbering the property and pay closing costs and
(ii) the balance in Units. The approximately $17.0 million cash payment was
funded with proceeds from the Company's public offering of 3,000,000 shares of
common stock completed in April 1996 and borrowings incurred under its then
existing credit facility with Salomon Brothers Realty Corp.
On August 27, 1996, the Independent Directors further authorized the
Operating Partnership to exercise its options to acquire 48 Harbor Park Drive (a
36,000 square foot research and development industrial property located in Port
Washington), 30 Hub Drive (a 73,000 square foot industrial property located in
the Company's County Line Industrial Center in Melville, New York), and 110
Bi-County Blvd. (a 147,000 square foot industrial property located in
Farmingdale, New York). 48 Harbor Park Drive was authorized to be acquired at a
purchase price of $3,500,000 (the outstanding principal amount of mortgage debt
encumbering the property which was recently incurred to fund a retrofitting of
the building and
15
<PAGE>
significant tenant improvements). 30 Hub Drive, and 110 Bi-County Blvd. were
authorized to be acquired at their Fixed Prices of $2,007,700, and $8,969,300,
respectively.
In September 1996, the Operating Partnership made a cash payment of
$3,500,000 to a partnership owned by Donald Rechler and Roger Rechler in
connection with the acquisition of 48 Harbor Park Drive. This payment was funded
with borrowings incurred under its then existing credit facility with Salomon
Brothers Realty Corp.
On November 27, 1996, the Operating Partnership acquired 30 Hub Drive from a
partnership owned by Donald Rechler and Roger Rechler for $2,007,700. The
Operating Partnership acquired such property with the issuance of 20,892 Units
(valued at $37.00 per Unit) and the prepayment of the aggregate principal amount
of the mortgage debt encumbering such property of $1,234,696.
On January 7, 1997, the Operating Partnership acquired 110 Bi-County Blvd.
at the Fixed Price of $8,969,300. Donald Rechler and Roger Rechler maintained an
ownership interest in the Partnership that owned 110 Bi-County Blvd. In
addition, Scott Rechler, President and Mitchell Rechler, Executive Vice
President of the Company, and certain trusts established for the benefit of
other members of the Rechler family maintain an ownership interest in the
partnership that owned 110 Bi-County Blvd. The Operating Partnership acquired
such property with the issuance of 101,902 Units (valued at $42.00 per Unit) and
assumed the debt encumbering such property on January 7, 1997, of $4,689,416.
During 1996, the Company made construction loan advances to fund certain
redevelopment and leasing costs relating to one of the other Reckson Option
Properties. At December 31, 1996, advances due the Company were approximately
$2,940,000. Such amount bears interest at the rate of 12% per annum and is due
on demand.
LEASE OF CORPORATE OFFICES
The Company leases 12,146 square feet of office space at its corporate
offices located at 225 Broadhollow Road, at an annual base rent of $316,345 from
a partnership in which Donald Rechler, Roger Rechler, Mitchell Rechler and
trusts established for Rechler family members maintain an equity interest.
16
<PAGE>
PROPOSAL 3: APPROVAL OF THE 1997 STOCK OPTION PLAN
In February 1997 the Board of Directors approved the adoption of the 1997
Stock Option Plan, subject to the approval of the stockholders at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997 STOCK
OPTION PLAN.
The 1995 Stock Option Plan was adopted at the time of the IPO in order to
provide a means for the Company to implement its long-term incentive program for
executive officers and directors, as well as to provide incentives for other
officers and employees. The Company's objective in providing these incentives is
to attract, retain and motivate talented persons that will maximize stockholder
value. In this regard, the Company has sought to provide incentives for a broad
range of persons employed by the Company in granting awards under the 1995 Stock
Option Plan. The 1995 Stock Option Plan provides for the grant of awards under
such plan (including the grant of stock options and restricted and unrestricted
shares of Common Stock) in respect of up to an aggregate of 750,000 shares of
Common Stock. As of March 15, 1997, awards had been granted under the 1995 Stock
Option Plan in respect of 656,269 shares of Common Stock. Of this amount, awards
in respect of 450,269 shares of Common Stock were issued to persons other than
the Named Executive Officers. In addition, options issued under the 1996
Employee Stock Option Plan may only be issued (i) to employees that are not
officers or directors of the Company or (ii) as an inducement in connection with
the hiring of new employees.
In order to continue the implementation of the Company's long-term incentive
program, the Board of Directors has approved the adoption of the 1997 Stock
Option Plan, subject to the approval of the stockholders at the meeting. The
1997 Stock Option Plan provides for the grant of awards under such plan in
respect of up to an aggregate of 1,500,000 shares of Common Stock (3,000,000
shares of Common Stock after giving effect to the two-for-one stock dividend
described above). The 1997 Stock Option Plan is substantially similar to the
1995 Stock Option Plan.
The following is a description of the 1997 Stock Option Plan:
The 1997 Stock Option Plan will be administered by the Compensation
Committee. Officers and key employees of the Company and its subsidiaries
generally will be eligible to participate in the 1997 Stock Option Plan.
Non-employee Directors of the Company will be eligible to receive stock options
under the 1997 Stock Option Plan on a limited basis.
The 1997 Stock Option Plan authorizes (i) the grant of stock options that
qualify as incentive stock options under Section 422 of the Code ("ISOs"), (ii)
the grant of stock options that do not so qualify ("NQSOs"), (iii) the grant of
stock options in lieu of cash Directors' fees and employee bonuses, (iv) grants
of shares of Common Stock, in lieu of cash compensation and (v) the making of
loans to acquire shares of Common Stock in lieu of compensation. The exercise
price of stock options is determined by the Compensation Committee, but may not
be less than 100% of the fair market value of the shares of Common Stock on the
date of grant in the case of ISOs; provided that, in the case of grants of NQSOs
granted in lieu of cash Directors' fees and employee bonuses, the exercise price
may not be less than 50% of the fair market value of the shares of Common Stock
on the date of grant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 STOCK OPTION PLAN. The
following is a brief summary of the principal Federal income tax consequences of
awards under the 1997 Stock Option Plan. The summary is based upon current
Federal income tax laws and interpretations thereof, all of which are subject to
change at any time, possibly with retroactive effect. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign tax consequences.
A participant is not subject to Federal income tax either at the time of
grant or at the time of exercise of an ISO. However, upon exercise, the
difference between the fair market value of the Common Stock and the exercise
price is an item of tax preference subject to the possible application of the
alternative minimum tax. If a participant does not dispose of Common Stock
acquired through the exercise of an ISO
17
<PAGE>
in a "disqualifying disposition" (i.e., no disposition occurs within two years
from the date of grant of the share option nor within one year of the transfer
of the Common Stock to the participant), then the participant will be taxed only
upon the gain, if any, from the sale of such Common Stock, and such gain will be
taxable as gain from the sale of a capital asset.
The Company will not receive any tax deduction on the exercise of an ISO or,
if the above holding period requirements are met, on the sale of the underlying
Common Stock. If there is a disqualifying disposition (i.e., one of the holding
period requirements is not met), the participant will be treated as receiving
compensation subject to ordinary income tax in the year of the disqualifying
disposition and the Company will be entitled to a deduction for compensation
expense in an amount equal to the amount included in income by the participant.
The participant generally will be required to include in income an amount equal
to the difference between the fair market value of the Common Stock at the time
of exercise and the exercise price. Any appreciation in value after the time of
exercise will be taxed as capital gain and will not result in any deduction by
the Company.
If NQSOs are granted to a participant, there are no Federal income tax
consequences at the time of grant. Upon exercise of the option, the participant
must report as ordinary income an amount equal to the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise. The Company will receive a tax deduction in like amount. Any
appreciation in value after the time of exercise will be taxed as capital gain
and will not result in any deduction by the Company.
A participant who is awarded restricted stock that is subject to a
substantial risk of forfeiture (as defined in the Code) will not be taxed at the
time of the grant unless the participant makes a special election under section
83(b) of the Code. Assuming that no such election is made, the Company will
receive no tax deduction at the time of the grant. Upon the lapse of the
substantial risk of forfeiture associated with the restricted stock, a
participant will recognize ordinary income equal to the fair market value of the
restricted stock at the time of the lapse. At the same time, the Company will
receive a tax deduction in the amount of ordinary income recognized by a
participant.
If a participant makes an election under section 83(b) of the Code or if the
restricted stock is subject to restrictions that do not comprise a substantial
risk of forfeiture, he or she will recognize ordinary income in an amount equal
to the fair market value of the restricted stock at the time of the grant
(determined without regard to any restrictions which may lapse). The Company
will receive a tax deduction in the equal amount at the same time. No tax will
be payable by a participant (and no additional deduction will be taken by the
Company) upon lapse of the restrictions.
A participant who receives a Stock Loan generally will not be taxed at the
time of the grant of such a Loan. Similarly, the Company will receive no tax
deduction at the time of such Loan. Any portion of a Stock Loan that is forgiven
by the Company will be treated generally as ordinary compensation income in the
year of forgiveness.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
18
<PAGE>
STOCKHOLDER PROPOSALS
For a proposal of a stockholder to be presented to an annual meeting, other
than a stockholder proposal included in the Company's proxy statement pursuant
to Rule 14a-8 of the Securities Act of 1934, as amended ("Rule 14a-8"), the
Secretary of the Company must receive written notice thereof on or before the
date specified in the Company's Bylaws, and the proponent or a representative of
the proponent must attend the annual meeting.
For a proposal of a stockholder to be presented to the Company's 1998 annual
meeting of stockholders, other than a stockholder proposal included in the
Company's proxy statement pursuant to Rule 14a-8, it must be received at the
principal executive offices of the Company after November 23, 1997 and on or
before March 8, 1998, unless the 1998 annual meeting of stockholders is
scheduled to take place before May 22, 1998. The Company's Bylaws provide that
any stockholder wishing to nominate a director or have a stockholder proposal
other than a stockholder proposal included in the Company's proxy statement
pursuant to Rule 14a-8, considered at an annual meeting must provide written
notice of such nomination or proposal and appropriate supporting documentation,
as set forth in the Bylaws, to the Company at its principal executive offices
not less than 75 days nor more than 180 days prior to the anniversary of the
immediately preceding annual meeting of stockholders (the "Anniversary Date");
provided, however, that in the event that the annual meeting is scheduled to be
held more than seven calendar days prior, or more than 60 days subsequent, to
the Anniversary Date, such nominations or proposals must be delivered to the
Company not earlier than the 180th day prior to such meeting and not later than
the later of the 75th day prior to such annual meeting or the twentieth day
following the earlier of the day on which public announcement of the meeting is
first made or notice of the meeting is mailed to stockholders. Any such proposal
should be mailed to: Reckson Associates Realty Corp., 225 Broadhollow Road,
Melville, New York 11747, Attn: Gregg M. Rechler, Secretary.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement that will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
19
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
225 BROADHOLLLOW ROAD
MELVILLE, NEW YORK 11747
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Scott H. Rechler and John
V.N. Klein, and either of them, as Proxies of the undersigned, with full power
of substitution, to vote all shares of Common Stock of Reckson Associates Realty
Corp. (the "Company") held of record by the undersigned as of the close of
business on March 28, 1997, on behalf of the undersigned at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held at the Omni, 333 Earl Ovington
Boulevard, Mitchel Field, New York, 9:30 a.m., local time, on Thursday, May 22,
1997, and at any adjournments or postponements thereof.
When properly executed, this proxy will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is given, this proxy
will be voted FOR the three nominees of the Board of Directors listed in
Proposal 1 and FOR Proposal 2 and Proposal 3. In their discretion, the Proxies
are each authorized to vote upon such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof. A stockholder
wishing to vote in accordance with the Board of Directors' recommendations need
only sign and date this proxy and return it in the enclosed envelope.
Please vote and sign on other side and
return promptly in the enclosed envelope. SEE REVERSE
SIDE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/X/ Please mark your votes as in this example.
1. To elect three Class II Directors of the Company to
serve until the 2000 Annual Meeting of Stockholders
and until their respective successors are duly elected
and qualified. FOR AGAINST ABSTAIN
Nominees: Donald J. Rechler, Mitchell D. Rechler 2. To ratify the selection of / / / / / /
and Leonard Feinstein Ernst & Young LLP as the
FOR WITHHELD independent auditors of
/ / / / the Company for the fiscal
year ending December 31, 1997.
3. To approve the Company's
1997 Stock Option Plan / / / / / /
/ /_____________________ MARK HERE / /4. To consider and act upon any other matters that
For all nominees except as noted above FOR ADDRESS may properly be brought before the Annual Meeting
CHANGE AND and at any adjournments or postponements thereof.
NOTE BELOW
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's 1997 Annual Report to Stockholders and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked
at any time before it is exercised.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Signature:___________________________________Date:________
Signature:___________________________________Date:________
If Held Jointly
</TABLE>
<PAGE>
RECKSON ASSOCIATES REALTY CORP. AMENDED AND RESTATED
1997 STOCK OPTION PLAN
ARTICLE 1. GENERAL
1.1. Purpose. The purpose of the Reckson Associates Realty Corp. 1997
Stock Option Plan (the "Plan") is to provide for certain officers, directors and
key employees, as defined in Section 1.3, of Reckson Associates Realty Corp.
(the "Company") and certain of its Affiliates (as defined below) an equity-based
incentive to maintain and enhance the performance and profitability of the
Company. It is the further purpose of this Plan to permit the granting of
awards that will constitute performance based compensation for certain executive
officers, as described in Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), and regulations promulgated thereunder.
1.2. Administration.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which
Committee shall consist of two or more directors, or by the Board. It is
intended that the directors appointed to serve on the Committee shall be
"non-employee directors" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Act")) and "outside directors" (within the
meaning of Code Section 162(m)); however, the mere fact that a Committee member
shall fail to qualify under either of these requirements shall not invalidate
any award made by the Committee which award is otherwise validly made under the
Plan. The members of the Committee shall be appointed by, and may be changed at
any time and from time to time in the discretion of, the Board.
(b) The Committee shall have the authority (i) to exercise all of the powers
granted to it under the Plan, (ii) to construe, interpret and implement the Plan
and any Plan agreements executed pursuant to the Plan, (iii) to prescribe, amend
and rescind rules relating to the Plan, (iv) to make any determination necessary
or advisable in administering the Plan, and (v) to correct any defect, supply
any omission and reconcile any inconsistency in the Plan. The Committee shall
have no authority to interpret or administer Article 5 of the Plan or to take
any action with respect to any awards thereunder.
(c) The determination of the Committee on all matters relating to the Plan
or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder.
(e) Notwithstanding anything to the contrary contained herein, the Board
may, in its sole discretion, at any time and from time to time, resolve to
administer the Plan, in which case, the term Committee as used herein shall be
deemed to mean the Board.
1.3. Persons Eligible for Awards. Awards under the Plan may be made to
such officers, directors and key employees ("key personnel") of the Company or
<PAGE>
its Affiliates as the Committee shall from time to time in its sole discretion
select. No member of the Board who is not an officer or employee of the Company
or an Affiliate (an "Independent Director") shall be eligible to receive any
Awards under the Plan, except for non-qualified stock options granted
automatically under the provisions of Article 5 of the Plan.
1.4. Types of Awards Under Plan.
(a) Awards may be made under the Plan in the form of (i) stock options
("options"), (ii) restricted stock awards, and (iii) unrestricted stock awards
in lieu of cash compensation, all as more fully set forth in Articles 2 and 3.
(b) Options granted under the Plan may be either (i) "nonqualified" stock
options ("NQSOs") or (ii) options intended to qualify for incentive stock option
treatment described in Code Section 422 ("ISOs"). Grants of options made under
the Plan may also be made in lieu of cash fees otherwise payable to Directors of
the Company or cash bonuses payable to employees of the Company or any
Affiliate.
(c) All options when granted are intended to be NQSOs, unless the applicable
Plan agreement explicitly states that the option is intended to be an ISO. If
an option is intended to be an ISO, and if for any reason such option (or any
portion thereof) shall not qualify as an ISO, then, to the extent of such
nonqualification, such option (or portion) shall be regarded as a NQSO
appropriately granted under the Plan provided that such option (or portion)
otherwise meets the Plan's requirements relating to NQSOs.
1.5. Shares Available for Awards.
(a) Subject to Section 4.5 (relating to adjustments upon changes in
capitalization), as of any date the total number of shares of Common Stock with
respect to which awards may be granted under the Plan, shall equal the excess
(if any) of 1,500,000 shares of Common Stock, over (i) the number of shares of
Common Stock subject to outstanding awards, (ii) the number of shares in respect
of which options have been exercised, or grants of restricted or unrestricted
Common Stock have been made pursuant to the Plan, and (iii) the number of shares
issued subject to forfeiture restrictions which have lapsed.
In accordance with (and without limitation upon) the preceding sentence,
awards may be granted in respect of the following shares of Common Stock: shares
covered by previously-granted awards that have expired, terminated or been
cancelled for any reason whatsoever (other than by reason of exercise or
vesting).
(b) In any year, a person eligible for awards under the Plan may not be
granted options under the Plan covering a total of more than [75,000] shares of
Common Stock.
(c) Shares of Common Stock that shall be subject to issuance pursuant to the
Plan shall be authorized and unissued or treasury shares of Common Stock, or
shares of Common Stock purchased on the open market or from shareholders of the
Company for such purpose.
(d) Without limiting the generality of the foregoing, the Committee may,
with the grantee's consent, cancel any award under the Plan and issue a new
award in substitution therefor upon such terms as the Committee may in its sole
discretion determine, provided that the substituted award shall satisfy all
applicable Plan requirements as of the date such new award is made.
2
<PAGE>
1.6. Definitions of Certain Terms.
(a) The term "Affiliate" as used herein means Reckson Operating Partnership,
L.P., Reckson FS Limited Partnership, Reckson Executive Centers, L.L.C., Reckson
Finance, Inc., Reckson Management Group, Inc., Reckson Construction Group, Inc.,
and any person or entity as subsequently approved by the Board which, at the
time of reference, directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.
(b) The term "Cause" shall mean a finding by the Committee that the
recipient of an award under the Plan has (i) acted with gross negligence or
willful misconduct in connection with the performance of his material duties to
the Company or its Affiliates; (ii) defaulted in the performance of his material
duties to the Company or its Affiliates and has not corrected such action within
15 days of receipt of written notice thereof; (iii) willfully acted against the
best interests of the Company or its Affiliates, which act has had a material
and adverse impact on the financial affairs of the Company or its Affiliates; or
(iv) been convicted of a felony or committed a material act of common law fraud
against the Company, its Affiliates or their employees and such act or
conviction has, or the Committee reasonably determines will have, a material
adverse effect on the interests of the Company or its Affiliates.
(c) The term "Common Stock" as used herein means the shares of common stock
of the Company as constituted on the effective date of the Plan, and any other
shares into which such common stock shall thereafter be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
(d) The "fair market value" (or "FMV") as of any date and in respect of any
share of Common Stock shall be:
(i) if the Common Stock is listed for trading on the New York Stock
Exchange, the closing price, regular way, of the Common Stock as reported
on the New York Stock Exchange Composite Tape, or if no such reported sale
of the Common Stock shall have occurred on such date, on the next preceding
date on which there was such a reported sale; or
(ii) the Common Stock is not so listed but is listed on another
national securities exchange or authorized for quotation on the National
Association of Securities Dealers Inc.'s NASDAQ National Market System
("NASDAQ/NMS"), the closing price, regular way, of the Common Stock on such
exchange or NASDAQ/NMS, as the case may be, on which the largest number of
shares of Common Stock have been traded in the aggregate on the preceding
twenty trading days, or if no such reported sale of the Stock shall have
occurred on such date on such exchange or NASDAQ/NMS, as the case may be,
on the preceding date on which there was such a reported sale on such
exchange or NASDAQ/NMS, as the case may be; or
(iii) if the Stock is not listed for trading on a national securities
exchange or authorized for quotation on NASDAQ/NMS, the average of the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported.
3
<PAGE>
1.7. Agreements Evidencing Awards.
(a) Options and restricted stock awards granted under the Plan shall be
evidenced by written agreements. Any such written agreements shall (i) contain
such provisions not inconsistent with the terms of the Plan as the Committee may
in its sole discretion deem necessary or desirable and (ii) be referred to
herein as "Plan Agreements."
(b) Each Plan agreement shall set forth the number of shares of Common Stock
subject to the award granted thereby.
(c) Each Plan agreement with respect to the granting of an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company in connection with the exercise of the option evidenced thereby. The
option exercise price per share shall not be less than 100% of the fair market
value of a share of Common Stock on the date the option is granted.
ARTICLE 2. STOCK OPTIONS
2.1. Option Awards.
(a) Grant of Stock Options. The Committee may grant options to purchase
shares of Common Stock in such amounts and subject to such terms and conditions
as the Committee shall from time to time in its sole discretion determine,
subject to the terms of the Plan.
(b) Dividend Equivalent Rights. To the extent expressly provided by the
Committee at the time of the grant, each NQSO granted under this Section 2.1
shall also generate Dividend Equivalent Rights ("DERs"), which shall entitle the
grantee to receive an additional share of Common Stock for each DER received
upon the exercise of the NQSO, at no additional cost, based on the formula set
forth herein. As of the last business day of each calendar quarter, the amount
of dividends paid by the Company on each share of Common Stock with respect to
that quarter shall be divided by the FMV per share to determine the actual
number of DERs accruing on each share subject to the NQSO. Such amount of DERs
shall be multiplied by the number of shares covered by the NQSO to determine the
number of DERs which accrued during such quarter. The provisions of this
Section 2.1(b) 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
("ERISA") or the rules thereunder.
For example. Assume that a grantee holds a NQSO to purchase 600 shares of
Common Stock. Further assume that the dividend per share for the first quarter
was $0.10, and that the FMV per share on the last business day of the quarter
was $20. Therefore, .005 DER would accrue per share for that quarter and such
grantee would receive three DERs for that quarter (600 X .005). For purposes of
determining how many DERs would accrue during the second quarter, the NQSO would
be considered to be for 603 shares of Common Stock.
2.2. Exercisability of Options. Subject to the other provisions of the
Plan:
(a) Exercisability Determined by Plan Agreement. Each Plan agreement shall
set forth the period during which and the conditions subject to which the option
shall be exercisable (including, but not limited to vesting of such options), as
determined by the Committee in its discretion.
4
<PAGE>
(b) Partial Exercise Permitted. Unless the applicable Plan agreement
otherwise provides, an option granted under the Plan may be exercised from time
to time as to all or part of the full number of shares for which such option is
then exercisable, in which event the DERs relating to the portion of the option
being exercised shall also be exercised.
(c) Notice of Exercise; Exercise Date.
(i) An option shall be exercisable by the filing of a written notice of
exercise with the Company, on such form and in such manner as the Committee
shall in its sole discretion prescribe, and by payment in accordance with
Section 2.4.
(ii) Unless the applicable Plan agreement otherwise provides, or the
Committee in its sole discretion otherwise determines, the date of exercise
of an option shall be the date the Company receives such written notice of
exercise and payment.
2.3. Limitation on Exercise. Notwithstanding any other provision of the
Plan, no Plan agreement shall permit an ISO to be exercisable more than 10 years
after the date of grant.
2.4. Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the applicable Plan
agreement otherwise provides or the Committee in its sole discretion otherwise
determines, any written notice of exercise of an option shall be accompanied by
payment of the full purchase price for the shares being purchased.
(b) Manner of Payment. Payment of the option exercise price shall be made
in any combination of the following:
(i) by certified or official bank check payable to the Company (or
the equivalent thereof acceptable to the Committee);
(ii) by personal check (subject to collection), which may in the
Committee's discretion be deemed conditional;
(iii)with the consent of the Committee in its sole discretion, by
delivery of previously acquired shares of Common Stock owned by the grantee
for at least six months having a fair market value (determined as of the
option exercise date) equal to the portion of the option exercise price
being paid thereby, provided that the Committee may require the grantee to
furnish an opinion of counsel acceptable to the Committee to the effect
that such delivery would not result in the grantee incurring any liability
under Section 16(b) of the Act and does not require any Consent (as defined
in Section 4.2); and
(iv) with the consent of the Committee in its sole discretion, by the
full recourse promissory note and agreement of the grantee providing for
payment with interest on the unpaid balance accruing at a rate not less
than that needed to avoid the imputation of income under Code Section 7872
and upon such terms and conditions (including the security, if any,
therefor) as the Committee may determine; and
5
<PAGE>
(v) by withholding shares of Common Stock from the shares otherwise
issuable pursuant to the exercise.
(c) Cashless Exercise. Payment in accordance with Section 2.4(b) may be
deemed to be satisfied, if and to the extent provided in the applicable Plan
agreement, by delivery to the Company of an assignment of a sufficient amount of
the proceeds from the sale of Common Stock acquired upon exercise to pay for all
of the Common Stock acquired upon exercise and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be made at the
grantee's direction at the time of exercise, provided that the Committee may
require the grantee to furnish an opinion of counsel acceptable to the Committee
to the effect that such delivery would not result in the grantee incurring any
liability under Section 16 of the Act and does not require any Consent (as
defined in Section 4.2).
(d) Issuance of Shares. As soon as practicable after receipt of full
payment, the Company shall, subject to the provisions of Section 4.2, deliver to
the grantee one or more certificates for the shares of Common Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
2.5.Default Rules Concerning Termination of Employment.
Subject to the other provisions of the Plan and unless the applicable Plan
agreement otherwise provides:
(a) General Rule. All options granted to a grantee shall terminate upon the
grantee's termination of employment for any reason except to the extent
post-employment exercise of the option is permitted in accordance with this
Section 2.5.
(b) Termination for Cause. All unexercised or unvested options granted to a
grantee shall terminate and expire on the day a grantee's employment is
terminated for Cause.
(c) Regular Termination; Leave of Absence. If the grantee's employment
terminates for any reason other than as provided in subsection (b), (d) or (f)
of this Section 2.5, any awards granted to such grantee which were exercisable
immediately prior to such termination of employment may be exercised, and any
awards subject to vesting may continue to vest, until the earlier of either: (i)
90 days after the grantee's termination of employment and (ii) the date on which
such options terminate or expire in accordance with the provisions of the Plan
(other than this Section 2.5) and the Plan agreement; provided that the
Committee may, in its sole discretion, determine such other period for exercise
in the case of a grantee whose employment terminates solely because the
grantee's employer ceases to be an Affiliate or the grantee transfers employment
with the Company's consent to a purchaser of a business disposed of by the
Company. The Committee may, in its sole discretion, determine (i) whether any
leave of absence (including short-term or long-term disability or medical leave)
shall constitute a termination of employment for purposes of the Plan and (ii)
the effect, if any, of any such leave on outstanding awards under the Plan.
(d) Retirement. If a grantee's employment terminates by reason of
retirement (i.e., the voluntary termination of employee by a grantee after
attaining the age of 55), the options exercisable by the grantee immediately
6
<PAGE>
prior to the grantee's retirement shall be exercisable by the grantee until the
earlier of (i) 12 months after the grantee's retirement and (ii) the date on
which such options terminate or expire in accordance with the provisions of the
Plan (other than this Section 2.5) and the Plan agreement.
(e) Death After Termination. If a grantee's employment terminates in the
manner described in subsections (c) or (d) of this Section 2.5 and the grantee
dies within the period for exercise provided for therein, the options
exercisable by the grantee immediately prior to the grantee's death shall be
exercisable by the personal representative of the grantee's estate or by the
person to whom such options pass under the grantee's will (or, if applicable,
pursuant to the laws of descent and distribution) until the earlier of (i) 12
months after the grantee's death and (ii) the date on which such options
terminate or expire in accordance with the provisions of subsections (c) or (d)
of this Section 2.5.
(f) Death Before Termination. If a grantee dies while employed by the
Company or any Affiliate, all options granted to the grantee but not exercised
before the death of the grantee, whether or not exercisable by the grantee
before the grantee's death, shall immediately become and be exercisable by the
personal representative of the grantee's estate or by the person to whom such
options pass under the grantee's will (or, if applicable, pursuant to the laws
of descent and distribution) until the earlier of (i) 12 months after the
grantee's death and (ii) the date on which such options terminate or expire in
accordance with the provisions of the Plan (other than this Section 2.5) and the
Plan agreement.
2.6. Special ISO Requirements. In order for a grantee to receive special
tax treatment with respect to stock acquired under an option intended to be an
ISO, the grantee of such option must be, at all times during the period
beginning on the date of grant and ending on the day three months before the
date of exercise of such option, an employee of the Company or any of the
Company's parent or subsidiary corporations (within the meaning of Code Section
424), or of a corporation or a parent or subsidiary corporation of such
corporation issuing or assuming a stock option in a transaction to which Code
Section 424(a) applies. If an option granted under the Plan is intended to be
an ISO, and if the grantee, at the time of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
grantee's employer corporation or of its parent or subsidiary corporation, then
(i) the option exercise price per share shall in no event be less than 110% of
the fair market value of the Common Stock on the date of such grant and (ii)
such option shall not be exercisable after the expiration of five years after
the date such option is granted.
ARTICLE 3. RESTRICTED STOCK AND UNRESTRICTED STOCK AWARDS
3.1. Restricted Stock Awards.
(a) Grant of Awards. The Committee may grant restricted stock awards, alone
or in tandem with other awards, under the Plan in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine; provided, however, that the grant of any such restricted
stock awards may be made only in lieu of cash compensation and bonuses. The
vesting of a restricted stock award granted under the Plan may be conditioned
upon the completion of a specified period of employment with the Company or any
Affiliate, upon the attainment of specified performance goals, and/or upon such
other criteria as the Committee may determine in its sole discretion.
(b) Payment. Each Plan agreement with respect to a restricted stock award
shall set forth the amount (if any) to be paid by the grantee with respect to
such award. If a grantee makes any payment for a restricted stock award which
does not vest, appropriate payment may be made to the grantee following the
forfeiture of such award on such terms and conditions as the Committee may
determine. The Committee shall have the authority to make or authorize loans to
7
<PAGE>
finance, or to otherwise accommodate the financing of, the acquisition or
exercise of a restricted stock award.
(c) Forfeiture upon Termination of Employment. Unless the applicable Plan
agreement otherwise provides or the Committee otherwise determines, (i) if a
grantee's employment terminates for any reason (including death) before all of
his restricted stock awards have vested, such awards shall terminate and expire
upon such termination of employment, and (ii) in the event any condition to the
vesting of restricted stock awards is not satisfied within the period of time
permitted therefor, such unvested shares shall be returned to the Company.
(d) Issuance of Shares. The Committee may provide that one or more
certificates representing restricted stock awards shall be registered in the
grantee's name and bear an appropriate legend specifying that such shares are
not transferable and are subject to the terms and conditions of the Plan and the
applicable Plan agreement, or that such certificate or certificates shall be
held in escrow by the Company on behalf of the grantee until such shares vest or
are forfeited, all on such terms and conditions as the Committee may determine.
Unless the applicable Plan agreement otherwise provides, no share of restricted
stock may be assigned, transferred, otherwise encumbered or disposed of by the
grantee until such share has vested in accordance with the terms of such award.
Subject to the provisions of Section 4.2, as soon as practicable after any
restricted stock award shall vest, the Company shall issue or reissue to the
grantee (or to the grantee's designated beneficiary in the event of the
grantee's death) one or more certificates for the Common Stock represented by
such restricted stock award.
(e) Grantees' Rights Regarding Restricted Stock. Unless the applicable Plan
agreement otherwise provides: (i) a grantee may vote and receive dividends on
restricted stock awarded under the Plan; and (ii) any stock received as a
distribution with respect to a restricted stock award shall be subject to the
same restrictions as such restricted stock.
3.2. Unrestricted Shares. The Committee may issue stock under the Plan,
alone or in tandem with other awards, in such amounts and subject to such terms
and conditions as the Committee shall from time to time in its sole discretion
determine; provided, however, that the grant of any such unrestricted stock
awards may be made only in lieu of cash compensation and bonuses.
ARTICLE 4. MISCELLANEOUS
4.1. Amendment of the Plan; Modification of Awards.
(a) Plan Amendments. The Board may, without stockholder approval, at any
time and from time to time suspend, discontinue or amend the Plan in any respect
whatsoever, except that no such amendment shall impair any rights under any
award theretofore made under the Plan without the consent of the grantee of such
award. Furthermore, except as and to the extent otherwise permitted by Section
4.5 or 4.11, no such amendment shall, without stockholder approval:
(i) materially increase the benefits accruing to grantees under the
Plan;
(ii)increase the maximum number of shares which may be made subject to
awards to an individual as options in any year;
8
<PAGE>
(iii) materially increase, beyond the amounts set forth in Section 1.5,
the number of shares of Common Stock in respect of which awards may be
issued under the Plan;
(iv) materially modify the designation in Section 1.3 of the class of
persons eligible to receive awards under the Plan;
(v) provide for the grant of stock options having an option exercise
price per share of Common Stock less than 100% of the fair market value of
a share of Common Stock on the date of grant; or
(vi) extend the term of the Plan beyond the period set forth in
Section 4.13.
(b) Award Modifications. Subject to the terms and conditions of the Plan
(including Section 4.1(a)), the Committee may amend outstanding Plan agreements
with such grantee, including, without limitation, any amendment which would (i)
accelerate the time or times at which an award may vest or become exercisable
and/or (ii) extend the scheduled termination or expiration date of the award,
provided, however, that no modification having a material adverse effect upon
the interest of a grantee in an award shall be made without the consent of such
grantee.
4.2. Restrictions.
(a) Consent Requirements. If the Committee shall at any time determine that
any Consent (as hereinafter defined) is necessary or desirable as a condition
of, or in connection with, the granting of any award under the Plan, the
acquisition, issuance or purchase of shares or other rights hereunder or the
taking of any other action hereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine not to
make any payment whatsoever until Consent has been given if (i) the Committee
may make any payment under the Plan in cash, Common Stock or both, and (ii) the
Committee determines that Consent is necessary or desirable as a condition of,
or in connection with, payment in any one or more of such forms.
(b) Consent Defined. The term "Consent" as used herein with respect to any
Plan Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule or regulation, (ii)
the expiration, elimination or satisfaction of any prohibitions, restrictions or
limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (iii)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(iv) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any Affiliate.
4.3. Nontransferability. No award granted to any grantee under the Plan or
under any Plan agreement shall be assignable or transferable by the grantee
9
<PAGE>
other than by will or by the laws of descent and distribution. During the
lifetime of the grantee, all rights with respect to any award granted to the
grantee under the Plan or under any Plan agreement shall be exercisable only by
the grantee.
4.4. Withholding Taxes.
(a) Whenever under the Plan shares of Common Stock are to be delivered
pursuant to an award, the Committee may require as a condition of delivery that
the grantee remit an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto. Whenever cash is to
be paid under the Plan, the Company may, as a condition of its payment, deduct
therefrom, or from any salary or other payments due to the grantee, an amount
sufficient to satisfy all federal, state and other governmental withholding tax
requirements related thereto or to the delivery of any shares of Common Stock
under the Plan.
(b) Without limiting the generality of the foregoing, (i) a grantee may
elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Common Stock owned by the grantee for at
least six months (or such other period as the Committee may determine) having a
fair market value (determined as of the date of such delivery by the grantee)
equal to all or part of the amount to be so withheld, provided that the
Committee may require, as a condition of accepting any such delivery, the
grantee to furnish an opinion of counsel acceptable to the Committee to the
effect that such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act and (ii) the Committee may permit any
such delivery to be made by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the award giving rise to the tax withholding
obligation (in which event the date of delivery shall be deemed the date such
award was exercised).
4.5. Adjustments Upon Changes in Capitalization. If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued pursuant to awards under the Plan, the maximum number of options which
may be granted to any one person in any year, the number of shares of Common
Stock subject to awards, the option exercise price of options theretofore
granted under the Plan, and the amount payable by a grantee in respect of an
award, shall be appropriately adjusted (as the Committee may determine) for any
change in the number of issued shares of Common Stock resulting from the
subdivision or combination of shares of Common Stock or other capital
adjustments, or the payment of a stock dividend after the effective date of the
Plan, or other change in such shares of Common Stock effected without receipt of
consideration by the Company; provided that any awards covering fractional
shares of Common Stock resulting from any such adjustment shall be eliminated
and provided further, that each ISO granted under the Plan shall not be adjusted
in a manner that causes such option to fail to continue to qualify as an ISO
within the meaning of Code Section 422. Adjustments under this Section shall be
made by the Committee, whose determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive.
4.6. Right of Discharge Reserved. Nothing in the Plan or in any Plan
agreement shall confer upon any person the right to continue in the employment
of the Company or an Affiliate or affect any right which the Company or an
Affiliate may have to terminate the employment of such person.
4.7. No Rights as a Stockholder. No grantee or other person shall have any
of the rights of a stockholder of the Company with respect to shares subject to
an award until the issuance of a stock certificate to him for such shares.
Except as otherwise provided in Section 4.5, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued. In the case of a grantee of
an award which has not yet vested, the grantee shall have the rights of a
10
<PAGE>
stockholder of the Company if and only to the extent provided in the applicable
Plan agreement.
4.8. Nature of Payments.
(a) Any and all awards or payments hereunder shall be granted, issued,
delivered or paid, as the case may be, in consideration of services performed
for the Company or for its Affiliates by the grantee.
(b) No such awards and payments shall be considered special incentive
payments to the grantee or, unless otherwise determined by the Committee, be
taken into account in computing the grantee's salary or compensation for the
purposes of determining any benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate and the grantee.
(c) By accepting an award under the Plan, the grantee shall thereby waive
any claim to continued exercisability or vesting of an award or to damages or
severance entitlement related to non-continuation of the award beyond the period
provided herein or in the applicable Plan agreement, notwithstanding any
contrary provision in any written employment contract with the grantee, whether
any such contract is executed before or after the grant date of the award.
4.9. Non-Uniform Determinations. The Committee's determinations under the
Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, and (c) the
treatment of leaves of absence pursuant to Section 2.7(c).
4.10. Other Payments or Awards. Nothing contained in the Plan shall
be deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
4.11. Reorganization.
(a) In the event that the Company is merged or consolidated with another
corporation and, whether or not the Company shall be the surviving corporation,
there shall be any change in the shares of Common Stock by reason of such merger
or consolidation, or in the event that all or substantially all of the assets of
the Company are acquired by another person, or in the event of a reorganization
or liquidation of the Company (each such event being hereinafter referred to as
a "Reorganization Event") or in the event that the Board shall propose that the
Company enter into a Reorganization Event, then the Committee may in its
discretion, by written notice to a grantee, provide that his options will be
terminated unless exercised within 30 days (or such longer period as the
Committee shall determine in its sole discretion) after the date of such notice;
provided that if, and to the extent that, the Committee takes such action with
respect to the grantee's options not yet exercisable, the Committee shall also
accelerate the dates upon which such options shall be exercisable. The
Committee also may in its discretion by written notice to a grantee provide that
all or some of the restrictions on any of the grantee's awards may lapse in the
11
<PAGE>
event of a Reorganization Event upon such terms and conditions as the Committee
may determine.
(b) Whenever deemed appropriate by the Committee, the actions referred to in
Section 4.11(a) may be made conditional upon the consummation of the applicable
Reorganization Event.
4.12. Section Headings. The section headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections.
4.13. Effective Date and Term of Plan.
(a) The Plan shall be deemed adopted and become effective upon the approval
thereof by the shareholders of the Company.
(b) The Plan shall terminate 10 years after the earlier of the date on which
it becomes effective or is approved by shareholders, and no awards shall
thereafter be made under the Plan. Notwithstanding the foregoing, all awards
made under the Plan prior to such termination date shall remain in effect until
such awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan agreement.
4.14. Governing Law. The Plan shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.
ARTICLE 5. STOCK OPTIONS GRANTED TO INDEPENDENT DIRECTORS
5.1. Automatic Grant of Options. Each Independent Director appointed or
elected for the first time shall automatically be granted a NQSO to purchase
3,000 shares of Common Stock on his date of appointment or election. Each
Independent Director who is serving as Director of the Company on the fifth
business day after each annual meeting of shareholders shall automatically be
granted on such day NQSOs to acquire 1,000 shares of Common Stock; provided,
however, that an Independent Director who is appointed or elected for the first
time shall not be eligible to receive NQSOs pursuant to this sentence for the
year of his initial appointment or election. The exercise price per share for
the Common Stock covered by a NQSO granted pursuant to this Section 5.1 shall be
equal to the FMV of the Common Stock on the date the NQSO is granted.
5.2. Exercise; Termination; Non-Transferability
(a) All NQSOs granted under this Article 5 shall be immediately
exercisable. No NQSO issued under this Article 5 shall be exercisable after the
expiration of ten years from the date upon which such NQSO is granted.
(b) The rights of an Independent Director in a NQSO granted under this
Article 5 shall terminate twelve months after such Director ceases to be a
Director of the Company or the specified expiration date, if earlier; provided,
however, that such rights shall terminate immediately on the date on which an
Independent Director ceases to be a Director by reason of termination of his
directorship on account of any act of (i) fraud or intentional misrepresentation
or (ii) embezzlement, misappropriation or conversion of assets or opportunities
of the Company or any Affiliate.
12
<PAGE>
(c) No NQSO granted under this Article 5 shall be transferable by the
grantee otherwise than by will or by the laws of descent and distribution, and
such grantee shall be exercisable during the grantee's lifetime only by the
grantee. Any NQSO granted to an Independent Director and outstanding on the
date of his death may be exercised by the legal representative or legatee of the
grantee for the period of twelve months from the date of death or until the
expiration of the stated term of the option, if earlier.
(d) NQSOs granted under this Article 5 may be exercised only by written
notice to the Company specifying the number of shares to be purchased. Payment
of the full purchase price of the shares to be purchased may be made by
certified or official bank check payable to the Company. A grantee shall have
the rights of a stockholder only as to shares acquired upon the exercise of a
NQSO and not as to unexercised NQSOs.
5.3. Adjustments Upon Changes in Capitalization. The number of shares of
Common Stock subject to awards and the option exercise price of NQSOs
theretofore granted under this Article 5, and the amount payable by a grantee in
respect of an award, shall be appropriately adjusted for any change in the
number of issued shares of Common Stock resulting from the subdivision or
combination of shares of Common Stock or other capital adjustments, or the
payment of a stock dividend after the effective date of the Plan, or other
change in such shares of Common Stock effected without receipt of consideration
by the Company; provided that any awards covering fractional shares of Common
Stock resulting from any such adjustment shall be eliminated.
5.4 Limited to Independent Directors. The provisions of this Article 5
shall apply only to NQSOs granted or to be granted to Independent Directors,
shall be interpreted as if this Article 5 constituted a separate plan of the
Company and shall not be deemed to modify, limit or otherwise apply to any other
provision of this Plan or to any NQSO issued under this Plan to a participant
who is not an Independent Director of the Company. To the extent inconsistent
with the provisions of any other Section of this Plan, the provisions of this
Article 5 shall govern the rights and obligations of the Company and Independent
Directors respecting NQSOs granted or to be granted to Independent Directors.
The provisions of this Article 5 shall not be amended more than once every six
months other than to comport with changes in the Code, ERISA or the rules
thereunder.
13
