UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
Federal Realty Investment Trust
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
[LOGO OF FEDERAL REALTY APPEARS HERE]
March 30, 2001
Dear Shareholder:
Please accept my personal invitation to attend our Annual Meeting of
Shareholders on Wednesday, May 2, 2001 at 10:00 a.m. This year's meeting will
be held at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland.
The business to be conducted at the meeting is set forth in the formal notice
that follows. In addition to electing two Trustees, we are asking for
shareholder approval of the 2001 Long-Term Incentive Plan, which is designed to
enhance the Trust's ability to attract, retain and compensate highly qualified
officers and employees and which we believe will help to ensure the Trust's
future growth and success. In addition, management will provide a review of
2000 operating results and discuss the outlook for the future. After the formal
presentation, our Trustees and management will be available to answer any
questions that you may have.
In addition to voting by mail by completing, signing and returning the
enclosed proxy card, you may also vote either by telephone (1-800-PROXIES) or
on the Internet (www.voteproxy.com) by following the instructions on your proxy
card.
Your vote is important. I urge you to vote by one of the three methods
mentioned above.
I look forward to receiving your vote and to seeing you on May 2.
Sincerely,
/s/ STEVEN J. GUTTMAN
Steven J. Guttman
Chairman of the Board and Chief
Executive Officer
FEDERAL REALTY INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2001
To Our Shareholders:
The 2001 Annual Meeting of Shareholders of Federal Realty Investment Trust
("Federal Realty" or the "Trust") will be held at Woodmont Country Club, 1201
Rockville Pike, Rockville, Maryland, on Wednesday, May 2, 2001, at 10:00 a.m.
for the purpose of considering and acting upon the following:
1.The election of two Trustees to serve for the ensuing three years.
2.The approval of the Trust's 2001 Long-Term Incentive Plan.
3.The transaction of such other business as may properly come before the
meeting or any adjournment.
Shareholders of record at the close of business on March 23, 2001 are
entitled to notice of and to vote at the Annual Meeting.
For the Trustees:
/s/ NANCY J. HERMAN
Nancy J. Herman
Senior Vice President--General
Counsel and Secretary
Your vote is important. Please vote, even if you plan to attend the meeting, by
completing, signing and returning the enclosed proxy card, or by telephone (1-
800-PROXIES) or on the Internet (www.voteproxy.com) by following the
instructions on your proxy card. You may revoke your proxy by submitting a
proxy bearing a later date, or by voting in person at the Annual Meeting.
FEDERAL REALTY INVESTMENT TRUST
1626 East Jefferson Street, Rockville, Maryland 20852
PROXY STATEMENT
March 24, 2001
Proxies in the form enclosed are solicited by the Board of Trustees of
Federal Realty Investment Trust for use at the 2001 Annual Meeting of
Shareholders ("Annual Meeting") to be held at 10:00 a.m., Wednesday, May 2,
2001, at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland. The
close of business on March 23, 2001 has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the meeting. On
that date, the Trust had 39,603,779 common shares of beneficial interest
("Shares") outstanding. If the proxy in the enclosed form is submitted, it will
be voted as specified in the proxy; if no specific voting instructions are
indicated, the proxy will be voted in favor of the two Trustees nominated, to
approve the 2001 Long-Term Incentive Plan and in the named proxies' discretion
as to other matters at the Annual Meeting. Any proxy may be revoked by a
shareholder at any time before it is voted by submitting a proxy bearing a
later date or by voting in person at the Annual Meeting.
This proxy statement contains two proposals for shareholder consideration. At
the Annual Meeting, the presence of a majority of the outstanding Shares
entitled to vote, in person or by proxy, constitutes a quorum. Abstentions will
be counted for purposes of determining a quorum. As to each proposal,
shareholders are entitled to cast one vote per Share. The affirmative vote of a
plurality of votes cast at the meeting, in person or by proxy, is required for
the election of Trustees. The affirmative vote of a majority of votes cast at
the meeting, in person or by proxy, is required for the approval of the Trust's
2001 Long-Term Incentive Plan.
This proxy statement and an accompanying proxy are being mailed to
shareholders on or about March 30, 2001, together with the Trust's 2000 Annual
Report, which includes audited financial statements for the year ended December
31, 2000.
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
To the Trust's knowledge, based upon information available to the Trust,
beneficial owners of more than 5% of the Trust's Shares as of March 23, 2001,
are as follows:
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
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Loomis, Sayles & Company, 4,578,902 10.4%
L.P.(1)
One Financial Center
Boston, Massachusetts 02111
Morgan Stanley Dean Witter & 4,000,536 10.1%
Co.(2)
1585 Broadway
New York, New York 10036
Morgan Stanley Dean Witter In- 3,706,900 9.4%
vestment
Management, Inc.(3)
1221 Avenue of the Americas
New York, New York 10020
RREEF America LLC(4) 2,163,000 5.5%
875 N. Michigan Avenue
Chicago, Illinois 60611
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(1) Information based on a Schedule 13G filed with the Securities and Exchange
Commission ("SEC") on September 7, 2000. The Schedule 13G indicates that
the reporting entity is an investment adviser with sole voting power over
3,700 Shares and sole dispositive power over 4,578,902 Shares, and that
the Schedule 13G is being filed with respect to Shares that the reporting
entity has a right to acquire as a result of its benefical ownership of
convertible securities.
(2) Information based on a Schedule 13G/A filed with the SEC on February 7,
2001. The Schedule 13G/A indicates that the reporting entity is an
investment adviser with shared voting power over 3,335,636 Shares and
shared dispositive power over 4,000,536 Shares.
(3) Information based on a Schedule 13G/A filed with the SEC on February 7,
2001. The Schedule 13G/A indicates that the reporting entity is an
investment adviser with shared voting power over 3,042,000 Shares and
shared dispositive power over 3,706,900 Shares.
(4) Information based on a Schedule 13G filed with the SEC on February 15,
2001. The Schedule 13G indicates that the reporting entity manages
2,163,000 Shares.
PROPOSAL 1
Election of Trustees
Pursuant to Section 5.2 of the Trust's Declaration of Trust, the Trustees
are divided into three classes serving three-year terms. Two Trustees,
comprising one class of Trustees, are to be elected at the Annual Meeting.
Mr. Dennis L. Berman and Ms. Kristin Gamble have been nominated for election
as Trustees to hold office until the 2004 Annual Meeting and until their
successors have been elected and qualified. Proxies may not be voted for more
than two Trustees.
Principal Occupations Trustee Term to
Name Age and Other Directorships* Since Expire
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Dennis L. Berman........ 50 General Partner, Berman Enterprises, 1989 2004
Vingarden Associates, GDR Partnerships,
builders/developers; Director, Beco Manage-
ment, office building owners/managers.
Kristin Gamble.......... 55 President, Flood, Gamble Associates, Inc., 1995 2004
an investment counseling firm; Director,
Ethan Allen Interiors, Inc., a furniture
manufacturer and retailer.
Terms of office of the four Trustees named below will continue until the
Annual Meeting in the years indicated.
Principal Occupations Trustee Term to
Name Age and Other Directorships* Since Expire
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Steven J. Guttman....... 54 Chairman of the Board and Chief Executive 1979 2002
Officer of the Trust; Former President of
the Trust; Former Trustee, International
Council of Shopping Centers; Member and
Former Chairman, National Association of
Real Estate Investment Trusts Board of
Governors and Executive Committee; Member,
Real Estate Advisory Board and Executive
Committee, Wharton School of the University
of Pennsylvania; Member, Board of Advisors,
George Washington University Law School;
Member, Policy Advisory Board, Fisher
Center for Real Estate and Urban Economics,
University of California, Berkeley.
Mark S. Ordan........... 41 Chairman and Chief Executive Officer, High 1996 2002
Noon Always, Inc., an upscale quick-serve
healthy lunch operation; Former Chairman,
President and Chief Executive Officer,
Fresh Fields Markets, Inc.; Trustee, Vassar
College; Trustee, National Symphony
Orchestra.
2
Principal Occupations Trustee Term to
Name Age and Other Directorships* Since Expire
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Kenneth D. Brody........ 57 Founding Partner, Winslow Partners LLC, a 1997 2003
private equity investment firm; Co-founder
and Principal, Taconic Capital Advisors
LLC, an investment advisory firm; Former
President and Chairman, Export-Import Bank
of the United States; Director, Quest
Diagnostics, Inc.
Walter F. Loeb.......... 76 President, Loeb Associates Inc., a manage- 1991 2003
ment consulting firm. Publisher, Loeb Re-
tail Letter; Retired Principal and Senior
Retail Analyst, Morgan Stanley & Co., Inc.;
Director, The Gymboree Corp.; Director, Wet
Seal, Inc., a women's apparel retailer; Di-
rector, Hudson's Bay Company, a Canadian
chain of retail department stores and dis-
count stores; Director, The Warnaco Group,
Inc.; Director, ProfitLogic, Inc.
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* The business histories set forth in these tables cover a five-year period.
Board of Trustees' Meetings and Committees
The Board of Trustees has an Audit Committee, comprised of Mr. Berman
(Chairman), Ms. Gamble and Mr. Loeb, which independently reviews the Trust's
financial statements and coordinates its review with the Trust's independent
public accountants. Each member of the Audit Committee is "independent," as
that term is defined in the New York Stock Exchange listing standards. The
Audit Committee held four meetings in 2000.
The Compensation Committee of the Board of Trustees, comprised of Mr. Ordan
(Chairman) and Mr. Brody, reviews and reports to the Board on incentive plans
and remuneration of officers. The Compensation Committee also administers the
Trust's Amended and Restated 1993 Long-Term Incentive Plan (the "Amended Plan")
and certain other compensation plans, and approves stock option and other
equity-based awards. That committee held four meetings in 2000.
The Board of Trustees has no standing nominating committee.
During 2000 the Board of Trustees held five meetings. All Trustees attended
at least 75% of all meetings of the Board and Board committees on which they
served during 2000.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE TWO NOMINEES.
3
OWNERSHIP OF SHARES BY TRUSTEES AND OFFICERS
As of March 23, 2001, Trustees and executive officers as a group, and the
Trustees and named executive officers, individually, beneficially owned the
following Shares:
Percentage of
Number of Shares Outstanding Shares
Name of Beneficial Owner Beneficially Owned (1) of the Trust
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Trustees and executive officers as a
group (10 individuals)(2).......... 3,059,735 7.73%
Dennis L. Berman(3)................. 55,471 *
Kenneth D. Brody(4)................. 14,000 *
Kristin Gamble(5)................... 95,767 *
Steven J. Guttman(6)................ 1,932,859 4.88%
Nancy J. Herman(7).................. 31,856 *
Ron D. Kaplan(8).................... 448,414 1.13%
Walter F. Loeb(9)................... 35,930 *
Mark S. Ordan(10)................... 15,307 *
Cecily A. Ward(11).................. 125,581 *
Donald C. Wood(12).................. 304,550 *
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*Less than 1%.
(1) The number and percentage of Shares shown in this table reflect beneficial
ownership, determined in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") including Shares
which are not owned but as to which options are outstanding and may be
exercised within 60 days. Except as noted in the following footnotes, each
Trustee and named executive officer has sole voting and investment power as
to all Shares listed. Fractions are rounded to the nearest full Share.
(2) Includes 1,643,365 options.
(3) Includes 22,500 options. Includes 12,500 Shares in trust as to which Mr.
Berman shares voting power with two other trustees. Mr. Berman does not
have disposition rights with respect to these Shares. This number also
includes 1,000 Shares owned by a partnership in which Mr. Berman is a
general partner.
(4) Includes 10,000 options.
(5) Includes 15,000 options. Includes 76,867 Shares as to which Ms. Gamble
shares investment power for clients. Includes 1,400 Shares as to which Ms.
Gamble is a trustee of a profit sharing plan, of which Ms. Gamble has a
direct interest in 571 Shares.
(6) Includes 1,003,333 options. Includes 12,000 Shares in trust as to which Mr.
Guttman shares voting and investment power with one other trustee, 29,822
Shares held in trust for his children, a Performance Share Award of 180,000
Shares and Restricted Share Awards of 200,155 Shares. Includes 6,465 Shares
owned by Mr. Guttman's wife.
(7) Includes 20,500 options. Includes Restricted Share Awards of 4,428 Shares.
(8) Includes 218,697 options. Includes a Performance Share Award of 37,500
Shares and Restricted Share Awards of 42,072 Shares. Does not include 1,995
Shares as to which Mr. Kaplan's wife has sole voting and investment power.
(9) Includes 22,500 options.
(10) Includes 12,500 options. Includes 2,807 Shares as to which voting and
investment power is shared with Mr. Ordan's wife.
(11) Includes 110,000 options. Includes Restricted Share Awards of 4,497
Shares.
(12) Includes 208,335 options. Includes a Performance Share Award of 30,000
Shares and Restricted Share Awards of 43,476 Shares.
4
COMPENSATION OF EXECUTIVE OFFICERS AND TRUSTEES
The following table describes the compensation of the Chief Executive Officer
and the four other most highly paid executive officers ("named executive
officers").
Summary Compensation Table
Long-Term Compensation
-----------------------------
Annual Compensation Awards Payouts
---------------------------- ------------------ ----------
Other Restricted
Annual Share LTIP All Other
Salary Bonus Compensation Awards(s) Options Payouts Compensation
Name and (A) (B) (C) (D) (E)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
-------------------------------------------------------------------------------------------------------
Steven J. Guttman(1) 2000 $ -- $ -- $ -- $1,197,000 100,000 $1,170,000 $264,100(F)
Chairman of the Board -- -- -- 1,032,000 150,000 1,148,000 237,000(F)
and 1999
Chief Executive Officer 1998 -- -- -- 984,000 -- -- 226,000(F)
Nancy J. Herman(2) 2000 185,000 64,000 -- 18,000 20,000 -- 9,000
Senior Vice President-- 1999 140,000 51,000 -- 87,000 15,000 -- 6,000
General Counsel and 1998 102,000 33,000 -- -- 8,500 -- 3,000
Secretary
Ron D. Kaplan(3) 2000 325,000 200,000 -- 55,000 50,000 244,000 84,000(G)
Senior Vice President-- 1999 300,000 160,000 -- 44,000 100,000 239,000 77,000(G)
Capital Markets, Chief 1998 285,000 135,000 -- 1,609,000 -- -- 75,000(G)
Investment Officer
Cecily A. Ward(4) 2000 185,000 64,000 -- 18,000 20,000 -- 16,000(F)
Vice President-- 1999 160,000 58,000 -- 89,000 15,000 -- 16,000(F)
Chief Financial Officer 1998 155,000 55,000 -- -- 50,000 -- 16,000(F)
and Treasurer
Donald C. Wood(5) 2000 350,000 240,000 -- 66,000 50,000 146,000 22,000
President and 1999 300,000 180,000 -- 767,000 100,000 -- 15,000
Chief Operating Officer 1998 200,000 230,000 92,000 253,000 250,000 -- 5,000
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(1) Mr. Guttman, who formerly served as the Trust's President, became Chairman
of the Board of Trustees in February 2001. In January and February 2000,
Mr. Guttman received 35,349 Shares valued at $665,000 and vesting at the
end of five years in lieu of his 2000 cash salary of $500,000. In February
2001, Mr. Guttman received 26,869 Shares valued at $532,000 and vesting at
the end of five years in lieu of a cash bonus of $400,000 for 2000. The
terms of these arrangements are described below in "Employment Agreements;
Termination of Employment and Change in Control Arrangements." As of
December 31, 2000, Mr. Guttman held a total of 138,286 Restricted Shares
valued at $2,627,000.
(2) Ms. Herman was promoted to Vice President -- General Counsel and Secretary
in December 1998 and to Senior Vice President in July 2000. In February
2001, Ms. Herman received a Restricted Share Award of 903 Shares, valued on
the date of grant at $18,000, in lieu of 20% of her cash bonus for 2000, as
described below in (B). As of December 31, 2000, Ms. Herman held 4,528
Restricted Shares valued at $86,000.
(3) In February 2001, Mr. Kaplan received a Restricted Share Award of 2,778
Shares, valued on the date of grant at $55,000, in lieu of 20% of his cash
bonus for 2000, as described below in (B). As of December 31, 2000, Mr.
Kaplan held a total of 41,363 Restricted Shares valued at $786,000.
(4) Ms. Ward, who formerly served as the Trust's Vice President -- Controller,
became the Trust's Treasurer in November 1999 and was promoted in February
2000 to Vice President -- Chief Financial Officer. In February 2001, Ms.
Ward received a Restricted Share Award of 903 Shares, valued on the date of
grant at $18,000, in lieu of 20% of her cash bonus for 2000, as described
below in (B). As of December 31, 2000, Ms. Ward held 4,632 Restricted
Shares valued at $88,000.
(5) Mr. Wood commenced employment with the Trust in May 1998 as its Senior Vice
President -- Chief Financial Officer and was promoted to Chief Operating
Officer in November 1999 and to President in February 2001. In February
2001, Mr. Wood received a Restricted Share Award of 3,334 Shares, valued on
the date of grant at $66,000, in lieu of 20% of his cash bonus for 2000, as
described below in (B). As of December 31, 2000, Mr. Wood held a total of
42,178 Restricted Shares valued at $801,000.
5
(A) Amounts shown include amounts deferred at the election of the named officer
pursuant to plans available to substantially all employees and pursuant to
a non-qualified deferred compensation plan available to all officers and
certain other highly compensated employees.
(B) In accordance with the Trust's Incentive Compensation Plan, Vice Presidents
and employees classified as "Directors" received 20% of their bonuses for
2000 in Shares vesting equally over a three-year period. In consideration
for the vesting provision, they received Shares valued at 110% of the cash
value on the date of grant. Senior Vice Presidents, while not covered by
the Incentive Compensation Plan, received 20% of their 2000 bonuses in
Shares as well, on the same terms as those outlined in the Incentive
Compensation Plan.
(C) Dividends are paid on Restricted Shares.
(D) Option exercise price is equal to the fair market value of the Shares on
the date of grant.
(E) The amounts shown in this column for the last fiscal year include the
following: (1) Mr. Guttman: $4,000--Trust paid group term life insurance;
$4,000--Trust paid annuity contract premium; $56,000--interest that would
have been payable on interest-free loan made in connection with split-
dollar life insurance agreement; $11,000--Trust paid long-term disability
insurance premium; and $189,000--deferred compensation from forgiveness of
loans as described below in (F); (2) Ms. Herman: $1,000--Trust paid group
term life insurance; $1,000--interest that would have been payable on
interest-free loan made in connection with split-dollar life insurance
agreement; $4,000--Trust contribution to Section 401(k) Plan; $3,000--Trust
paid long-term disability insurance premium; (3) Mr. Kaplan: $1,000--Trust
paid group term life insurance; $13,000--interest that would have been
payable on interest-free loan made in connection with split-dollar life
insurance agreement; $4,000--Trust contribution to Section 401(k) Plan;
$3,000--Trust paid long-term disability insurance premium; $63,000--
deferred compensation from forgiveness of loans as described below in (G);
(4) Ms. Ward: $1,000--group term life insurance premium; $4,000--Trust
contribution to Section 401(k) Plan; $3,000--Trust paid long-term
disability insurance premium; and $8,000--deferred compensation from
forgiveness of loans as described below in (F); and (5) Mr. Wood: $1,000--
Trust paid group term life insurance; $14,000--interest that would have
been payable on interest-free loan made in connection with split-dollar
life insurance agreement; $3,000--Trust paid long-term disability insurance
premium; $4,000--Trust contribution to Section 401(k) Plan.
(F) In 1991, Mr. Guttman and Ms. Ward were awarded the opportunity to purchase
Shares of the Trust and the Trust made available loans for 100% of the
purchase price. One-half of the loan was originally scheduled to be
forgiven, by forgiving one-sixteenth each January 31, over an eight-year
period so long as the officer was employed by the Trust. The Trust and the
named officers agreed to modify the terms of the loan so that beginning in
1995 and each year thereafter, there will be no forgiveness as of January
31 of each year if Funds from Operations ("FFO") per Share increases by
less than 5% during the preceding fiscal year. If FFO per Share increases
by 5% or more, one-sixteenth of the loan will be forgiven. Beginning in
1996 and thereafter, if FFO per Share increases by 10% or more and total
return to shareholders is 10% or greater during the fiscal year, one-eighth
of the loan will be forgiven on the following January 31. However, 25% of
the original principal amount of each loan is not subject to forgiveness by
the Trust. The loans are due on July 31, 2003.
(G) On December 17, 1993, the Trust awarded Mr. Kaplan the opportunity to
purchase 40,000 Shares as of January 1, 1994 at the closing price of $25
per share on December 31, 1993. The Trust loaned Mr. Kaplan 100% of the
purchase price for a term of 12 years. Forgiveness of Mr. Kaplan's loan is
subject to the same performance measures described above in (F).
Trustee Compensation
Trustees' fees are paid to Trustees other than Mr. Guttman. In accordance
with the provisions of the Amended Plan, Trustees' fees (other than per-meeting
fees) are payable in cash or Shares or a combination of both, at the election
of the Trustee; the Trust issued Shares for 21% of the Trustees' fees paid in
2000. The annual Trustee fee for 2000 was $25,000. Each Trustee was paid the
fee based on the number of months during the year he or she served as a
Trustee. The annual fee in 2000 for service on the Compensation Committee was
$2,500 and $4,500 for service as its Chairman. The annual fee in 2000 for
service on the Audit Committee was
6
$2,000 and $4,000 for service as its Chairman. Committee fees were also
prorated based on the number of months of service. In addition to annual fees
for service on the Board of Trustees and Board committees, the Trustees
received fees of $1,000 per meeting attended in person and $500 per meeting
attended by telephone. In accordance with the Amended Plan, as of the date of
the 2000 Annual Meeting of Shareholders, each non-employee Trustee received an
option to purchase 2,500 Shares at an exercise price of $22.0625.
The Board of Trustees has amended the Amended Plan to provide that if the
2001 Long-Term Incentive Plan is approved at the Annual Meeting, annual option
grants under the Amended Plan to non-employee Trustees will cease and will
instead be made under the 2001 Long-Term Incentive Plan. If the 2001 Long-Term
Incentive Plan is approved at the Annual Meeting, each non-employee Trustee
will receive an option to purchase 2,500 Shares under the 2001 Long-Term
Incentive Plan as of the date of the Annual Meeting.
Employment Agreements; Termination of Employment and Change in Control
Arrangements
The Trust has an amended and restated employment agreement with Mr. Guttman
which provides, among other things, that his salary may not be decreased below
its then-current level and is increased on January 1 of each year by 50% of any
increase in the Consumer Price Index ("CPI") for the prior year and that
Mr. Guttman is eligible to receive an annual bonus, in the Board of Trustees'
discretion, of up to 120% of his salary. The agreement provides for a three-
year term of employment to be automatically renewed at the end of each month
unless either party notifies the other that it has elected not to extend the
term. The Trust may terminate Mr. Guttman's employment if he is totally
disabled for at least six consecutive months, in which case Mr. Guttman is
entitled to receive each month for a three-year period the difference, if any,
between the monthly payments he receives under the disability insurance
policies the Trust maintains on his behalf and his base monthly salary. The
Trust may terminate Mr. Guttman's employment for cause (as defined in the
agreement) without payment to Mr. Guttman. Mr. Guttman may terminate his
employment under certain circumstances, including if his responsibilities are
materially modified without his written consent, a change in control occurs (as
defined in the agreement), the Trust relocates its principal office outside the
Washington, D.C. area, he is not reappointed as a member of the Trust's Board
of Trustees, a Chairman of the Trust's Board of Trustees is appointed other
than Mr. Guttman, or his employment agreement is not assumed by a successor to
the Trust. If Mr. Guttman so terminates his employment, he is entitled to
receive the compensation he would have otherwise received (including bonuses)
for the remaining term of the employment agreement. Mr. Guttman may also
terminate his employment for any other reason upon at least six months notice,
in which case the Trust's obligation to pay compensation to him ceases on the
effective date of termination.
Mr. Guttman and the Trust have entered into restricted share award agreements
(the "Restricted Share Agreements") pursuant to which Mr. Guttman will receive
(unless he elects otherwise six months in advance) Shares in lieu of his salary
for the years 1998 through 2002 and Shares in lieu of his bonus for the years
1997 through 2001. The Shares granted pursuant to the Restricted Share
Agreements, which will be 133% of the salary and bonus levels determined by the
Board of Trustees, will vest five years after the date of grant, subject to
accelerated vesting in the event of a change in control (as defined in the
Amended Plan) or the termination of Mr. Guttman's employment due to his death,
disability (as defined in his employment agreement) or without cause (as
defined in his employment agreement). Dividends are paid on the Restricted
Shares if and when awarded. If Mr. Guttman voluntarily resigns from his
employment with the Trust or his employment is terminated for cause prior to
the end of the aforementioned five-year period, his rights to the Restricted
Shares are forfeited.
The Trust has severance agreements with Ms. Herman, Mr. Kaplan, Ms. Ward and
Mr. Wood which provide, among other things, that if the employee is terminated
without cause (as defined in the agreements), the employee will be entitled to
receive his or her salary for up to 18 months, depending upon length of service
(Mr. Wood's agreement provides for 18 months regardless of length of service,
and Ms. Herman's provides for 12 months) and benefits for nine months. The
employee also will receive the benefits payable upon termination without cause
under certain additional circumstances, including, among other things, a
demotion or a substantial reduction in the employee's responsibilities without
his or her written consent, relocation of the Trust's principal office outside
the Washington, D.C. area, or the decrease of the employee's base salary below
7
a percentage specified in each employee's severance agreement. The Trust may
terminate the employee's employment with cause without payment to the employee.
If Mr. Kaplan or Ms. Ward voluntarily resigns, they will receive their salary
and benefits for up to six months, depending upon length of service, unless
they become employed by a competitor.
The Trust has entered into agreements with Mr. Guttman, Ms. Herman, Mr.
Kaplan, Ms. Ward and Mr. Wood providing that, if any of these officers leave
the employment of the Trust within six months following a change in control
(generally defined to include control of a specified percentage of the
outstanding Shares), he or she will be entitled to receive a lump sum cash
payment and benefits and executive perquisites for a period following such
termination, to have the restrictions on the exercise or receipt of any stock
options or stock grants lapse and, at the option of the officer, to have the
Trust redeem all Shares owned at termination at a formula price. The cash
payments the officers are entitled to receive are computed using a formula
based upon the officer's salary at the date his or her employment terminates
and bonuses that were paid over the previous three years. This amount is
multiplied by a certain percentage: 299% for Mr. Guttman; 200% for Mr. Kaplan
and Mr. Wood; and 100% for Ms. Herman and Ms. Ward. These agreements also
provide that if benefits paid pursuant thereto are determined to be subject to
an excise or similar tax, the Trust will provide the officer with such
additional compensation as is necessary to place him or her in the same after-
tax position as he or she would have been had such tax not been paid or
incurred.
In September 1997, the Trust granted performance share awards ("Performance
Awards") to Mr. Guttman and Mr. Kaplan effective in January 1998 for 300,000
and 62,500 Shares ("Performance Shares"), respectively. Pursuant to the terms
of these awards, a specified number of Performance Shares will vest each year
from 1998 through 2005 if the Trust meets or exceeds the threshold-level
"Performance Target," and over a shorter period of time if the Trust meets a
higher level. The Performance Targets are established annually by the
Compensation Committee at the beginning of the year to which they will apply.
Any Performance Shares which remain unvested after 2005 vest in five equal
annual installments through 2010. All Performance Shares vest in the event of a
change in control (as defined in the Performance Awards), or the termination of
Mr. Guttman's or Mr. Kaplan's employment due to disability (as defined in the
Performance Awards) or without cause (as defined in the Performance Awards). If
Mr. Guttman's or Mr. Kaplan's employment is terminated for cause, his rights to
any unvested Performance Shares are forfeited. If Mr. Guttman or Mr. Kaplan
dies or voluntarily resigns from his employment with the Trust, a pro rata
number of Performance Shares for that year will vest if the Performance Target
is met, and his rights to any future unvested Shares are forfeited.
In September 1997, the Trust granted restricted share awards ("Service
Awards") to Mr. Kaplan effective in January 1998 for an aggregate of 62,500
Shares. Pursuant to the terms of the Service Awards, an aggregate of 651 Shares
vest each month over an eight-year period, subject to accelerated vesting in
the event of a change in control (as defined in the Service Awards) or the
termination of Mr. Kaplan's employment due to disability or without cause (each
as defined in the Service Awards). If Mr. Kaplan voluntarily resigns from his
employment with the Trust or his employment is terminated for cause prior to
the end of the aforementioned eight-year period, his rights to any unvested
Shares are forfeited. If Mr. Kaplan dies, the number of Shares which would have
vested in the month of his death vest and his rights to any future unvested
Shares are forfeited.
The Trust granted a restricted share award of 10,000 Shares (the "Restricted
Share Award") to Mr. Wood in May 1998 upon the commencement of his employment.
Pursuant to the terms of the Restricted Share Award, the Shares will vest in
five equal annual installments, subject to accelerated vesting if any of the
following events occur after the first anniversary of the date of grant: a
change in control or the termination of Mr. Wood's employment due to death,
disability or without cause (as such terms are defined in the Restricted Share
Award). If Mr. Wood voluntarily resigns from his employment with the Trust or
his employment is terminated for cause prior to the end of the five-year
vesting period, his rights to any unvested Shares are forfeited.
In February 2000, the Trust granted a Performance Award to Mr. Wood for
37,500 Performance Shares. Pursuant to the terms of this award, a specified
number of Performance Shares will vest each year from 2000
8
through 2007 if the Trust meets or exceeds the threshold-level "Performance
Target," and over a shorter period of time if the Trust meets a higher level.
Both levels are established annually by the Compensation Committee at the
beginning of the year to which they will apply. Any Performance Shares which
remain unvested after 2007 vest in five equal annual installments through 2012.
In all other respects, the Performance Award is identical to the Performance
Awards of Mr. Guttman and Mr. Kaplan described above in this section.
In February 2000, the Trust granted a Service Award to Mr. Wood for an
aggregate of 37,500 Shares. Pursuant to the terms of the Service Award, an
aggregate of 391 Shares vest each month over an eight-year period. In all other
respects, the Service Award is identical to the Service Award of Mr. Kaplan
described above in this section.
The Trust has entered into split-dollar life insurance agreements with Mr.
Guttman, Ms. Herman, Mr. Kaplan and Mr. Wood pursuant to which the Trust makes
certain premium payments on their behalf relating to certain insurance policies
and is reimbursed for those premiums after fifteen years. The Trust's funding
obligations end, and it is entitled to immediate reimbursement, in the event of
termination of the employee's employment under certain circumstances. The
Trust's funding obligations do not end, however, in the event of termination
without cause or in connection with a change in control of the Trust, provided
in either case that the employee has been employed by the Trust for at least
five years at the time of termination.
The Amended Plan provides that all stock options granted pursuant to it shall
vest in the event of a change of control, as defined in the Amended Plan.
The Share Purchase Plan permits the Trust to make non-recourse purchase loans
to participants to facilitate the purchase of Shares pursuant to awards made
thereunder. The Share Purchase Plan provides that a portion of the outstanding
balance of any purchase loan will be forgiven as of the date of a change in
control.
Option Awards in 2000
The following table provides information on option awards in 2000 to the
named executive officers.
Potential
Realizable Value at
% of Assumed Annual
Total Rates of Stock Price
Number of Options Appreciation
Shares Awarded to for Option Term (1)
Underlying Employees ---------------------
Options in Fiscal Exercise Expiration
Name Awarded (#) Year Price ($/Sh) Date 5% ($) 10% ($)
----------------------------------------------------------------------------------------------
Steven J. Guttman....... 100,000(2) 14% $18.00 2/14/10 $1,132,000 $2,869,000
Nancy J. Herman......... 20,000(3) 3% 20.9375 7/27/10 263,000 667,000
Ron D. Kaplan........... 50,000(2) 7% 18.00 2/14/10 566,000 1,434,000
Cecily A. Ward.......... 20,000(3) 3% 20.9375 7/27/10 263,000 667,000
Donald C. Wood.......... 50,000(2) 7% 18.00 2/14/10 566,000 1,434,000
--------
(1) These assumed annual rates of stock price appreciation are specified by the
SEC. No assurance can be given that such rates will be achieved.
(2) These options vest in three equal annual installments beginning on
February 14, 2001.
(3) These options vest in three equal annual installments beginning on July
27, 2001.
9
Aggregated Option Exercises in 2000 and December 31, 2000 Option Values
The following table provides information on option exercises in 2000 by the
named executive officers, and the value of each such officer's unexercised
options at December 31, 2000.
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 2000 (#) December 31, 2000 ($)(1)
Shares Acquired ------------------------- -------------------------
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------------
Steven J. Guttman....... -- $ -- 920,000 300,000 $-- $100,000
Nancy J. Herman......... 5,500 2,500 13,000 33,000 -- --
Ron D. Kaplan........... -- -- 169,000 116,000 -- 50,000
Cecily A. Ward.......... -- -- 105,000 30,000 -- --
Donald C. Wood.......... -- -- 96,000 304,000 -- 50,000
--------
(1) Based on $19.00 per Share closing price on the NYSE on December 31, 2000.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance graph
included elsewhere in this proxy statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Trust filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Trust specifically incorporates this
Report or the performance graph by reference in the specified filing.
In 2000, the Compensation Committee was responsible for determining the
level of compensation paid to the Trust's executive officers. The Compensation
Committee is comprised entirely of non-employee Trustees.
Philosophy: The members of the Compensation Committee believe that the
Trust's success is largely due to the efforts of its employees and, in
particular, the leadership exercised by its executive officers. Therefore, the
Compensation Committee believes that it is important to:
. Adopt compensation programs that stress Share ownership and, thereby, tie
long-term compensation to increases in shareholder value as evidenced by
Share price appreciation.
. Adopt compensation programs that enhance the Trust's ability to attract
and retain qualified executive officers while providing the financial
motivation necessary to achieve continued high levels of Trust
performance.
. Provide a mix of cash and stock-based compensation programs that are
competitive with a select group of successful real estate investment
trusts and other successful national and regional firms that the members
of the Compensation Committee believe are comparable to the Trust.
. Adjust salary, bonuses and other compensation awards commensurate with
overall corporate results.
. Implement compensation programs that emphasize teamwork, pay-for-
performance and overall corporate results.
The Compensation Committee has traditionally retained a high degree of
flexibility in structuring the Trust's compensation programs. This approach
has allowed the Compensation Committee annually to evaluate subjectively and
reward each executive officer's individual performance and contribution to the
Trust's overall financial and operational success.
Named Executive Officers (other than the Chief Executive Officer). Near the
end of each year, or early in the following year, the Compensation Committee
determines the salary to be paid to each executive officer during the
subsequent year and the bonus to be paid for the current year for executive
officers other than Ms. Ward, whose bonus is determined in accordance with the
Incentive Compensation Plan, which is discussed below. Mr. Guttman assists the
Compensation Committee by making recommendations concerning salaries and
bonuses to be paid to executive officers, other than himself.
10
Mr. Guttman's recommendations and the Committee's decisions are based upon
their evaluation of each executive officer's performance and responsibilities
as they relate to certain "Performance Factors" including the increase in funds
from operations ("FFO"), the financing transactions completed and the
development, redevelopment and operation of the Trust's properties. The bonuses
awarded by the Compensation Committee for 2000 consider the Trust's operating
performance in 2000 as well as the market demand for the Trust's key employees.
The bonuses for executive officers for 2000 were higher than for 1999. This
increase was made in recognition of management's success in achieving continued
strong operating results from the Trust's existing portfolio while undertaking
a substantial new development pipeline.
In determining the executive officers' salary and bonus levels, the
Compensation Committee also takes into account the total cash compensation paid
to executive officers with similar positions in select successful real estate
investment trusts and other national and regional companies that it concludes
possess revenues, profitability and growth that are comparable to the Trust's
(the "Survey Group"). Some of the companies in the Survey Group are included in
the National Association of Real Estate Investment Trust equity index. The
Compensation Committee's goal is to maintain the total compensation package for
executive officers at a level which is competitive with the total compensation
paid to executive officers of the companies in the Survey Group.
In 1999, the Compensation Committee adopted a new Incentive Compensation Plan
for most Trust employees other than the senior executive officers, aimed at
increasing objectivity of the annual bonus awards by quantifying awards based
on specific operational performance thresholds (including targets based on
growth in FFO and regional net operating income) and the achievement of
individual objectives. Pursuant to this Plan, Ms. Ward is eligible for a bonus
of 30-50% of her base salary, depending upon the level of FFO growth per Share
achieved by the Trust; the actual bonus is based 60% upon the attainment of
Trust goals and 40% upon the attainment of individual goals. In accordance with
the Incentive Compensation Plan, Vice Presidents and employees classified as
"Directors" received 20% of their bonuses for 2000 in Shares vesting over a
three-year period. In consideration for the vesting provision, they received
Shares valued at 110% of the cash value on the date of grant. The Compensation
Committee determined that Senior Vice Presidents, while not covered by the
Incentive Compensation Plan, should receive 20% of their 2000 bonuses in Shares
as well, on the same terms as those outlined in the Incentive Compensation
Plan.
Chief Executive Officer. As Chief Executive Officer, Mr. Guttman is
compensated pursuant to his employment agreement discussed above and in
accordance with the performance factors discussed earlier. Mr. Guttman's
compensation package is comprised of:
. a base salary component commensurate with other non-founder chief
executive officers in the industry
. an annual incentive bonus awarded at the discretion of the Board of
Trustees which has historically approximated 40-80% of base pay
.a long-term performance share component which vests based on FFO
performance hurdles.
In September 1997, the Compensation Committee approved a plan to link Mr.
Guttman's compensation to shareholder value. The Compensation Committee
approved a Stock in Lieu of Salary Plan and a Stock in Lieu of Bonus Plan
pursuant to which Mr. Guttman may elect to forgo receipt of his salary and/or
bonus in cash and receive instead the number of Shares equal to 133% of his
salary and/or bonus amount divided by the closing price per Share as of
December 31 of the previous year. To implement the Stock in Lieu of Salary and
Bonus Plans, the Trust and Mr. Guttman entered into restricted share award
agreements pursuant to which Mr. Guttman will receive (unless he elects
otherwise) Shares in lieu of his salary for the years 1998 through 2002 and
Shares in lieu of his bonus for the years 1997 through 2001. The terms of these
agreements are described above in "Employment Agreements; Termination of
Employment and Change in Control Arrangements." Mr. Guttman's salary for 2000
was increased to $500,000 from its 1998-99 level of $475,000. Mr. Guttman
elected to receive Shares in lieu of cash for his 2000 salary and 1999 bonus
(cash award of $300,000) as well as his 2001 salary and 2000 bonus (cash award
of $400,000). Pursuant to these elections and the applicable restricted share
award agreements, a total of 57,571 Restricted Shares were awarded in January
and February 2000 for his 2000 salary and 1999 bonus, and a total of 61,869
Restricted Shares were awarded in January and February 2001 for his 2001 salary
and 2000 bonus.
11
Also in September 1997, the Compensation Committee awarded Mr. Guttman a
performance share award of 300,000 Shares effective January 1, 1998, as
described above in "Employment Agreements; Termination of Employment and Change
in Control Arrangements." Mr. Guttman's performance share award agreement was
amended in 2000 to provide that, for calendar years subsequent to 1999, the
Performance Targets will be established annually by the Compensation Committee
at the beginning of each year in order to better align the financial incentives
under his performance share award agreement with successful execution of the
Trust's business plan for that year. Since growth in the Trust's FFO per Share
exceeded the higher Performance Target in 2000, 60,000 of Mr. Guttman's
Performance Shares vested in accordance with the terms of his performance share
award agreement.
The Compensation Committee believes that the compensation arrangements
described above will fulfill the objective of linking Mr. Guttman's long-term
compensation directly and closely to increasing shareholder value. Increasing
Mr. Guttman's equity ownership in the Trust will align his interests with
shareholders' long-term interests because the value of Mr. Guttman's options
and restricted share and performance awards over time will increase only as
Share value increases.
Amended and Restated 1993 Long-Term Incentive Plan. In 1997, the Compensation
Committee, the Board of Trustees and the shareholders approved revisions to the
Amended Plan to improve and modify its terms and to qualify the Amended Plan
under the performance-based compensation exception to Section 162(m) of the
Code.
2001 Long-Term Incentive Plan. In February 2000, the Trustees approved,
subject to shareholder approval, the 2001 Long-Term Incentive Plan. If
approved, the 2001 Long-Term Incentive Plan would reserve 1,750,000 Shares for
issuance to officers, key employees and other persons to allow the Trust to
attract, retain and compensate such persons and to align their interests more
closely with those of the shareholders.
Deductibility of Executive Compensation in Excess of $1.0 Million. Section
162(m) of the Internal Revenue Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of
$1 million in any taxable year to an executive officer who is named in the
Summary Compensation Table. Exceptions are made for qualified performance-based
compensation, among other things. The Compensation Committee intends generally
to structure its executive awards to take advantage of this Section 162(m)
exception. However, the Committee does not believe that it is necessarily in
the best interest of the Trust and its shareholders that all compensation meet
the requirements of Section 162(m) for deductibility and the Committee may
determine to award non-deductible compensation in such circumstances as it
deems appropriate. Moreover, in light of the ambiguities and uncertainties
under Section 162(m), no assurance can be given that compensation intended by
the Trust to satisfy the requirements for deductibility under Section 162(m)
does in fact do so.
Submitted by:
Mark S. Ordan (Chairman)
Kenneth D. Brody
12
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Brody and Ordan. Mr. Loeb
served as the Chairman of the Compensation Committee until May 2000. There are
no Compensation Committee interlocks and no Trust employees serve on the
Compensation Committee.
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Trust filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent the Trust specifically incorporates this
Report by reference therein.
During 2000, the Audit Committee of the Board of Trustees developed a charter
for the Committee, which was approved by the full Board on May 3, 2000. The
complete text of the charter, which reflects the standards set forth in the SEC
regulations and the New York Stock Exchange rules, is reproduced in Appendix A
to this proxy statement.
The Committee meets as it deems necessary or appropriate to carry out its
responsibilities. The Committee met four times during 2000. The Committee met
with both management and the Trust's outside auditors to review and discuss all
financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all financial
statements were prepared in accordance with generally accepted accounting
principles. The Committee's review included discussion with the outside
auditors of matters required to be discussed pursuant to Statement on Auditing
Standards No. 61, Communication with Audit Committees.
With respect to the Trust's outside auditors, the Committee, among other
things, discussed with Arthur Andersen LLP matters relating to its
independence, including the disclosures made to the Committee as required by
the Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees.
On the basis of these reviews and discussions, the Committee recommended to
the Board of Trustees that the Board approve the inclusion of the Trust's
audited financial statements in the Trust's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and
Exchange Commission.
Submitted by:
Dennis L. Berman, Chairman
Kristin Gamble
Walter F. Loeb
13
Performance Graph
The following performance graph compares the cumulative total shareholder
return on the Trust's Shares with the cumulative return on the S&P 500 and the
index of equity real estate investment trusts prepared by the National
Association of Real Estate Investment Trusts ("NAREIT") for the five fiscal
years commencing December 31, 1995 and ending December 31, 2000, assuming an
investment of $100 and the reinvestment of all dividends. Equity real estate
investment trusts are defined as those which derive more than 75% of their
income from equity investments in real estate assets. The NAREIT equity index
includes all tax qualified real estate investment trusts listed on the NYSE,
American Stock Exchange or the Nasdaq National Market. Stock performance for
the past five years is not necessarily indicative of future results.
Stock Price Performance Graph Appears Here
FRT NAREIT S&P
12/31/95 100 100 100
12/31/96 128.32 135.27 122.96
12/31/97 129.8 162.67 163.99
12/31/98 128.02 134.2 210.86
12/31/99 111.05 128 255.2
12/31/2000 123.12 161.75 231.96
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of stock option plans, from 1984 through 2000 officers
and key employees have exercised options and paid for some of the Shares by
issuance of notes to the Trust. Notes accepted pursuant to the 1983 or 1985
stock option plans are for a term extending to the employee's or officer's
retirement date with interest payable quarterly at the annual rate that is the
lesser of (1) the Trust's current borrowing rate or (2) the current indicated
annual dividend rate on the Shares acquired pursuant to the option divided by
the purchase price of such Shares. Notes accepted pursuant to the Amended Plan
are for a period extending to the employee's or officer's retirement date with
interest payable quarterly at the annual rate that is the lesser of (1) the
Trust's borrowing rate on the date of exercise or (2) the indicated annual
dividend rate on the date of exercise of the option divided by the purchase
price of such Shares. The stock option notes are secured by the Shares, which
will not be released until the notes are paid in full. Pursuant to the terms of
a restricted stock agreement, Mr. Guttman borrowed $210,000, $105,000 of which
was repaid in 1992. The remaining balance of $105,000 is payable on April 15,
2001, with no interest. The note is secured by 18,975 Shares.
In 1991, the Trust accepted notes from Trust officers in connection with the
1991 Share Purchase Plan for $5,359,922. The current balance of the notes is
$1,172,000. Up to 75% of the original principal balance of these loans may be
forgiven by the Trust if certain conditions are met. In connection with the
1991 Share Purchase Plan, the Trust has loaned officers $929,000 with which to
pay income taxes associated with the forgiveness. The interest rate on the
share purchase loans and related tax loans is 9.39%. On January 1, 1994, the
Trust lent Mr. Kaplan $1,000,000 to purchase 40,000 Shares. The current balance
is $500,000 and he has been loaned $200,000 with which to pay income taxes
associated with the forgiveness. Up to 75% of the original principal balance of
the share purchase loan may be forgiven by the Trust if certain conditions are
met. The interest rate on his share purchase loans and related tax loans is
6.24%.
The Trust has loaned Mr. Guttman, Mr. Kaplan and Mr. Wood a total of
$1,159,000, $241,000 and $73,000, respectively, with which to pay income taxes
associated with the vesting of Shares pursuant to their Performance Awards, and
has loaned Mr. Kaplan and Mr. Wood a total of $250,000 and $41,000,
respectively, with which to pay income taxes associated with the vesting of
Shares pursuant to their Service Awards. The interest rate on the loans to Mr.
Guttman and Mr. Kaplan is 6.36%; the interest rate on the loans to Mr. Wood is
6.54%.
The following table sets forth the indebtedness to the Trust of the officers
as of March 23, 2001:
Maximum
Outstanding Current
during Balance
Name Title 2000 of Notes
--------------------------------------------------------------------------------
Steven J. Guttman......... Chairman of the Board and $2,950,000 $3,422,000
Chief Executive Officer
Nancy J. Herman........... Senior Vice President- 115,000 115,000
General Counsel and
Secretary
Ron D. Kaplan............. Senior Vice President- 2,212,000 2,296,000
Capital Markets, Chief
Investment Officer
Cecily A. Ward............ Vice President-Chief 114,000 96,000
Financial Officer and
Treasurer
Donald C. Wood............ President and Chief 42,000 115,000
Operating Officer
From time to time the Trustees may actively engage, on their own behalf and
as agents for and advisors to others, in real estate transactions, including
development and financing. The Trustees have agreed that they will not acquire
an interest in any property which meets the investment criteria of the Trust
without first offering the property to the Trust.
15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Trustees and executive officers of the Trust are required by Section
16(a) of the Exchange Act to file reports of initial ownership and changes of
ownership of the Trust's Shares with the Securities and Exchange Commission and
with the New York Stock Exchange. To the Trust's best knowledge, based solely
on review of copies of such reports furnished to the Trust and written
representations that no other reports were required, the required filings of
all such Trustees and executive officers were filed timely.
PROPOSAL 2
Approval of the Trust's
2001 Long-Term Incentive Plan
The Trust's shareholders are being asked to approve the Trust's 2001 Long-
Term Incentive Plan.
Upon the recommendation of the Trust's Compensation Committee, the Board
approved the 2001 Long-Term Incentive Plan on February 14, 2001, subject to
approval from the shareholders at the Annual Meeting. The Board is asking the
shareholders to approve the 2001 Long-Term Incentive Plan because it believes
that approval of the plan is essential to the Trust's continued success. The
purpose of the 2001 Long-Term Incentive Plan is to attract and to encourage the
continued employment and service of, and maximum efforts by, officers, key
employees and other individuals by allowing them to acquire or increase their
ownership interest in the Trust and to share in the future success of the
Trust. In the judgment of the Board, an initial or increased grant under the
2001 Long-Term Incentive Plan will be a valuable incentive and will serve to
the ultimate benefit of shareholders by aligning the interests of 2001 Long-
Term Incentive Plan participants more closely with those of the shareholders.
There are 1,750,000 Shares reserved for issuance under the 2001 Long-Term
Incentive Plan. No grants have been made under the 2001 Long-Term Incentive
Plan. On March 23, 2001, the closing price of the Trust's Shares was $19.27 per
Share. Because participation and the types of awards under the 2001 Long-Term
Incentive Plan are subject to the discretion of the Board and the Compensation
Committee, the benefits or amounts that will be received by any participant or
group of participants if the 2001 Long-Term Incentive Plan is approved are not
currently determinable.
Description of the Plan
A description of the provisions of the 2001 Long-Term Incentive Plan is set
forth below. This summary is qualified in its entirety by the detailed
provisions of the 2001 Long-Term Incentive Plan, a copy of which is attached as
Appendix B to this proxy statement.
Administration. The 2001 Long-Term Incentive Plan is administered by the
Compensation Committee of the Board of Trustees. Subject to the terms of the
plan, the Compensation Committee may select participants to receive awards,
determine the types of awards and terms and conditions of awards, and interpret
provisions of the plan.
Shares to be Issued Under the Plan. The Shares to be issued under the 2001
Long-Term Incentive Plan consist of authorized but unissued Shares. If any
Shares covered by an award are not purchased or are forfeited, or if an award
otherwise terminates without delivery of any Shares, then the number of Shares
counted against the aggregate number of Shares available under the plan with
respect to the award will, to the extent of any such forfeiture or termination,
again be available for making awards under the 2001 Long-Term Incentive Plan.
If the exercise price of any option granted under the 2001 Long-Term Incentive
Plan is satisfied by tendering Shares to the Trust, only the number of Shares
issued net of the Shares tendered shall be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the 2001
Long-Term Incentive Plan.
16
Eligibility. Awards may be made under the 2001 Long-Term Incentive Plan to
any employee of, or service provider to, the Trust or any of its affiliates,
including any such employee who is an officer or Trustee of the Trust or of
any affiliate, to any outside Trustee and to any other individual whose
participation in the plan is determined to be in the Trust's best interests by
the Board.
Amendment or Termination of the Plan. The Board may terminate or amend the
plan at any time and for any reason. Amendments will be submitted for
shareholder approval to the extent required by the Internal Revenue Code or
other applicable laws. Generally, no amendment, suspension or termination of
the plan shall, without the consent of the grantee, alter or impair rights or
obligations under any award theretofore awarded under the plan.
Options. The 2001 Long-Term Incentive Plan permits the granting of options
to purchase Shares intended to qualify as incentive stock options under the
Internal Revenue Code and options that do not qualify as incentive stock
options.
The exercise price of each option may not be less than 100% of the fair
market value of the Shares on the date of grant. In the case of certain 10%
shareholders who receive incentive stock options, the exercise price may not
be less than 110% of the fair market value of the Shares on the date of grant.
An exception to these requirements is made for options that the Trust grants
in substitution for options held by employees of companies that the Trust
acquires. In such a case, the exercise price is adjusted to preserve the
economic value of the employee's stock option from his or her former employer.
The term of each option is fixed by the Compensation Committee and may not
exceed 10 years from the date of grant. The Compensation Committee determines
at what time or times each option may be exercised and the period of time, if
any, after retirement, death, disability or termination of employment during
which options may be exercised. Options may be made exercisable in
installments. The exercisability of options may be accelerated by the
Compensation Committee.
In general, an optionee may pay the exercise price of an option by cash,
check, by tendering Shares (which, if acquired from the Trust, have been held
by the optionee for at least six months), by a full recourse promissory note
secured by the Shares, or by means of a broker-assisted cashless exercise.
Options granted under the 2001 Long-Term Incentive Plan may not be sold,
transferred, pledged or assigned other than by will or under applicable laws
of descent and distribution. However, the Trust may permit limited transfers
of nonqualified options for the benefit of immediate family members of
grantees to help with estate planning.
Outside Trustee Options. Under the 2001 Long-Term Incentive Plan, each
outside Trustee is granted an option to purchase 2,500 Shares upon the
continuation of his or her service as an outside Trustee after the date of the
2001 Annual Meeting of Shareholders. Outside Trustees receive additional
grants of options to purchase 2,500 Shares each year thereafter that they
continue in service with the Trust as outside Trustees. Outside Trustees may
also elect to receive their retainer in cash or Shares or a combination of the
two. When an outside Trustee receives all or a portion of his or her annual
compensation from the Trust in Shares, the number of Shares granted is
calculated by dividing the dollar amount of the retainer to be paid in Shares
by the fair market value of a Share on the day before the payment is to be
made. No fractional Shares will be issued.
Other Awards. The Compensation Committee may also award:
. restricted shares, which are shares subject to restrictions.
. deferred shares, which are credited as deferred share units, but
ultimately payable in the form of unrestricted shares in accordance with
the participant's deferral election. These awards may be based on
continuation of service and/or achievement of performance goals. The
Compensation Committee may allow participants to elect to receive
deferred share awards in lieu of compensation.
17
. restricted share units, which are share units subject to restrictions.
. unrestricted shares, which are shares at no cost or for a purchase price
determined by the Compensation Committee, and which are free from any
restrictions under the 2001 Long-Term Incentive Plan. Unrestricted shares
may be issued to participants in recognition of past services or other
valid consideration, and may be issued in lieu of cash compensation to be
paid to participants.
. dividend equivalent rights, which are rights entitling the recipient to
receive credits for dividends that would be paid if the recipient had
held a specified number of shares.
. share appreciation rights, which are rights to receive a number of shares
or, in the discretion of the Compensation Committee, an amount in cash or
a combination of shares and cash, based on the increase in the fair
market value of the Shares underlying the right during a stated period
specified by the Compensation Committee.
. performance share awards, which are rights to acquire a number of Shares,
subject to the attainment of specified performance goals.
. performance and annual incentive awards, payable in Shares. The
Compensation Committee may grant multi-year and annual incentive awards
subject to achievement of specified goals tied to business criteria
(described below). The Compensation Committee may specify the amount of
the incentive award as a percentage of these business criteria, a
percentage in excess of a threshold amount or as another amount which
need not bear a strictly mathematical relationship to these business
criteria. The Compensation Committee may modify, amend or adjust the
terms of each award and performance goal. If the Compensation Committee
determines that an award to an individual who is covered under
Section 162(m) of the Internal Revenue Code, or whom the Compensation
Committee designates as likely to be covered in the future, should comply
with the requirement that payments to such employee qualify as
performance-based compensation under Section 162(m) of the Internal
Revenue Code, the Committee will administer the award in compliance with
Section 162(m).
. share purchase awards, which may be granted alone or in conjunction with
any other awards. These awards consist of a right to purchase Shares and
to pay for such Shares either in cash or through a purchase loan, or a
combination of both, in the Compensation Committee's sole discretion.
Purchase loans are provided at the discretion of the Compensation
Committee. The Compensation Committee will determine the amount of each
purchase loan. Loans must be used exclusively for the purpose of
purchasing Shares from the Trust. The Compensation Committee may, in its
full discretion, forgive the balance due on any purchase loan.
Effect of Certain Corporate Transactions. Certain change of control
transactions involving the Trust, such as a sale of the Trust, may cause awards
granted under the 2001 Long-Term Incentive Plan to vest, unless the awards are
continued or substituted for in connection with the change of control
transaction. Moreover, except as otherwise provided in an award agreement, if a
grantee experiences an involuntary termination not for cause within one year
following a change of control, the grantee's award shall become fully vested,
and any purchase loan in connection with a share purchase award shall be
forgiven (except as may be otherwise provided in the award agreement), upon the
involuntary termination. Options granted to outside Trustees become fully
vested upon a change of control, even if the Trustee continues in service with
the Trust following the change of control.
Effect of Termination for Cause. Unless the award agreement provides
otherwise, termination for cause will result in the grantee's forfeiture of all
awards that are not vested as of the date of termination. Any purchase loan or
tax loan in connection with a share purchase award shall become due and payable
immediately upon termination.
18
Adjustments for Share Dividends and Similar Events. The Compensation
Committee will make appropriate adjustments in outstanding awards and the
number of Shares available for issuance under the 2001 Long-Term Incentive
Plan, including the individual limitations on awards, to reflect share
dividends, share splits and other similar events.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits publicly-held companies such as Federal Realty Investment
Trust to an annual deduction for federal income tax purposes of $1,000,000 for
compensation paid to their chief executive officer and the four highest
compensated executive officers (other than the chief executive officer)
determined at the end of each year (the "covered employees"). However,
performance-based compensation is excluded from this limitation. The 2001
Long-Term Incentive Plan is designed to permit the Compensation Committee to
grant awards that qualify as performance-based for purposes of satisfying the
conditions of Section 162(m).
To qualify as performance-based:
1. the compensation must be paid solely on account of the attainment of one
or more preestablished, objective performance goals;
2. the performance goal under which compensation is paid must be
established by a compensation committee comprised solely of two or more
trustees who qualify as outside directors for purposes of the exception;
3. the material terms under which the compensation is to be paid must be
disclosed to and subsequently approved in a separate vote by
shareholders of the Trust before payment is made; and
4. the compensation committee must certify in writing before payment of the
compensation that the performance goals and any other material terms
were in fact satisfied.
In the case of compensation attributable to options, the performance goal
requirement (summarized in (1) above) is deemed satisfied, and the
certification requirement (summarized in (4) above) is inapplicable, if the
grant or award is made by the compensation committee; the plan under which the
option is granted states the maximum number of shares with respect to which
options may be granted during a specified period to an employee; and under the
terms of the option, the amount of compensation is based solely on an increase
in the value of the shares after the date of grant.
One or more of the following business criteria, on a consolidated basis,
and/or with respect to specified subsidiaries or business units (except with
respect to the total shareholder return and earnings per share criteria), are
used exclusively by the Compensation Committee in establishing performance
goals:
. total shareholder return;
. total shareholder return as compared to total return (on a comparable
basis) of a publicly available index such as, but not limited to, the
Standard & Poor's 500 Stock Index or a REIT Index;
. net earnings;
. pretax profits;
. earnings before interest expense, taxes, depreciation and amortization;
. pretax operating earnings after interest expense and before bonuses,
service fees, and extraordinary or special items;
. operating margin;
. earnings per share;
. return on capital;
. return on investment;
19
. operating earnings;
. working capital;
. ratio of debt to shareholders' equity;
. revenue;
. funds from operations;
. share price;
. dividends;
. market share or market penetration;
. attainment of acquisition, disposition, financing, refinancing, or
capitalization goals;
. value creation in the form of an increase in the net asset value of a
real estate development or redevelopment project; and
. attainment of leasing goals.
Under the Internal Revenue Code, a trustee is an "outside director" if he or
she is not a current employee of the corporation; is not a former employee who
receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts paid to an entity that
employs the director or in which the director has at least a five percent
ownership interest), remuneration from the corporation in any capacity other
than as a director.
The maximum number of Shares subject to awards (other than dividend
equivalent rights) that can be awarded under the 2001 Long-Term Incentive Plan
to any person (other than the chief executive officer of the Trust) is 250,000
per year. The maximum number of Shares subject to awards (other than dividend
equivalent rights) that can be awarded under the 2001 Long-Term Incentive Plan
to the chief executive officer of the Trust is 500,000 per year. The maximum
number of Shares that can be awarded with respect to dividend equivalent rights
under the 2001 Long-Term Incentive Plan to any person (other than the chief
executive officer of the Trust) is 250,000 per year. The maximum number of
Shares that can be awarded with respect to dividend equivalent rights under the
2001 Long-Term Incentive Plan to the chief executive officer of the Trust is
500,000 per year.
Federal Income Tax Consequences
Incentive Stock Options. The grant of an option will not be a taxable event
for the grantee or for the Trust. A grantee will not recognize taxable income
upon exercise of an incentive stock option (except that the alternative minimum
tax may apply), and any gain realized upon a disposition of Shares received
pursuant to the exercise of an incentive stock option will be taxed as long-
term capital gain if the grantee holds the shares for at least two years after
the date of grant and for one year after the date of exercise (the "holding
period requirement"). The Trust will not be entitled to any business expense
deduction with respect to the exercise of an incentive stock option, except as
discussed below.
For the exercise of an option to qualify for the foregoing tax treatment, the
grantee generally must be an employee of the Trust or a Trust subsidiary from
the date the option is granted through a date within three months before the
date of exercise of the option.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the grantee will recognize ordinary income upon
the disposition of the Shares in an amount generally equal to the excess of the
fair market value of the Shares at the time the option was exercised over the
option exercise price (but not in excess of the gain realized on the sale). The
balance of the realized gain, if any, will be capital gain. The Trust will be
allowed a business expense deduction to the extent the grantee recognizes
ordinary income, subject to the Trust's compliance with Section 162(m) of the
Internal Revenue Code and to certain reporting requirements.
20
Non-Qualified Options. The grant of an option will not be a taxable event for
the grantee or the Trust. Upon exercising a non-qualified option, a grantee
will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the Shares on the date of exercise.
Upon a subsequent sale or exchange of shares acquired pursuant to the exercise
of a non-qualified option, the grantee will have taxable gain or loss, measured
by the difference between the amount realized on the disposition and the tax
basis of the Shares (generally, the amount paid for the Shares plus the amount
treated as ordinary income at the time the option was exercised).
If the Trust complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, the Trust will be
entitled to a business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income.
A grantee who has transferred a non-qualified option to a family member by
gift will realize taxable income at the time the non-qualified option is
exercised by the family member. The grantee will be subject to withholding of
income and employment taxes at that time. The family member's tax basis in the
Shares will be the fair market value of the Shares on the date the option is
exercised. The transfer of vested non-qualified options will be treated as a
completed gift for gift and estate tax purposes. Once the gift is completed,
neither the transferred options nor the Shares acquired on exercise of the
transferred options will be includible in the grantee's estate for estate tax
purposes.
Restricted Shares. A grantee who is awarded restricted shares will not
recognize any taxable income for federal income tax purposes in the year of the
award, provided that the shares are subject to restrictions (that is, the
restricted shares are nontransferable and subject to a substantial risk of
forfeiture). However, the grantee may elect under Section 83(b) of the Internal
Revenue Code to recognize compensation income in the year of the award in an
amount equal to the fair market value of the shares on the date of the award,
determined without regard to the restrictions. If the grantee does not make
such a Section 83(b) election, the fair market value of the shares on the date
the restrictions lapse will be treated as compensation income to the grantee
and will be taxable in the year the restrictions lapse. The Trust generally
will be entitled to a deduction for compensation paid in the same amount
treated as compensation income to the grantee in the year the grantee is taxed
on the income if the Trust complies with applicable reporting requirements.
Deferred Shares. There are no immediate tax consequences of receiving an
award of deferred shares under the 2001 Long-Term Incentive Plan. A grantee who
is awarded deferred shares will be required to recognize ordinary income in an
amount equal to the fair market value of the shares issued to such grantee at
the distribution date(s) under the deferral election, reduced by the amount, if
any, paid for such shares. The Trust generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income if the Trust complies
with applicable reporting requirements.
Restricted Share Units. There are no immediate tax consequences of receiving
an award of restricted share units under the 2001 Long-Term Incentive Plan. A
grantee who is awarded restricted share units will be required to recognize
ordinary income in an amount equal to the fair market value of shares issued to
such grantee at the end of the restriction period or, if later, the payment
date. The Trust generally will be entitled to a deduction for compensation paid
in the same amount treated as compensation income to the grantee in the year
the grantee is taxed on the income if the Trust complies with applicable
reporting requirements.
Unrestricted Shares. Participants who are awarded unrestricted shares will be
required to recognize ordinary income in an amount equal to the fair market
value of the shares on the date of the award, reduced by the amount, if any,
paid for such shares. The Trust generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income if the Trust complies
with applicable reporting requirements.
21
Dividend Equivalent Rights. Participants who receive dividend equivalent
rights will be required to recognize ordinary income equal to the amount
distributed to the grantee pursuant to the award. The Trust generally will be
entitled to a deduction for compensation paid in the same amount treated as
compensation income to the grantee in the year the grantee is taxed on the
income if the Trust complies with applicable reporting requirements.
Share Appreciation Rights. There are no immediate tax consequences of
receiving an award of share appreciation rights under the 2001 Long-Term
Incentive Plan. Upon exercising a share appreciation right, a grantee will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise.
If the Trust complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, the Trust will be
entitled to a business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income.
Performance Share Awards. There are no immediate tax consequences of
receiving an award of performance shares under the 2001 Long-Term Incentive
Plan. A grantee who is awarded performance shares will be required to recognize
ordinary income in an amount equal to the fair market value of shares issued to
such grantee pursuant to the award, reduced by the amount, if any, paid for
such shares. The Trust generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income if the Trust complies
with applicable reporting requirements.
Upon a grantee's disposition of performance shares, any gain realized in
excess of the amount reported as ordinary income will be reportable by the
grantee as a capital gain, and any loss will be reportable as a capital loss.
Capital gain or loss will be long-term if the grantee has held the shares for
at least one year. Otherwise, the capital gain or loss will be short-term.
Performance and Annual Incentive Awards. The award of a performance or annual
incentive award will have no federal income tax consequences for the Trust or
for the grantee. The payment of the award is taxable to the grantee as ordinary
income. If the Trust complies with applicable reporting requirements and with
the restrictions of Section 162(m) of the Internal Revenue Code, the Trust will
be entitled to a business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income.
Share Purchase Awards. Grantees who are awarded share purchase awards will
not be required to recognize any income upon the grant of the award or upon the
purchase of shares under a share purchase award; provided, that the participant
pays to the Trust the aggregate fair market value of the shares underlying the
share purchase award. If a share purchase loan and/or a tax loan is forgiven in
connection with a share purchase award, the grantee will be required to
recognize cancellation of indebtedness income. The Trust generally will be
entitled to a deduction for compensation paid in the same amount treated as
compensation income to the grantee in the year the grantee is taxed on the
income if the Trust complies with applicable reporting requirements.
Share Purchase Loans and Tax Loans. The extension of a share purchase loan or
tax loan by the Trust to a grantee will generally have no tax consequences for
the Trust or for the grantee; provided that the loan provides for payment of
interest by the grantee at the applicable federal rate.
Required Vote
The affirmative vote of a majority of votes cast at the meeting, in person or
by proxy, is required for the approval of the 2001 Long-Term Incentive Plan.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
22
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected as independent public accountants for
the Trust for the current year, and examined the Trust's financial statements
for the year ended December 31, 2000. On May 5, 1999, Grant Thornton LLP was
dismissed and Arthur Andersen LLP was engaged as the Trust's principal
independent public accountants. The decision to change accountants was approved
by the Board of Trustees upon the recommendation of the Audit Committee. The
reports of Grant Thornton LLP on the financial statements of the Trust for the
years ended December 31, 1997 and 1998 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified as to uncertainty, audit scope
or accounting principles. During the Trust's fiscal years ended December 31,
1997 and 1998 and the subsequent interim period through May 5, 1999, there were
no disagreements with Grant Thornton LLP on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of Grant Thornton LLP,
would have caused them to make reference thereto in their reports on the
financial statements for those years. During the Trust's fiscal years ended
December 31, 1997 and 1998 and the subsequent interim period through May 5,
1999, Arthur Andersen LLP was not engaged as an independent accountant to audit
the Trust's financial statements, nor was it consulted regarding the
application of the Trust's accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Trust's financial statements.
During fiscal year 2000, the Trust retained Arthur Andersen LLP to provide
services in the following categories and amounts:
Audit Fees........................ $202,350
Financial Information Systems
Design and Implementation Fees... $ 58,800
All Other Fees.................... $257,929
The Audit Committee has considered whether the provision of non-audit
services by Arthur Andersen LLP is compatible with maintaining auditor
independence.
A representative of Arthur Andersen LLP will be present at the Annual Meeting
and will have the opportunity to make a statement and answer appropriate
questions from shareholders.
ANNUAL REPORT
A copy of the Trust's Annual Report on Form 10-K for the year ended December
31, 2000, as filed with the Securities and Exchange Commission, will be mailed
without charge to shareholders upon request. Requests should be addressed to
the Trust, 1626 East Jefferson Street, Rockville, Maryland 20852, Attention:
Mr. Andrew Blocher, Vice President--Investor Relations and Finance. The Form
10-K includes certain exhibits, which will be provided only upon payment of a
fee covering the Trust's reasonable expenses for copying and mailing.
SOLICITATION OF PROXIES, SHAREHOLDER PROPOSALS AND OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, Trust officials may solicit proxies in person
and by telephone or facsimile, and may request brokerage houses and other
custodians, nominees and fiduciaries to forward soliciting materials to the
beneficial owners of Shares.
Proposals of shareholders intended to be presented at the 2002 Annual
Meeting, including nominations for persons for election to the Board of
Trustees, must be received by the Trust no later than November 26, 2001 to be
considered for inclusion in the Trust's proxy statement and form of proxy
relating to such meeting.
The Trustees know of no other business to be presented at the Annual Meeting.
If other matters properly come before the meeting, the persons named as proxies
will vote on them in accordance with their discretion.
23
You are urged to complete, sign, date and return your proxy promptly to make
certain your Shares will be voted at the Annual Meeting. For your convenience
in returning the proxy, an addressed envelope is enclosed, requiring no
additional postage if mailed in the United States. If you prefer, you may vote
either by telephone (1-800-PROXIES) or on the Internet (www.voteproxy.com) by
following the instructions on your proxy card.
For the Trustees,
/s/ NANCY J. HERMAN
Nancy J. Herman
Senior Vice President--General
Counsel and Secretary
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
PLEASE SUBMIT IT TODAY.
24
Appendix A
AUDIT COMMITTEE CHARTER
FEDERAL REALTY INVESTMENT TRUST
May 3, 2000
Purpose:
The primary function of the audit committee (the "Committee") is to assist
the Board of Trustees ("the Board") in fulfilling its oversight
responsibilities by reviewing the financial information which is provided to
shareholders and others, the systems of internal controls which management has
established and the audit process. The Committee will maintain free and open
communication between the Board, the independent public accountants, the
financial management and other employees of the Trust, recognizing that the
independent auditors are ultimately accountable to the Board and the Committee.
Composition:
The Committee shall be comprised of three or more independent trustees, who
possess the requisite knowledge and experience to fulfill their duties. All
three members must be financially literate and at least one member must also
have accounting or related financial management expertise. The chairman will be
the senior member of the committee, consistent with the Trust's practice of
rotating committee memberships on an annual basis.
Meetings:
The committee shall meet quarterly and at such other times as it deems
appropriate, in order to ensure timely, periodic review of the Trust's
financial results, changes in accounting principles, if any, accounting
treatment of significant transactions and related disclosures prior to filings
with the SEC.
Responsibilities:
In carrying out its responsibilities, the audit committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions. In carrying out these responsibilities, the audit
committee will:
- Review and recommend to the Trustees the independent public accountants,
approve the compensation to the independent public accountants, and
review and discharge the independent public accountants.
- Review the annual written statement from the independent public
accountants delineating all relationships between the accountants and
the Trust, and discuss any relationships which may impact the
objectivity and independence of the accountants in order to ensure the
continuing objectivity and independence of the accountants.
- Meet with the independent public accountants and financial management of
the Trust to review the scope of the annual audit and the audit
procedures to be utilized and at the conclusion of the audit, review
such audit, including any comments or recommendations of the independent
public accountants.
- Review with the independent public accountants and the Trust's financial
management the adequacy and effectiveness of the accounting and
financial controls, focusing on areas where new or more detailed
controls or procedures are desirable. Review the annual management
recommendation letter prepared by the independent public accountants and
management's responses to such letter.
- Review with management and the independent public accountants
significant risks or exposures and assess steps management has taken to
minimize such risks to the Trust.
- Review the quarterly and annual financial results with management and
the independent auditors, prior to any interim or year-end filings,
including:
A-1
. Any material accounting issues identified by management or the
independent public accountants.
. The independent public accountant's evaluation of the quality,
disclosure and content of the financial statements.
. Any changes in accounting principles.
. Any related party transactions.
. Other matters required to be communicated by the independent public
accountants to the Committee under generally accepted auditing
standards.
- Annually, review and amend, if needed, the Audit Committee Charter.
Reports:
- Annually, or more often as deemed necessary, report to the entire Board
on the activities and findings of the Committee.
- Prepare the annual report of the Committee's oversight responsibilities
for inclusion in the Trust's annual proxy statement.
- Review and approve the Trust's certification to the New York Stock
Exchange concerning the meetings, membership requirements and charter of
the Committee.
- Review the Trust's proxy statement disclosure concerning the
independence of the members and the charter of the Committee.
A-2
Appendix B
FEDERAL REALTY INVESTMENT TRUST
2001 LONG-TERM INCENTIVE PLAN
Federal Realty Investment Trust, a Maryland real estate investment trust (the
"Trust"), sets forth herein the terms of the Trust's 2001 Long-Term Incentive
Plan (the "Plan").
1. PURPOSE
The purpose of the Plan is to enhance the Trust's ability to attract, retain,
and compensate highly qualified officers, key employees, and other persons, and
to motivate such officers, key employees, and other persons to serve the Trust
and its Affiliates (as defined herein) and to expend maximum effort to improve
the business results and earnings of the Trust, by providing to such officers,
key employees and other persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Trust and with
other financial incentives. To this end, the Plan provides for the grant of
share options, share appreciation rights, restricted shares, restricted share
units, deferred share awards, unrestricted share awards, performance share
awards, dividend equivalent rights, performance awards and annual incentive
awards in accordance with the terms hereof. Share options granted under the
Plan may be non-qualified share options or incentive share options, as provided
herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "Acceptance Date" means the date, no later than the twentieth (20th)
Business Day after the offer date, on which a Grantee accepts an offer to
purchase Shares made pursuant to a Share Purchase Award.
2.2 "Affiliate" means, with respect to the Trust, any company or other trade
or business that controls, is controlled by or is under common control with the
Trust within the meaning of Rule 405 of Regulation C under the Securities Act,
including, without limitation, any Subsidiary.
2.3 "Annual Incentive Award" means a conditional right granted to a Grantee
under Section 20.3.2 hereof to receive Shares or another Award, unless
otherwise determined by the Committee, after the end of a specified fiscal
year.
2.4 "Annual Retainer" means the total amount which is determined each year by
the Board to be payable to each Outside Trustee for services during such year
as an Outside Trustee and as a member of a committee or committees of the
Board.
2.5 "Annual Retainer Payment Date" means July 1 or any other date determined
each year by the Board as the date on which the Annual Retainer for such year
shall be paid.
2.6 "Award" means a grant of an Option, Share Appreciation Rights, Restricted
Shares, Restricted Share Unit, Deferred Shares, Share Purchase Award,
Unrestricted Shares, Performance Shares, Dividend Equivalent Rights,
Performance or Annual Incentive Awards under the Plan.
2.7 "Award Agreement" means the written agreement between the Trust and a
Grantee that evidences and sets out the terms and conditions of an Award.
B-1
2.8 "Beneficial Ownership" means ownership within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
2.9 "Benefit Arrangement" shall have the meaning set forth in Section 21
hereof.
2.10 "Board" means the Board of Trustees of the Trust.
2.11 "Business Day" means any day on which the New York Stock Exchange is
open for trading.
2.12 "Cause" means, as determined by the Board and unless otherwise provided
in an applicable employment or other agreement with the Trust or an Affiliate,
Grantee's: (i) failure (other than failure due to disability) to substantially
perform his duties with the Trust or an Affiliate, which failure remains
uncured after written notice thereof and the expiration of a reasonable period
of time thereafter in which the Grantee is diligently pursuing cure; (ii)
willful misconduct which is demonstrably injurious to the Trust or an
Affiliate, monetarily or otherwise; (iii) breach of fiduciary duty involving
personal profit; or (iv) willful violation in the course of performing his
duties for the Trust of any law, rule or regulation (other than traffic
violations or misdemeanor offenses).
2.13 "Change in Control" means any of the events set forth below; provided,
however, that the Committee, in its sole discretion, may specify a different
definition of Change in Control in any Award Agreement and, in such event, the
definition of Change in Control set forth in the Award Agreement shall apply to
the Award granted under such Award Agreement:
(a) An acquisition in one or more transactions (other than directly from
the Trust or pursuant to options granted under this Plan or otherwise by
the Trust) of any Trust Voting Securities by any Person immediately after
which such Person has Beneficial Ownership of 20% or more of the combined
voting power of the then outstanding Trust Voting Securities; provided,
however, in determining whether a Change in Control has occurred, Trust
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (x) the Trust or (y) a Subsidiary, (ii) the Trust or any
Subsidiary, or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Plan, are members of the
Trustees (the "Incumbent Trustees"), cease for any reason to constitute at
least two-thirds of the Trustees; provided, however, that if the election,
or nomination for election by the Trust's shareholders, of any new member
was approved by a vote of at least two-thirds of the Incumbent Trustees,
such new member shall, for purposes of this Plan, be considered as a member
of the Incumbent Trustees; provided, further, however, that no individual
shall be considered a member of the Incumbent Trustees if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Trustees (a "Proxy
Contest"), including, without limitation, by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
(c) Approval by shareholders of the Trust of
(1) A merger, consolidation or other reorganization involving the Trust,
unless:
(i) the shareholders of the Trust, immediately before such merger,
consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or other
reorganization, at least a majority of the combined voting power of the
outstanding voting securities of the Person resulting from such merger,
consolidation or other reorganization (the "Surviving Person") in
substantially the same proportion as their ownership of the Trust
Voting Securities immediately before such merger, consolidation or
other reorganization,
(ii) the individuals who were members of the Incumbent Trustees
immediately prior to the execution of the agreement providing for such
merger, consolidation or other reorganization constitute at least two-
thirds of the members of the governing board of the Surviving Person,
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(iii) no Person (other than the Trust or any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by the
Trust or any Subsidiary, or any Person which, immediately prior to such
merger, consolidation, or other reorganization had Beneficial Ownership
of 20% or more of the then outstanding Trust Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Person's then outstanding voting securities, and
A transaction described in clauses (i) through (iii) shall herein be
referred to as a "Non-Control Transaction,"
(2) A complete liquidation or dissolution of the Trust; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Trust to any Person (other than
a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur (i) solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Trust Voting
Securities as a result of the acquisition of Trust Voting Securities by the
Trust which, by reducing the number of Trust Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person; provided, however, that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Trust Voting
Securities by the Trust, and after such share acquisition by the Trust, the
Subject Person becomes the Beneficial Owner of any additional Trust Voting
Securities which increases the percentage of the then outstanding Trust Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur, or (ii) if the Trust (a) establishes a wholly-owned subsidiary
("Holding Company"), (b) causes the Holding Company to establish a wholly-owned
subsidiary ("Merger Sub"), and (c) merges with Merger Sub, with the Trust as
the surviving entity (such transactions collectively are referred as the
"Reorganization"). Immediately following the completion of the Reorganization,
all references to the Trust Voting Securities shall be deemed to refer to the
voting securities of the Holding Company.
2.14 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.15 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board; provided, that, if the Committee consists of less than the entire
Board, each member shall be a "Non-Employee Director" within the meaning of
Exchange Act Rule 16b-3 and to the extent necessary for any Award intended to
qualify as performance-based compensation under Section 162(m) of the Code to
so qualify, each member of the Committee, whether or not it consists of the
entire Board, shall be an "outside director" within the meaning of Section
162(m) of the Code and the regulations promulgated thereunder.
2.16 "Covered Employee" means a Grantee who is a Covered Employee within the
meaning of Section 162(m)(3) of the Code.
2.17 "Deferred Shares" means a right, granted to a Grantee under Section 14
hereof, to receive Shares, cash or a combination thereof at the end of a
specified deferral period.
2.18 "Disability" means any physical or mental injury or disease which
renders a Grantee incapable of meeting the requirements of the employment
performed by such Grantee immediately prior to the commencement of such
disability. The determination of whether a Grantee is disabled shall be made by
the Committee in its sole discretion. Notwithstanding the foregoing, if a
Grantee's employment by the Trust terminates by reason of a disability, as
defined in an employment or other agreement between such Grantee and the Trust,
such Grantee shall be deemed to be disabled for purposes of the Plan.
2.19 "Dividend Equivalent" means a right, granted to a Grantee under Section
18 hereof, to receive cash, Shares, other Awards or other property equal in
value to dividends paid with respect to a specified number of Shares, or other
periodic payments.
2.20 "Effective Date" means the date on which the Plan is approved by the
Board.
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2.21 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.22 "Fair Market Value" means the value of a Share, determined as follows:
if on the Grant Date or other determination date the Shares are listed on an
established national or regional stock exchange, are admitted to quotation on
The Nasdaq Stock Market, or are publicly traded on an established securities
market, the Fair Market Value of a Share shall be the closing price of the
Shares on such exchange or in such market (if there is more than one such
exchange or market the Board shall determine the appropriate exchange or
market) on the Grant Date or such other determination date (or if there is no
such reported closing price, the Fair Market Value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices
on such trading day) or, if no sale of Shares are reported for such trading
day, on the next preceding day on which any sale shall have been reported. If
the Shares are not listed on such an exchange, quoted on such system or traded
on such a market, Fair Market Value shall be the value of the Shares as
determined by the Board in good faith.
2.23 "Family Member" means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, of the Grantee, any person
sharing the Grantee's household (other than a tenant or employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Grantee) control the management of
assets, and any other entity in which these persons (or the Grantee) own more
than fifty percent of the voting interests.
2.24 "Good Reason" means, as determined by the Board and unless otherwise
provided in an applicable employment or other agreement between the Grantee and
the Trust or an Affiliate, without the Grantee's consent: (i) a material
reduction in the Grantee's responsibilities, duties, authority, or title, (ii)
the transfer of the Grantee to a place of employment that is more than sixty
(60) miles from the Grantee's current place of employment, or (iii) a material
reduction in the Grantee's salary.
2.25 "Grant Date" means, as determined by the Board or authorized Committee,
the latest to occur of (i) the date as of which the Board approves an Award,
(ii) the date on which the recipient of an Award first becomes eligible to
receive an Award under Section 6 hereof, or (iii) such other date as may be
specified by the Board.
2.26 "Grantee" means a person who receives or holds an Award under the Plan.
2.27 "Incentive Share Option" means an "incentive share option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.28 "Interest" means the amount of interest accrued on a Purchase Loan or a
Tax Loan made to a Grantee during the relevant period. Interest on a Purchase
Loan or a Tax Loan shall accrue at a fixed rate per annum equal to the lesser
of (a) the Trust's borrowing rate and (b) the amount of cash dividend paid on
one Share for the calendar year preceding the Acceptance Date divided by the
Share price, or such other interest rate as the Committee, in its sole
discretion, determines. The interest rate for a Tax Loan shall be identical to
the interest rate charged on the related Purchase Loan. In no event, however,
shall such rates be greater than the maximum rate chargeable to consumers under
the usury laws of the State of Maryland.
2.29 "Involuntary Termination" means a termination of the Grantee's Service
by the Trust or its successor other than for Cause or a termination of the
Grantee's Service by the Grantee for Good Reason.
2.30 "Non-qualified Share Option" means an Option that is not an Incentive
Share Option.
2.31 "Option" means an Incentive Share Option or Non-qualified Share Option
to purchase one or more Shares pursuant to the Plan.
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2.32 "Option Price" means the purchase price for each Share subject to an
Option.
2.33 "Other Agreement" shall have the meaning set forth in Section 21 hereof.
2.34 "Outside Trustee" means a member of the Board who is not an officer or
employee of the Trust.
2.35 "Performance Award" means a conditional right granted to a Grantee under
Section 20.3 hereof to receive Shares or another Award after the end of a
period of up to 15 years.
2.36 "Performance Share Award" means an Award granted pursuant to Section 17.
2.37 "Person" means "person" as such term is used for purposes of Section
13(d) or 14(d) of the Exchange Act, including, without limitation, any
individual, firm, corporation, partnership, joint venture, association, trust
or other entity, or any group of Persons.
2.38 "Plan" means this Federal Realty Investment Trust 2001 Long-Term
Incentive Plan.
2.39 "Purchase Loan" means the loan provided to a Grantee by the Trust to
facilitate the Grantee's purchase of Shares pursuant to a Share Purchase Award.
2.40 "Purchase Loan Term" means the period for repayment and satisfaction of
a Purchase Loan.
2.41 "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.42 "Restricted Period" means the period during which Restricted Shares or
Restricted Share Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.43 "Restricted Shares" means Shares, awarded to a Grantee pursuant to
Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.44 "Restricted Share Unit" means a unit awarded to a Grantee pursuant to
Section 13 hereof, which represents a conditional right to receive a Share in
the future, and which is subject to restrictions and to a risk of forfeiture.
2.45 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.46 "Service" means service as an employee, officer, trustee or other
Service Provider of the Trust or an Affiliate. A change in a Grantee's duties
or position shall not constitute a termination of Service; provided, that, the
change of a Grantee's status from an employee to a Service Provider shall
result in a termination of Service unless the Board determines otherwise by so
providing in the applicable Award Agreement or by making such a determination
at the time the Grantee's status changes. Subject to the preceding sentence,
whether a termination of Service shall have occurred for purposes of the Plan
shall be determined by the Board, which determination shall be final, binding
and conclusive.
2.47 "Service Provider" means a consultant or adviser to the Trust, a manager
of the Trust's properties or affairs, or other similar service provider or
Affiliate, and employees of any of the foregoing, as such persons may be
designated from time to time by the Board pursuant to Section 6 hereof.
2.48 "Share" means the common shares of beneficial interest, par value $.01,
of the Trust.
2.49 "Share Appreciation Right" or "SAR" means a right granted to a Grantee
under Section 12 hereof.
2.50 "Share Purchase Award" means an Award, granted in accordance with
Section 15, of the right to acquire Shares.
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2.51 "Share Purchase Award Price" means the number of Shares in a Grantee's
Share Purchase Award multiplied by the Share price.
2.52 "Subsidiary" means any "subsidiary corporation" of the Trust within the
meaning of Section 424(f) of the Code.
2.53 "Tax Loan" means a loan (or loans) offered to and accepted by a Grantee
to offset all or a portion of federal and state taxes that a Grantee incurs as
a result of the Trust's forgiveness of his Purchase Loan.
2.54 "Termination Date" means the date upon which an Option shall terminate
or expire, as set forth in Section 10.2 hereof.
2.55 "Trust" means Federal Realty Investment Trust.
2.56 "Trust Voting Securities" means the combined voting power of all
outstanding voting securities of the Trust entitled to vote generally in the
election of the Trustees.
2.57 "Unrestricted Share Award" means an Award granted pursuant to Section 16
hereof.
3. ADMINISTRATION OF THE PLAN
3.1. Board.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Trust's declaration of
trust and by-laws and applicable law. The Board shall have full power and
authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Trust's declaration of trust and by-laws and
applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Award or any Award Agreement shall be final and
conclusive. To the extent permitted by law, the Board may delegate its
authority under the Plan to a member of the Board or to an executive officer of
the Trust who is a member of the Board, or to a Committee as provided in
Section 3.2.
3.2. Committee.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as
set forth in Section 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the declaration of trust and by-laws of the
Trust and applicable law. In the event that the Plan, any Award or any Award
Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. To the
extent permitted by law, the Committee may delegate its authority under the
Plan to a member of the Board or an executive officer of the Trust who is a
member of the Board.
3.3. Terms of Awards.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority:
(i) to designate Grantees,
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(ii) to determine the type or types of Awards to be made to a Grantee,
(iii) to determine the number of Shares to be subject to an Award,
(iv) to establish the terms and conditions of each Award (including, but not
limited to, the exercise price of any Option, the nature and duration of any
restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of an Award or the Shares subject
thereto, and any terms or conditions that may be necessary to qualify Options
as Incentive Share Options),
(v) to prescribe the form of each Award Agreement evidencing an Award,
(vi) to amend, modify, or supplement the terms of any outstanding Award,
(vii) in order to effectuate the purposes of the Plan but without amending
the Plan, to modify Awards to eligible individuals who are foreign nationals or
are individuals who are employed outside the United States to recognize
differences in local law, tax policy, or custom, and
(viii) to the extent that the Board in its sole discretion deems it necessary
or desirable, to lend money to a Grantee for purposes of (a) exercising his or
her rights under an Award hereunder or (b) paying any income tax liability
related to an Award; provided, however, that Non-Employee Trustees shall not be
eligible to receive such loans. Such a loan shall be evidenced by a promissory
note payable to the order of the Trust executed by the Grantee and containing
such other terms and conditions as the Board may deem desirable.
As a condition to any subsequent Award, the Board shall have the right, at
its discretion, to require Grantees to return to the Trust any Awards
previously made under the Plan. Subject to the terms and conditions of the
Plan, any such new Award shall be upon such terms and conditions as are
specified by the Board at the time the new Award is made. The Board shall have
the right, in its discretion, to make Awards in substitution or exchange for
any other award under another plan of the Trust, any Affiliate, or any business
entity to be acquired by the Trust or an Affiliate. The Trust may retain the
right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of actions taken by the Grantee in violation or breach of or
in conflict with any non-competition agreement, any agreement prohibiting
solicitation of employees or clients of the Trust or any Affiliate thereof or
any confidentiality obligation with respect to the Trust or any Affiliate
thereof or otherwise in competition with the Trust or any Affiliate thereof, to
the extent specified in such Award Agreement applicable to the Grantee.
Furthermore, the Trust may annul an Award if the Grantee is an employee of the
Trust or an Affiliate thereof and is terminated for Cause as defined in the
applicable Award Agreement or the Plan, as applicable. The grant of any Award
under the Plan shall be contingent on the Grantee executing the applicable
Award Agreement.
3.4. No Liability.
No member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Award
Agreement.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 24 hereof, the number of Shares
available for issuance under the Plan shall be One Million Seven Hundred Fifty
Thousand (1,750,000). Shares issued or to be issued under the Plan shall be
authorized but unissued shares. If any Shares covered by an Award are not
purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares subject thereto, then the number of Shares counted
against the aggregate number of shares available under the Plan with respect to
such Award shall, to the extent of any such forfeiture or termination, again be
available for making Awards under the Plan. If the exercise price of any Option
granted under the Plan is satisfied by tendering Shares to the Trust (by either
actual delivery or by attestation), only the number of Shares issued net of the
Shares tendered shall be deemed delivered for purposes of determining the
maximum number of Shares available for delivery under the Plan.
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5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval of
the Plan by the Trust's shareholders within one year of the Effective Date.
Upon approval of the Plan by the shareholders of the Trust as set forth above,
all Awards made under the Plan on or after the Effective Date shall be fully
effective as if the shareholders of the Trust had approved the Plan on the
Effective Date. If the shareholders fail to approve the Plan within one year
after the Effective Date, any Awards made hereunder shall be null and void and
of no effect.
5.2. Term.
The Plan shall terminate automatically ten (10) years after its adoption by
the Board and may be terminated on any earlier date as provided in Section 23.
6. AWARD ELIGIBILITY
6.1. Trust or Subsidiary Employees; Service Providers; Other Persons.
Subject to Section 7, Awards may be made under the Plan to: (i) any employee
of, or a Service Provider to, the Trust or of any Affiliate, including any such
employee or Service Provider who is an officer or trustee of the Trust, or of
any Affiliate, as the Board shall determine and designate from time to time,
(ii) any Outside Trustee, and (iii) any other individual whose participation in
the Plan is determined to be in the best interests of the Trust by the Board.
6.2. Successive Awards.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1. Limitation on Shares Subject to Awards.
During any time when the Trust has a class of equity security registered
under Section 12 of the Exchange Act, (i) no Grantee (other than the Chief
Executive Officer of the Trust) may be granted Awards (other than Dividend
Equivalent Rights) in the aggregate in respect of more than 250,000 Shares per
calendar year, (ii) the Chief Executive Officer of the Trust may not be granted
Awards (other than Dividend Equivalent Rights) in the aggregate in respect of
more than 500,000 Shares per calendar year, (iii) no Grantee (other than the
Chief Executive Officer of the Trust) may be granted Dividend Equivalent Rights
with respect to more than 250,000 Shares per calendar year, and (iv) the Chief
Executive Officer of the Trust may not be granted Dividend Equivalent Rights
with respect to more than 500,000 Shares per calendar year. The preceding
limitations in this Section 7.1 are subject to adjustment as provided in
Section 24 hereof.
7.2. Limitations on Incentive Share Options.
An Option shall constitute an Incentive Share Option only (i) if the Grantee
of such Option is an employee of the Trust or any Subsidiary of the Trust; (ii)
to the extent specifically provided in the related Award Agreement; and (iii)
to the extent that the aggregate Fair Market Value (determined at the time the
Option is granted) of the Shares with respect to which all Incentive Share
Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee's employer and
its Affiliates) does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were granted.
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8. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Trust and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
an Award of Options shall specify whether such Options are intended to be Non-
qualified Share Options or Incentive Share Options, and in the absence of such
specification such Options shall be deemed Non-qualified Share Options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in the
Award Agreement evidencing such Option. The Option Price shall be at least the
aggregate Fair Market Value on the Grant Date of the Shares subject to the
Option; provided, however, that in the event that a Grantee would otherwise be
ineligible to receive an Incentive Share Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Trust's outstanding Shares), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Share Option shall
be not less than the greater of the par value of a Share or 110 percent of the
Fair Market Value of a Share on the Grant Date. In no case shall the Option
Price of any Option be less than the par value of a Share.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. Vesting.
Subject to Sections 10.2 and 24.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
Section 10.1, fractional numbers of Shares subject to an Option shall be
rounded down to the next nearest whole number. The Board may provide, for
example, in the Award Agreement for (i) accelerated exercisability of the
Option in the event the Grantee's Service terminates on account of death,
Disability or another event, (ii) expiration of the Option prior to its term in
the event of the termination of the Grantee's Service, (iii) immediate
forfeiture of the Option in the event the Grantee's Service is terminated for
Cause or (iv) unvested Options to be exercised subject to the Trust's right of
repurchase with respect to unvested Shares.
10.2. Term.
Each Option granted under the Plan shall terminate, and all rights to
purchase Shares thereunder shall cease, upon the expiration of ten years from
the date such Option is granted, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Board and
stated in the Award Agreement relating to such Option (the "Termination Date");
provided, however, that in the event that the Grantee would otherwise be
ineligible to receive an Incentive Share Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the outstanding Shares), an Option granted to such Grantee that
is intended to be an Incentive Share Option shall not be exercisable after the
expiration of five years from its Grant Date.
10.3. Acceleration.
Any limitation on the exercise of an Option contained in any Award Agreement
may be rescinded, modified or waived by the Board, in its sole discretion, at
any time and from time to time after the Grant Date of such Option, so as to
accelerate the time at which the Option may be exercised. Notwithstanding any
other provision of the Plan, no Option shall be exercisable in whole or in part
prior to the date the Plan is approved by the shareholders of the Trust as
provided in Section 5.1 hereof.
10.4. Termination of Service.
Each Award Agreement shall set forth the extent to which the Grantee shall
have the right to exercise the Option following termination of the Grantee's
Service. Such provisions shall be determined in the sole
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discretion of the Board, need not be uniform among all Options issued pursuant
to the Plan, and may reflect distinctions based on the reasons for termination
of Service.
10.5. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by
the shareholders of the Trust as provided herein, or after ten years following
the Grant Date, or after the occurrence of an event referred to in Section 24
hereof which results in termination of the Option.
10.6. Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Trust of written notice of exercise on any Business Day, at the Trust's
principal executive office, addressed to the attention of the Secretary of the
Trust or the Chief Financial Officer of the Trust. Such notice shall specify
the number of Shares with respect to which the Option is being exercised and
shall be accompanied by payment in full of the Option Price, in accordance with
Section 10.7, of the Shares for which the Option is being exercised. The
minimum number of Shares with respect to which an Option may be exercised, in
whole or in part, at any time shall be the lesser of (i) 100 Shares or such
lesser number set forth in the applicable Award Agreement and (ii) the maximum
number of Shares available for purchase under the Option at the time of
exercise.
10.7. Form of Payment.
Payment of the Option Price for the Shares purchased pursuant to the exercise
of an Option shall be made (i) in cash or in cash equivalents acceptable to the
Trust; (ii) through the tender to the Trust of Shares, which Shares, if
acquired from the Trust, shall have been held for at least six months and which
shall be valued, for purposes of determining the extent to which the Option
Price has been paid thereby, at their Fair Market Value on the date of
exercise; (iii) if authorized by the Committee in the Award Agreement, a full
recourse promissory note secured by the Shares or (iv) by a combination of the
methods described in (i), (ii), and (iii). Notwithstanding the foregoing,
unless the Board provides otherwise in the Award Agreement, payment in full of
the Option Price need not accompany the written notice of exercise provided
that the notice of exercise directs that the certificate or certificates for
the Shares for which the Option is exercised be delivered to a licensed broker
acceptable to the Trust as the agent for the individual exercising the Option
and, at the time such certificate or certificates are delivered, the broker
tenders to the Trust cash (or cash equivalents acceptable to the Trust) equal
to the Option Price for the Shares purchased pursuant to the exercise of the
Option plus the amount (if any) of federal and/or other taxes which the Trust
may in its judgment be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect.
10.8. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject Shares or to direct the voting of the subject
Shares) until the Shares covered thereby are fully paid and issued to him.
Except as provided in Section 24 hereof, no adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such issuance.
10.9. Delivery of Share Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full
of the Option Price, such Grantee shall be entitled to the issuance of a share
certificate or certificates evidencing his or her ownership of the Shares
subject to the Option.
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11. TRANSFERABILITY OF OPTIONS
11.1. Transferability of Options.
Except as provided in Section 11.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the
Grantee's guardian or legal representative) may exercise an Option. Except as
provided in Section 11.2, no Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution.
11.2. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer, not
for value, all or part of an Option which is not an Incentive Share Option to
any Family Member. For the purpose of this Section 11.2, a "not for value"
transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer
to an entity in which more than fifty percent of the voting interests are owned
by Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this Section 11.2, any such Option shall continue to
be subject to the same terms and conditions as were applicable immediately
prior to transfer. Subsequent transfers of transferred Options are prohibited
except to Family Members of the original Grantee in accordance with this
Section 11.2 or by will or the laws of descent and distribution. The events of
termination of Service of Section 10.4 hereof shall continue to be applied with
respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods,
specified in Section 10.4.
12. SHARE APPRECIATION RIGHTS
The Board is authorized to grant SARs to Grantees on the following terms and
conditions:
12.1. Right to Payment.
A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one Share on
the date of exercise over (B) the grant price of the SAR as determined by the
Board. The grant price of an SAR shall not be less than the Fair Market Value
of a Share on the date of grant except as provided in Section 20.1.
12.2. Other Terms.
The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which an SAR may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of Service or upon other
conditions, the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Shares will be delivered or
deemed to be delivered to Grantees, whether or not an SAR shall be in tandem or
in combination with any other Award, and any other terms and conditions of any
SAR. SARs may be either freestanding or in tandem with other Awards.
13. RESTRICTED SHARES
13.1. Grant of Restricted Shares or Restricted Share Units.
The Board may from time to time grant Restricted Shares or Restricted Share
Units to persons eligible to receive Awards under Section 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine. To
the extent that the Board determines that the vesting of a Restricted Share
Award shall be subject to the satisfaction of performance criteria, the Award
may be designated by the Board as a Performance Award in accordance with
Section 20.3.
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13.2. Restrictions.
At the time a grant of Restricted Shares or Restricted Share Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Shares or Restricted Share Units. Each Award of Restricted
Shares or Restricted Share Units may be subject to a different Restricted
Period. The Board may, in its sole discretion, at the time a grant of
Restricted Shares or Restricted Share Units is made, prescribe restrictions in
addition to or other than the expiration of the Restricted Period, including
the satisfaction of corporate or individual performance objectives, which may
be applicable to all or any portion of the Restricted Shares or Restricted
Share Units in accordance with Section 20.3.1 and 20.3.2. Neither Restricted
Shares nor Restricted Share Units may be sold, transferred, assigned, pledged
or otherwise encumbered or disposed of during the Restricted Period or prior to
the satisfaction of any other restrictions prescribed by the Board with respect
to such Restricted Shares or Restricted Share Units.
13.3. Restricted Share Certificates.
The Trust shall issue, in the name of each Grantee to whom Restricted Shares
have been granted, share certificates representing the total number of
Restricted Shares granted to the Grantee, as soon as reasonably practicable
after the Grant Date. The Board may provide in an Award Agreement that either
(i) the Secretary of the Trust or the Chief Financial Officer of the Trust
shall hold such certificates for the Grantee's benefit until such time as the
Restricted Shares are forfeited to the Trust or the restrictions lapse, or (ii)
such certificates shall be delivered to the Grantee, provided, however, that
such certificates shall bear a legend or legends that complies with the
applicable securities laws and regulations and makes appropriate reference to
the restrictions imposed under the Plan and the Award Agreement.
13.4. Rights of Holders of Restricted Shares.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Shares shall have the right to vote such Shares and the right to
receive any dividends declared or paid with respect to such Shares. The Board
may provide that any dividends paid on Restricted Shares must be reinvested in
Shares, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Shares. All distributions, if any,
received by a Grantee with respect to Restricted Shares as a result of any
share split, share dividend, combination of shares, or other similar
transaction shall be subject to the restrictions applicable to the original
Grant.
13.5. Rights of Holders of Restricted Share Units.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Share Units shall have no rights as shareholders of the Trust. The
Board may provide in an Award Agreement evidencing a grant of Restricted Share
Units that the holder of such Restricted Share Units shall be entitled to
receive, upon the Trust's payment of a cash dividend on its outstanding Shares,
a cash payment for each Restricted Share Unit held equal to the per-share
dividend paid on the Shares. Such Award Agreement may also provide that such
cash payment will be deemed reinvested in additional Restricted Share Units at
a price per unit equal to the Fair Market Value of a Share on the date that
such dividend is paid.
13.6. Termination of Service.
Unless the Board otherwise provides in an Award Agreement or in writing after
the Award Agreement is issued, upon the termination of a Grantee's Service, any
Restricted Shares or Restricted Share Units held by such Grantee that have not
vested, or with respect to which all applicable restrictions and conditions
have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of
Restricted Shares or Restricted Share Units, the Grantee shall have no further
rights with respect to such Award, including but not limited to any right to
vote Restricted Shares or any right to receive dividends with respect to
Restricted Shares or Restricted Share Units.
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13.7. Delivery of Shares and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to Restricted Shares or Restricted Share Units shall lapse, and a
share certificate for such Shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the
case may be.
14. DEFERRED SHARE AWARDS
14.1. Nature of Deferred Share Awards.
A Deferred Share Award is an Award of phantom share units to a Grantee,
subject to restrictions and conditions as the Board may determine at the time
of grant. Conditions may be based on continuing Service and/or achievement of
pre-established performance goals and objectives. The terms and conditions of
each such agreement shall be determined by the Board, and such terms and
conditions may differ among individual Awards and Grantees. At the end of the
deferral period, the Deferred Share Award, to the extent vested, shall be paid
to the Grantee in the form of Shares.
14.2. Election to Receive Deferred Share Awards in Lieu of Compensation.
The Board may, in its sole discretion, permit a Grantee to elect to receive a
portion of the cash compensation or Restricted Share Award otherwise due to
such Grantee in the form of a Deferred Share Award. Any such election shall be
made in writing and shall be delivered to the Trust no later than the date
specified by the Board and in accordance with rules and procedures established
by the Board. The Board shall have the sole right to determine whether and
under what circumstances to permit such elections and to impose such
limitations and other terms and conditions thereon as the Board deems
appropriate.
14.3. Rights as a Shareholder.
During the deferral period, a Grantee shall have no rights as a Shareholder;
provided, however, that the Grantee may be credited with Dividend Equivalent
Rights with respect to the phantom share units underlying his Deferred Share
Award, subject to such terms and conditions as the Board may determine.
14.4. Restrictions on Transfer.
A Deferred Share Award may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of during the deferral period.
14.5. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's right
in all Deferred Share Awards that have not vested shall automatically terminate
upon the Grantee's termination of Service for any reason.
15. SHARE PURCHASE AWARD
15.1. Grant of Share Purchase Award.
The Committee, in its sole discretion, may grant Share Purchase Awards to
Grantees either alone or in addition to other Awards granted under the Plan. A
Share Purchase Award shall consist of the right to purchase Shares of the Trust
and to pay for such Shares either in cash or through a Purchase Loan or a
combination of both, in the Committee's sole discretion. A Grantee shall have
until 5:00 P.M. on the twentieth (20th) Business Day following his offer date
to accept a Share Purchase Award and sign an Award Agreement relating to the
Share Purchase Award.
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15.2. Terms of Purchase Loans and Tax Loans.
(a) Purchase Loan. The Trust shall provide to each Grantee who accepts a
Share Purchase Award a Purchase Loan in the principal amount equal to the
portion of the Share Purchase Award Price designated by the Committee as not
payable in cash. Each Purchase Loan shall be evidenced by a promissory note.
The term of the Purchase Loan shall be such period of time as may be determined
by the Committee, in its sole discretion, but, payable in full upon termination
of Service subject to the terms of this Section 15, and the proceeds of the
Purchase Loan shall be used exclusively by the Grantee for payment of the Share
Purchase Award Price.
(i) Interest on Purchase Loan. From the Acceptance Date until the
Grantee's Purchase Loan is forgiven, paid in full or otherwise
satisfied in full, Interest on the outstanding balance of the Purchase
Loan shall accrue and be payable quarterly in arrears on each date of
payment of a cash dividend on the Shares purchased by the Grantee
pursuant to a Share Purchase Award. If no quarterly cash dividend is
paid on the Shares for a quarter, Interest shall accrue (without any
interest thereon) on the last day of the quarter, and shall be
satisfied from future cash dividends paid on such Shares as provided
for in Section 15.3(b) hereof. Any accrued but unpaid Interest on a
Purchase Loan shall be due on the last day of the Purchase Loan Term.
(ii) Forgiveness of Purchase Loan. Subject to Section 15.2(a)(iii),
the Committee shall have the right, in its sole discretion, at the
offer date, to determine (i) the extent to which the Trust shall
forgive the repayment of all or a portion of a Purchase Loan and (ii)
the terms of such forgiveness. To the extent necessary for the
forgiveness of a Purchase Loan intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, the terms
and conditions of the Purchase Loan shall be such that forgiveness of
the Purchase Loan is contingent upon the attainment of specified
performance goals within the Award Period, as provided for in Section
20.3, and such Purchase Loan shall be treated as a Performance Award
for purposes of Section 20.3.
(iii) Effect of a Change in Control. Unless otherwise provided in the
Award Agreement, in the event of a Change in Control and if the Grantee
experiences an Involuntary Termination within one year following the
consummation of the Change in Control, the outstanding balance and
Interest due on any Purchase Loan will be completely forgiven as of the
date of the Grantee's Involuntary Termination.
(b) Tax Loan. In order to provide a Grantee cash to fulfill federal, state
and local tax obligations arising as a result of the forgiveness of a Purchase
Loan, the Committee may, in its sole discretion, offer a Tax Loan to a Grantee
subject to such terms as the Committee, in its sole discretion, determines. The
Tax Loan shall be prepayable, in whole or in part, at any time and from time to
time, without penalty.
(i) Interest on Tax Loan. Each Tax Loan shall bear Interest at a rate
identical to the rate of Interest charged on the Grantee's Purchase
Loan and shall be evidenced by a promissory note. Interest on each Tax
Loan, or any balance thereof, shall accrue and be payable quarterly in
arrears on the same date and in the same manner as Interest on a
Purchase Loan, as provided in Sections 15.2(a)(i) and 15.3(b) of the
Plan, until such Tax Loan is paid in full.
15.3. Security for Loans.
(a) Stock Power. Purchase Loans and Tax Loans granted to Grantees shall be
secured by a pledge of the Shares acquired with a Purchase Loan pursuant to a
Share Purchase Award. Except as the Committee may otherwise determine, such
loans shall be full recourse with respect to a Grantee. The share certificates
for the Shares purchased by a Grantee under the Plan shall be issued in the
Grantee's name, but shall be held as security for repayment of the Grantee's
Purchase Loan and/or any Tax Loan by the Chief Financial Officer of the Trust
(or for a Share Purchase Award made to the Chief Financial Officer, by the
Chief Executive Officer) together with a stock power executed in blank by the
Grantee (the execution and delivery of which by the Grantee shall be a
condition to the issuance of the Share Purchase Award). During the Purchase
Loan Term, the Grantee shall be entitled to exercise all rights applicable to
such Shares, including, without limitation, the
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right to vote such Shares and, subject to Section 15.3(b), the right to receive
dividends paid on such Shares. When the Purchase Loan and any accrued but
unpaid Interest thereon has been repaid or otherwise satisfied in full, the
Chief Financial Officer (or Chief Executive Officer, as the case may be) shall
deliver to the Grantee the share certificates for the Shares purchased by a
Grantee under the Plan, other than the Shares, if any, retained as collateral
for the Tax Loan under Section 15.3(c), provided the Grantee executes and
delivers to the Chief Financial Officer (or Chief Executive Officer, as the
case may be) a substitute stock power for any share certificates representing
the portion of the Share Purchase Award retained by the Trust to secure
repayment of any Tax Loan and any accrued but unpaid Interest thereon, as
provided for in Section 15.3(c) of this Plan.
(b) Assignment of Dividends. To secure repayment of the Grantee's Purchase
Loan, Tax Loan and Interest, each Grantee shall also execute an assignment to
the Trust of all cash dividends paid on the Shares purchased by the Grantee
with a Purchase Loan pursuant to a Share Purchase Award. The Trust shall deduct
from each cash dividend paid by the Trust on such Shares an amount equal to the
Interest due to the Trust for that quarter on the Grantee's Purchase Loan, and
Tax Loan, if any, and shall also deduct accrued but unpaid Interest on the
Purchase and Tax Loan, such deductions to be made in the following order: (i)
first to satisfy the Interest due on the Purchase Loan for that quarter, (ii)
second to satisfy the Interest due on the Tax Loan for that quarter, (iii)
third to satisfy any accrued but unpaid Interest on the Purchase Loan, and (iv)
fourth to satisfy any accrued but unpaid Interest on the Tax Loan. To the
extent that the cash dividend exceeds the total of the foregoing subsections
(i) through (iv), the Trust shall distribute the remainder of the dividend to
the Grantee. In the event the Interest due on the Grantee's Purchase Loan and
Tax Loan is greater than the cash dividend paid that quarter on such Shares (or
if the dividend is insufficient to repay accrued but unpaid Interest from
previous quarters), such unpaid Interest shall accrue and be payable in each
succeeding quarter and then in accordance with Section 15.2(a)(i) (in the case
of the Purchase Loan), Section 15.2 (b)(i) (in the case of the Tax Loan) and
this Section 15.3.
(c) Release and Delivery of Share Certificates at End of Purchase Loan Term.
The Trust shall release and deliver to each Grantee certificates for the Shares
purchased by the Grantee under the Plan at the end of the Purchase Loan Term,
provided the Grantee has paid or otherwise satisfied in full the balance of the
Purchase Loan, any Tax Loan and any accrued but unpaid Interest. In the event
the balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied
within ninety (90) days after the end of the Purchase Loan Term (or such longer
time as the Committee, in its sole discretion, shall provide for repayment or
satisfaction), the Trust shall retain a portion of Shares purchased under the
Share Purchase Award, as provided in Section 15.4(d).
If a Grantee has not paid or otherwise satisfied the balance of the Tax Loan
and any accrued but unpaid Interest thereon at the end of the Purchase Loan
Term, the Trust shall retain as security for repayment of the Tax Loan and any
accrued but unpaid Interest thereon the stock certificates for a portion of the
Shares purchased by the Grantee pursuant to a Share Purchase Award representing
Shares that have a Fair Market Value (determined as of the last day of the
Purchase Loan Term) equal to 200% of the outstanding balance of the Tax Loan
and any accrued but unpaid Interest thereon as of the last day of the Purchase
Loan Term, such stock certificates to be retained in the possession of the
Chief Financial Officer of the Trust (or the Chief Executive Officer, as the
case may be) as security for repayment of such indebtedness.
For purposes of this Section, a Grantee shall be considered to have paid in
full for that number of Shares acquired with a Purchase Loan determined by
multiplying the number of Shares covered by a Share Purchase Award by a
fraction, the numerator of which is the sum of (i) the cumulative amount of the
Purchase Loan principal which has been forgiven under Section 15.2(c) on the
date such calculation is made and (ii) the portion of the Purchase Loan, if
any, which has been prepaid by such date, and the denominator of which is the
original principal amount of the Purchase Loan.
In the event of a Grantee's termination of Service prior to the end of the
Purchase Loan Term, the stock certificates for the Shares purchased by the
Grantee pursuant to a Share Purchase Award shall be released and delivered to
the Grantee (or his beneficiary) or retained by the Trust, depending upon
whether the Grantee has repaid the balance of the Purchase Loan, Tax Loan and
any accrued but unpaid Interest on the Purchase and Tax Loans, in accordance
with Section 15.4 of this Plan.
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(d) Release and Delivery of Stock Certificates during Purchase Loan Term. On
each anniversary of the grant date of a Share Purchase Award, the Trust shall
release and deliver to each Grantee certificates for a portion of the Shares
purchased by a Grantee pursuant to a Share Purchase Award, provided that such
Grantee is employed by the Trust as of such date. The Trust shall retain as
security for repayment of the Purchase Loan, the Tax Loan and any accrued but
unpaid Interest thereon, a portion of the Shares purchased by a Grantee having
a Fair Market Value (determined as of the day preceding the anniversary of the
grant date of the Share Purchase Award each year of the Purchase Loan Term)
equal to 200% of the outstanding balance of the Purchase Loan, Tax Loan and any
accrued but unpaid Interest thereon as of the anniversary of the grant date of
the Share Purchase Award each year during the Purchase Loan Term. Certificates
representing the remaining Shares purchased pursuant to a Share Purchase Award
may be delivered to such Grantee. A Grantee shall not transfer, sell or
otherwise dispose of Shares released pursuant to this Section during the
remainder of the Purchase Loan Term; provided, however, that such Shares may be
pledged as collateral for other indebtedness of the Grantee; provided, further,
however, that in the event of a Change in Control, all such transfer
restrictions on such Shares shall lapse upon the Grantee's Involuntary
Termination if the Grantee experiences an Involuntary Termination within one
year following the consummation of the Change in Control.
15.4. Termination of Service.
(a) Termination of Service by Death or Disability. The Committee, in its sole
discretion, may provide for the forgiveness of a Purchase Loan as of the date
of Grantee's termination of Service by reason of death or Disability, in such
an amount of the original principal amount of the Purchase Loan as the
Committee shall designate; provided that the Grantee (or his Beneficiary, in
the case of the Grantee's death) shall first tender to the Trust within one
hundred and eighty (180) days of such termination of Service: (i) the amount of
the Trust's minimum withholding tax obligation which would be created as a
result of the forgiveness of the Purchase Loan and (ii) the amount of the
balance of Grantee's Purchase Loan, Tax Loan and any accrued but unpaid
Interest on such Loans.
(b) Termination of Service by Voluntary Resignation or Without Cause. In the
event of a Grantee's termination of Service by voluntary resignation, the
Grantee shall repay to the Trust the entire balance of the Purchase Loan, the
Tax Loan and any accrued but unpaid Interest on such Loans, which shall be
deemed immediately due and payable, within ninety (90) days of the date of
Grantee's termination of Service by voluntary resignation. In the event of a
Grantee's termination of Service by the Trust without Cause and except as
provided in Sections 15.2 and 15.3, the Grantee shall be obligated to repay the
balance of the Purchase Loan, Tax Loan and any accrued but unpaid Interest on
the Purchase and Tax Loans within twelve (12) months of the date of Grantee's
termination of Service.
(c) Termination of Service for Cause. In the event of a Grantee's termination
of Service for Cause, the Grantee's Purchase Loan, Tax Loan, and accrued but
unpaid Interest on such Loans, shall become due and payable immediately upon
the date of such Grantee's termination of Service.
(d) Retention of Share Purchase Award. If a Grantee fails to repay the
balance of the Purchase Loan, Tax Loan and accrued but unpaid Interest on the
Purchase and Tax Loans within the applicable time periods as provided in the
Grantee's promissory notes and in this Section 15.4, the Trust shall retain
that portion of the Shares acquired through a Share Purchase Award which has a
Fair Market Value (as of the last day of such applicable time period) equal to
the sum of the outstanding principal balance of Grantee's Purchase Loan and Tax
Loan and accrued but unpaid Interest on the Purchase and Tax Loans, and the
Trust shall be obligated to distribute to the Grantee stock certificates for
only that portion of the Share Purchase Award which is equal in value to the
difference between the Fair Market Value of the Shares covered by the Share
Purchase Award and the sum of the principal balance of the Grantee's Purchase
Loan and Tax Loan and the accrued but unpaid Interest on the Purchase and Tax
Loans, such Fair Market Value and balance to be determined as of the date such
Purchase Loan, Tax Loan and Interest payments are due as set forth in Grantee's
promissory notes and the foregoing Section 15.4. Notwithstanding the foregoing,
the Committee may also, in its sole discretion, choose to permit the Grantee to
repay the outstanding balance and Interest on his or her Tax Loan and Purchase
Loan
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by forfeiting Shares purchased pursuant to the Purchase Loan with a Fair Market
Value equal to the outstanding balance of the Tax Loan, the Purchase Loan, and
any accrued but unpaid Interest thereon.
15.5. Restrictions on Transfer.
No Share Purchase Award or Shares purchased through such an Award and pledged
to the Trust as collateral security for the Grantee's Purchase Loan, Tax Loan
and accrued but unpaid Interest thereon shall be transferable by the Grantee
other than by will or by the laws of descent and distribution.
16. UNRESTRICTED SHARE AWARDS
The Board may, in its sole discretion, grant (or sell at par value or such
other higher purchase price determined by the Board) an Unrestricted Share
Award to any Grantee pursuant to which such Grantee may receive Shares free of
any restrictions ("Unrestricted Shares") under the Plan. Unrestricted Share
Awards may be granted or sold as described in the preceding sentence in respect
of past services or other valid consideration, or in lieu of any cash
compensation due to such Grantee.
17. PERFORMANCE SHARE AWARDS
17.1. Nature of Performance Share Awards.
A Performance Share Award is an Award entitling the recipient to acquire
Shares upon the attainment of specified performance goals. The Board may make
Performance Share Awards independent of or in connection with the granting of
any other Award under the Plan. The Board in its sole discretion shall
determine whether and to whom Performance Share Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the Board
may rely on the performance goals and other standards applicable to other
performance unit plans of the Trust in setting the standards for Performance
Share Awards under the Plan. At any time prior to the Grantee's termination of
Service, the Board may in its sole discretion accelerate, waive or amend any or
all of the goals, restrictions or conditions imposed under any Performance
Share Award.
17.2. Rights as a Shareholder.
A Grantee receiving a Performance Share Award shall have the rights of a
Shareholder only as to Shares actually received by the Grantee under the Plan
and not with respect to Shares subject to the Award but not actually received
by the Grantee. A Grantee shall be entitled to receive a share certificate
evidencing the acquisition of Shares under a Performance Share Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Share Award (or in a performance plan adopted by the Board).
17.3. Termination of Service.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Performance Share Awards shall automatically terminate upon the
Grantee's termination of Service for any reason.
18. DIVIDEND EQUIVALENT RIGHTS
18.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the Shares
specified in the Dividend Equivalent Right (or other award to which it relates)
if such Shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award.
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The terms and conditions of Dividend Equivalent Rights shall be specified in
the grant. Dividend Equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
Shares, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment.
Dividend Equivalent Rights may be settled in cash or Shares or a combination
thereof, in a single installment or installments, all determined in the sole
discretion of the Board. A Dividend Equivalent Right granted as a component of
another Award may provide that such Dividend Equivalent Right shall be settled
upon exercise, settlement, or payment of, or lapse of restrictions on, such
other award, and that such Dividend Equivalent Right shall expire or be
forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms
and conditions different from such other award.
18.2. Interest Equivalents.
Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide in the Award Agreement for interest equivalents to
be credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be specified
by the grant.
18.3. Termination of Service.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of Service for any reason.
19. OUTSIDE TRUSTEE AWARDS
19.1. Grant of Outside Trustee Awards.
Each individual whose term as a Trustee continues after the date of each
annual meeting of shareholders of the Trust commencing with the 2001 annual
meeting of shareholders, and continuing until the date this Plan terminates,
shall as of the date of each such annual meeting of shareholders be granted an
Outside Trustee Award consisting of an Option to purchase 2,500 Shares. The
exercise price for such Options shall be the Fair Market Value of a Share on
the Date of Grant. All such Options shall be designated as Non-qualified Share
Options and shall have a ten-year term. Such Options shall be fully exercisable
six months after the Date of Grant, provided, however, in the event of a Change
in Control, such Options shall become immediately and fully exercisable. If an
Outside Trustee's Service terminates by reason of death or Disability, any
Option held by such Outside Trustee may be exercised for a period of two years
from the date of such termination or until the expiration of the Option,
whichever is shorter. If an Outside Trustee's Service terminates other than by
reason of death or Disability, under mutually satisfactory conditions, any
Option held by such Outside Trustee may be exercised for a period of one year
from the date of such termination, or until the expiration of the stated term
of the Option, whichever is shorter.
19.2. Payment of Annual Retainer.
During the term of this Plan, each Outside Trustee shall have the option of
receiving his Annual Retainer in cash or Shares or a combination of both. Each
Outside Trustee shall be required to make an annual irrevocable election
regarding the form of payment of his Annual Retainer. The election must be in
writing and must be delivered to the Secretary of the Trust on or before May 1
of each year. If no election is made with respect to a year, an Outside
Trustee's Annual Retainer for such year will automatically be paid in Shares.
The Annual Retainer for a year shall be paid to the Board on the Annual
Retainer Payment Date for such year. The total number of Shares to be issued to
an Outside Trustee who receives Shares pursuant to this Section 19 shall be
determined by dividing the dollar amount of the portion of the Annual Retainer
payable in Shares for a particular year by the Fair Market Value of a Share on
the Business Day immediately preceding the Annual Retainer Payment Date. In no
event shall the Trust be required to issue fractional Shares. Whenever under
the terms of this Section a fractional Share would otherwise be required to be
issued, an amount in lieu thereof shall be paid in cash based upon the Fair
Market Value of such fractional Share.
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20. CERTAIN PROVISIONS APPLICABLE TO AWARDS
20.1. Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Trust, any
Affiliate, or any business entity to be acquired by the Trust or an Affiliate,
or any other right of a Grantee to receive payment from the Trust or any
Affiliate. Such additional, tandem, and substitute or exchange Awards may be
granted at any time. If an Award is granted in substitution or exchange for
another Award, the Board shall require the surrender of such other Award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts payable
under other plans of the Trust or any Affiliate, in which the value of Shares
subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Shares or Restricted Shares), or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Shares minus the
value of the cash compensation surrendered (for example, Options granted with
an exercise price "discounted" by the amount of the cash compensation
surrendered).
20.2. Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award Agreement, payments
to be made by the Trust or an Affiliate upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Board shall
determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Shares in connection with such settlement, in the discretion of
the Board or upon occurrence of one or more specified events. Installment or
deferred payments may be required by the Board or permitted at the election of
the Grantee on terms and conditions established by the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Shares.
20.3. Performance and Annual Incentive Awards.
20.3.1. Performance Conditions.
The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 20.3.2 hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.
20.3.2. Performance or Annual Incentive Awards Granted to Designated
Covered Employees.
If and to the extent that the Committee determines that a Performance or
Annual Incentive Award to be granted to a Grantee who is designated by the
Committee as likely to be a Covered Employee should qualify as "performance-
based compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Performance or Annual Incentive Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 20.3.2.
(i) Performance Goals Generally. The performance goals for such
Performance or Annual Incentive Awards shall consist of one or more
business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee
consistent with this Section 20.3.2. Performance goals shall be
objective and shall otherwise meet the requirements of
B-19
Code Section 162(m) and regulations thereunder including the
requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance or Annual Incentive Awards shall be granted, exercised
and/or settled upon achievement of any one performance goal or that two
or more of the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance or Annual
Incentive Awards. Performance goals may differ for Performance or
Annual Incentive Awards granted to any one Grantee or to different
Grantees.
(ii) Business Criteria. One or more of the following business
criteria for the Trust, on a consolidated basis, and/or specified
subsidiaries or business units, geographic regions, or properties of
the Trust (except with respect to the total shareholder return and
earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such Performance or
Annual Incentive Awards: (1) total shareholder return; (2) such total
shareholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard
& Poor's 500 Stock Index or a REIT Index; (3) net earnings; (4) pretax
profits; (5) earnings before interest expense, taxes, depreciation and
amortization; (6) pretax operating earnings after interest expense and
before bonuses, service fees, and extraordinary or special items; (7)
operating margin; (8) earnings per share; (9) return on equity; (10)
return on capital; (11) return on investment; (12) operating earnings;
(13) working capital; (14) ratio of debt to shareholders' equity; (15)
revenue; (16) funds from operations; (17) Share price; (18) dividends;
(19) market share or market penetration; (20) attainment of
acquisition, disposition, financing, refinancing, or capitalization
goals; (21) value creation in the form of an increase in the net asset
value of a real estate development or redevelopment project; and (22)
attainment of leasing goals.
(iii) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of Performance Awards shall
be measured over a performance period of up to fifteen years and
achievement of performance goals in respect of Annual Incentive Awards
shall be measured over a performance period of up to one year, as
specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period
applicable to such Performance or Annual Incentive Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance or Annual Incentive Award Pool. The Committee may
establish a Performance or Annual Incentive Award pool, which shall be
an unfunded pool, for purposes of measuring Trust performance in
connection with Performance or Annual Incentive Awards.
(v) Settlement of Performance or Annual Incentive Awards; Other
Terms. Settlement of such Performance or Annual Incentive Awards shall
be in cash, Shares, other Awards or other property, in the discretion
of the Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with such
Performance or Annual Incentive Awards. The Committee shall specify the
circumstances in which such Performance or Annual Incentive Awards
shall be paid or forfeited in the event of termination of Service by
the Grantee prior to the end of a performance period or settlement of
Performance Awards.
20.3.3. Written Determinations.
All determinations by the Committee as to the establishment of performance
goals, the amount of any Performance Award pool or potential individual
Performance Awards and as to the achievement of performance goals relating to
Performance Awards, and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards, shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). To the extent required to comply with Code
Section 162(m), the Committee may delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards.
B-20
20.3.4. Status of Section 20.3.2 Awards Under Code Section 162(m).
It is the intent of the Trust that Performance Awards and Annual Incentive
Awards under Section 20.3.2 hereof granted to persons who are designated by the
Committee as likely to be Covered Employees within the meaning of Code Section
162(m) and regulations thereunder shall, if so designated by the Committee,
constitute "qualified performance-based compensation" within the meaning of
Code Section 162(m) and regulations thereunder. Accordingly, the terms of
Section 20.3.2, including the definitions of Covered Employee and other terms
used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards or an
Annual Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
21. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Trust or any Affiliate, except (i) an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph or (ii) an employment or other agreement between
the Trust and the Grantee that specifically provides for the payment of taxes
due under Section 4999 of the Code (an "Other Agreement"), and notwithstanding
any formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Shares or Restricted Share Unit held by that Grantee and any right to receive
any payment or other benefit under this Plan shall not become exercisable or
vested (i) to the extent that such right to exercise, vesting, payment, or
benefit, taking into account all other rights, payments, or benefits to or for
the Grantee under this Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Grantee under this Plan
to be considered a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result
of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Grantee from the Trust under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered
to have received a Parachute Payment under this Plan that would have the effect
of decreasing the after-tax amount received by the Grantee as described in
clause (ii) of the preceding sentence, then the Grantee shall have the right,
in the Grantee's sole discretion, to designate those rights, payments, or
benefits under this Plan, any Other Agreements, and any Benefit Arrangements
that should be reduced or eliminated so as to avoid having the payment or
benefit to the Grantee under this Plan be deemed to be a Parachute Payment.
22. REQUIREMENTS OF LAW
22.1. General.
The Trust shall not be required to sell or issue any Shares under any Award
if the sale or issuance of such Shares would constitute a violation by the
Grantee, any other individual exercising an Option, or the Trust of any
provision of any law or regulation of any governmental authority, including
without limitation any Federal
B-21
or state securities laws or regulations. If at any time the Trust shall
determine, in its discretion, that the listing, registration or qualification
of any Shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of Shares hereunder, no Shares may be
issued or sold to the Grantee or any other individual exercising an Option
pursuant to such Award unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Trust, and any delay caused thereby shall in no way
affect the date of termination of the Award. Specifically, in connection with
the Securities Act, upon the exercise of any Option or the delivery of any
Shares underlying an Award, unless a registration statement under such Act is
in effect with respect to the Shares covered by such Award, the Trust shall not
be required to sell or issue such Shares unless the Board has received evidence
satisfactory to it that the Grantee or any other individual exercising an
Option may acquire such Shares pursuant to an exemption from registration under
the Securities Act. Any determination in this connection by the Board shall be
final, binding, and conclusive. The Trust may, but shall in no event be
obligated to, register any securities covered hereby pursuant to the Securities
Act. The Trust shall not be obligated to take any affirmative action in order
to cause the exercise of an Option or the issuance of Shares pursuant to the
Plan to comply with any law or regulation of any governmental authority. As to
any jurisdiction that expressly imposes the requirement that an Option shall
not be exercisable until the Shares covered by such Option are registered or
are exempt from registration, the exercise of such Option (under circumstances
in which the laws of such jurisdiction apply) shall be deemed conditioned upon
the effectiveness of such registration or the availability of such an
exemption.
22.2. Rule 16b-3.
During any time when the Trust has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Trust that Awards
pursuant to the Plan and the exercise of Options granted hereunder will qualify
for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent
that any provision of the Plan or action by the Board does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
22.3. Limitation Following a Hardship Distribution.
To the extent required to comply with Treasury Regulation (S)1.401(k)-
1(d)(2)(iv)(B)(4), or any amendment or successor thereto, a Grantee's "elective
and employee contributions" (within the meaning of such Treasury Regulation)
under the Plan shall be suspended for a period of twelve months following such
Grantee's receipt of a hardship distribution made in reliance on such Treasury
Regulation from any plan containing a cash or deferred arrangement under
Section 401(k) of the Code maintained by the Trust or a related party within
the provisions of subsections (b), (c), (m) or (o) of Section 414 of the Code.
23. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any Shares as to which Awards have not been made;
provided, however, that the Board shall not, without approval of the Trust's
shareholders, amend the Plan such that it does not comply with the Code. Except
as permitted under this Section 23 or Section 24 hereof, no amendment,
suspension, or termination of the Plan shall, without the consent of the
Grantee, alter or impair rights or obligations under any Award theretofore
awarded under the Plan.
24. EFFECT OF CHANGES IN CAPITALIZATION
24.1. Changes in Shares.
If the number of outstanding Shares is increased or decreased or the Shares
are changed into or exchanged for a different number or kind of shares or other
securities of the Trust on account of any recapitalization, reclassification,
share split, reverse split, combination of shares, exchange of shares, share
dividend or other
B-22
distribution payable in capital shares, or other increase or decrease in such
shares effected without receipt of consideration by the Trust occurring after
the Effective Date, the number and kinds of shares for which grants of Options
and other Awards may be made under the Plan shall be adjusted proportionately
and accordingly by the Trust. In addition, the number and kind of shares for
which Awards are outstanding shall be adjusted proportionately and accordingly
so that the proportionate interest of the Grantee immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options shall not change the
aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of an Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share. The conversion of any
convertible securities of the Trust shall not be treated as an increase in
shares effected without receipt of consideration. Notwithstanding the
foregoing, in the event of a spin-off that results in no change in the number
of outstanding Shares of the Trust, the Trust may, in such manner as the Trust
deems appropriate, adjust (i) the number and kind of shares subject to
outstanding Awards and/or (ii) the exercise price of outstanding Options and
Share Appreciation Rights.
24.2. Reorganization in Which the Trust Is the Surviving Entity and in
Which No Change in Control Occurs.
Subject to Section 24.3 hereof, if the Trust shall be the surviving entity in
any reorganization, merger, or consolidation of the Trust with one or more
other entities in which no Change in Control occurs, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of Shares subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per Share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the Shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation. Subject to any contrary language
in an Award Agreement evidencing an Award, any restrictions applicable to such
Award shall apply as well to any replacement shares received by the Grantee as
a result of the reorganization, merger or consolidation.
24.3. Reorganization, Sale of Assets or Sale of Shares Which Involves a
Change in Control.
(a) Subject to Section 24.3(b), upon any transaction that results in a Change
in Control, (i) all outstanding Shares subject to Awards shall be deemed to
have vested, and all restrictions and conditions applicable to such Shares
subject to Awards shall be deemed to have lapsed, immediately prior to the
occurrence of such event, and (ii) all Options outstanding hereunder shall
become immediately exercisable for a period of fifteen days immediately prior
to the scheduled consummation of the event. Any exercise of an Option during
such fifteen-day period shall be conditioned upon the consummation of the event
and shall be effective only immediately before the consummation of the event.
Upon consummation of any such event, the Plan and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold
Options not later than the time at which the Trust gives notice thereof to its
shareholders.
(b) Section 24.3(a) shall not apply to the extent provision is made in
writing in connection with a transaction described in Section 24.3(a) for the
assumption of such Options and other Awards theretofore granted, or for the
substitution for such Options and other Awards of new options and other Awards
covering the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares or units and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided.
(c) Notwithstanding Section 24.3(b) and except as otherwise provided in the
Award Agreement or other agreement between the Grantee and the Trust, if a
Grantee experiences an Involuntary Termination within one year following the
consummation of a Change in Control, upon such Grantee's Involuntary
Termination all outstanding Shares subject to Awards held by such Grantee shall
be deemed to have vested, and all restrictions and conditions applicable to
such Shares subject to Awards shall be deemed to have lapsed and (ii) all
Options held by such Grantee shall become immediately fully vested and
exercisable to the extent the Options remain outstanding.
B-23
24.4. Adjustments.
Adjustments under this Section 24 related to Shares or securities of the
Trust shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. No fractional shares or other securities shall
be issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share.
24.5. No Limitations on Trust.
The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Trust to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
25. POOLING
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction involving
the Trust and such transaction is contingent upon pooling of interests
accounting, then that provision shall be deemed amended or revoked to the
extent required to preserve such pooling of interests. The Trust may require in
an Award Agreement that a Grantee who receives an Award under the Plan shall,
upon advice from the Trust, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of interests accounting
is available.
26. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Trust or any Affiliate, or to interfere in any way with any
contractual or other right or authority of the Trust either to increase or
decrease the compensation or other payments to any individual at any time, or
to terminate any employment or other relationship between any individual and
the Trust. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a trustee, officer,
consultant or employee of the Trust or an Affiliate. The obligation of the
Trust to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the
manner and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Trust to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
Grantee or beneficiary under the terms of the Plan. No Grantee shall have any
of the rights of a shareholder with respect to the Shares subject to an Option
except to the extent the certificates for such Shares shall have been issued
upon the exercise of the Option.
27. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Trust for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or particular individuals) as the Board in its discretion
determines desirable, including, without limitation, the granting of Share
options otherwise than under the Plan.
28. WITHHOLDING TAXES
The Trust or an Affiliate, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Grantee any Federal, state, or
local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any Shares upon the exercise of an Option or pursuant to an Award.
At the time of such vesting, lapse, or exercise,
B-24
the Grantee shall pay to the Trust or the Affiliate, as the case may be, any
amount that the Trust or the Affiliate may reasonably determine to be necessary
to satisfy such withholding obligation. Subject to the prior approval of the
Trust or the Affiliate, which may be withheld by the Trust or the Affiliate, as
the case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Trust or the Affiliate to
withhold Shares otherwise issuable to the Grantee or (ii) by delivering to the
Trust or the Affiliate Shares already owned by the Grantee. The Shares so
delivered or withheld shall have an aggregate Fair Market Value equal to such
withholding obligations. The Fair Market Value of the Shares used to satisfy
such withholding obligation shall be determined by the Trust or the Affiliate
as of the date that the amount of tax to be withheld is to be determined. A
Grantee who has made an election pursuant to this Section 28 may satisfy his or
her withholding obligation only with Shares that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
29. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
30. OTHER PROVISIONS
Each Award granted under the Plan may contain such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
31. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
32. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.
33. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing the
Grants awarded hereunder shall be governed by the laws of the State of Maryland
other than any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan and the instruments
evidencing the Awards awarded hereunder to the substantive laws of any other
jurisdiction.
* * *
To record adoption of the Plan by the Board as of February 14, 2001, and
approval of the Plan by the shareholders on , 2001, the Trust has
caused its authorized officer to execute the Plan.
FEDERAL REALTY INVESTMENT TRUST
By:
Title:
B-25
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
FEDERAL REALTY INVESTMENT TRUST
May 2, 2001
\/ Please Detach and Mail in the Envelope Provided \/
A [X] Please mark your
votes as in this
example.
This Proxy when properly executed will be voted as directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE TWO
NOMINEES AND "FOR" PROPOSAL 2.
FOR WITHHELD
[ ] [ ]
1. To elect the following Trustees for terms expiring as set forth in the
accompanying Proxy Statement.
For all, except as otherwise indicated.
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list.)
Nominees: Dennis L. Berman
Kristin Gamble
The Board of Trustees unanimously recommends a vote FOR the two nominees.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Trust's 2001 Long-Term Incentive Plan.
The Board of Trustees unanimously recommends a vote FOR the approval of the
Trust's 2001 Long-Term Incentive Plan.
3. In their discretion, on any other matters properly coming before the
meeting or any postponement or adjournment thereof.
SIGNATURE(S) DATE
--------------------------------- -------------- ----------
Note: Please sign exactly as your name(s) appear(s) hereon. If the shares are
held jointly each party must sign. If the shareholder named is a
corporation, partnership or other association, please sign its name and
add your own name and title. When signing as an attorney, executor,
administrator, trustee, guardian or in any other representative capacity,
please also give your full title or capacity.
PROXY
FEDERAL REALTY INVESTMENT TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned, a shareholder of Federal Realty Investment Trust (the
"Trust"), hereby constitutes and appoints RON D. KAPLAN and CECILY A. WARD, or
either of them, as the true and lawful attorneys and proxies of the undersigned,
with full power of substitution in each of them, for and in the name of the
undersigned, to vote and otherwise act at the Annual Meeting of Shareholders of
the Trust to be held at Woodmont Country Club, 1201 Rockville Pike, Rockville,
Maryland on Wednesday, May 2, 2001 at 10:00 a.m., or at any postponement or
adjournment thereof, with respect to all of the Common Shares of Beneficial
Interest of the Trust which the undersigned would be entitled to vote, with all
the powers the undersigned would possess if personally present, on the following
matters.
The undersigned hereby ratifies and confirms all that the aforesaid
attorneys and proxies may do hereunder.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and of the accompanying Proxy Statement and revokes any proxy previously given
with respect to the Annual Meeting.
(To Be Signed on Reverse Side)
-----------
SEE REVERSE
SIDE
-----------
ANNUAL MEETING OF SHAREHOLDERS OF
FEDERAL REALTY INVESTMENT TRUST
May 2, 2001
-------------------------------
PROXY VOTING INSTRUCTIONS
-------------------------------
TO VOTE BY MAIL
---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
--------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
-------------------
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS ---->
------------------
\/ Please Detach and Mail in the Envelope Provided \/
A [X] Please mark your
votes as in this
example.
This Proxy when properly executed will be voted as directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE TWO
NOMINEES AND "FOR" PROPOSAL 2.
FOR WITHHELD
[ ] [ ]
1. To elect the following Trustees for terms expiring as set forth in the
accompanying Proxy Statement.
For all, except as otherwise indicated.
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list.)
Nominees: Dennis L. Berman
Kristin Gamble
The Board of Trustees unanimously recommends a vote FOR the two nominees.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Trust's 2001 Long-Term Incentive Plan.
The Board of Trustees unanimously recommends a vote FOR the approval of the
Trust's 2001 Long-Term Incentive Plan.
3. In their discretion, on any other matters properly coming before the
meeting or any postponement or adjournment thereof.
SIGNATURE(S) DATE
--------------------------------- ------------------ ---------
Note: Please sign exactly as your name(s) appear(s) hereon. If the shares are
held jointly each party must sign. If the shareholder named is a
corporation, partnership or other association, please sign its name and
add your own name and title. When signing as an attorney, executor,
administrator, trustee, guardian or in any other representative capacity,
please also give your full title or capacity.