|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance
Payments
|
|
Continuation
of Medical/
Welfare
Benefits(1)
|
|
Value of
RS
Vestings(2)
|
|
Value of
PSU
Vestings(3)
|
|
Total
Termination
Benefits
|
|
Stephen E. Budorick
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premature/Constructive Termination
|
|
$
|
1,043,700
|
|
$
|
15,397
|
|
$
|
891,269
|
|
$
|
542,325
|
|
$
|
2,492,691
|
|
Change in Control
|
|
|
3,120,663
|
|
|
15,397
|
|
|
891,269
|
|
|
542,325
|
|
|
4,569,654
|
|
Death or Disability
|
|
|
|
|
|
|
|
|
891,269
|
|
|
542,325
|
|
|
1,433,594
|
|
Paul R. Adkins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premature/Constructive Termination
|
|
|
860,000
|
|
|
15,397
|
|
|
457,373
|
|
|
|
|
|
1,332,770
|
|
Change in Control
|
|
|
2,571,400
|
|
|
15,397
|
|
|
457,373
|
|
|
|
|
|
3,044,170
|
|
Death or Disability
|
|
|
|
|
|
|
|
|
457,373
|
|
|
|
|
|
457,373
|
|
Anthony Mifsud
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premature/Constructive Termination
|
|
|
594,167
|
|
|
15,397
|
|
|
976,904
|
|
|
213,529
|
|
|
1,799,997
|
|
Change in Control
|
|
|
1,336,873
|
|
|
15,397
|
|
|
976,904
|
|
|
213,529
|
|
|
2,542,703
|
|
Death or Disability
|
|
|
|
|
|
|
|
|
976,904
|
|
|
213,529
|
|
|
1,190,433
|
|
-
(1)
-
These
benefits were computed based on the monthly medical and welfare benefits for the named executive officers as of December 31, 2016 multiplied by the
number of months over which such benefits are to continue beyond such executives' employment termination.
-
(2)
-
Value
of a RS vesting is calculated by multiplying the number of shares subject to vesting as of December 31, 2016 by $31.22, the closing price of our common
shares on the NYSE on December 30, 2016.
-
(3)
-
Value
of PSU vestings is calculated by multiplying the number of common shares that would be issuable in settlement of unvested PSUs (including the effect of
aggregate dividends declared through December 31, 2016) by $31.22, the closing price of our common shares on the NYSE on December 30, 2016. The number of shares issuable in settlement
would be prorated based on the portion of the three-year performance period that has elapsed in the event of a change in control.
55
Table of Contents
Proposal 6Approval of the 2017 Omnibus Equity and Incentive Plan
On March 8, 2017, the Board adopted the 2017 Omnibus Equity and Incentive Plan (the "2017 Plan"), subject to the approval of our
shareholders. The 2017 Plan will become effective if and when it is approved by our shareholders and will replace our Amended and Restated 2008 Omnibus Equity and Incentive Plan (the "2008 Plan"),
effective as of such date, whereupon no further awards will be made under the 2008 Plan.
By
adopting the 2017 Plan we may continue to use equity awards to attract, retain and motivate employees. We believe that having a plan in place with a sufficient number of shares is
critical to our ability to attract, retain and motivate employees in a highly competitive marketplace and ensure that the Company's executive compensation is structured in a manner that aligns the
executives' interests with the success of the Company. The following highlights key reasons why we believe shareholders should approve the 2017 Plan:
Reasonable Plan Cost
-
-
Permits continued alignment of interests through use of equity compensation
-
-
Reasonable number of shares requested3,400,000 shares
-
-
Awards would not have a substantially dilutive effect (issuance of all shares is less than 3.4% of outstanding shares and common units)
-
-
No additional awards will be issued under the 2008 Plan655,503 shares remaining available under the 2008 Plan (equating to
full-value awards for 362,156 shares) will not be utilized
Responsible Grant Practices
-
-
0.83% three-year average burn ratewell below ISS industry standard of 2.55%
-
-
All equity awards granted to NEOs vest ratably over at least three years
-
-
60% of the equity awards granted to each NEO are PSUs subject to vesting based on relative TSR over a three-year period
-
-
PSU payout prorated upon termination and change in control
-
-
Clawback policy applies to equity awards
-
-
Robust share ownership guidelines
Shareholder-Friendly Plan Features
-
-
No single trigger change in control vesting acceleration of time-based awards
-
-
No liberal share recyclingshares withheld for tax withholding, net exercise or exercise payment not added back
-
-
No repricing permitted without shareholder approval
-
-
Shareholder approval required to increase the share reserve (i.e., no "evergreen" feature)
-
-
No dividends or distributions permitted to be paid on unearned performance-based awards
The Board recommends a vote "FOR" approval of the 2017 Plan.
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Table of Contents
Shares Available for Issuance
The number of common shares available for issuance under the 2017 Plan is 3,400,000 and will not be increased by the number of unused shares
under the 2008 Plan.
As
of March 2, 2017, there were 655,503 shares available under the 2008 Plan (equating to full-value awards for 362,156 shares). We will not grant any awards under the 2008 Plan
prior to the Annual Meeting and, as a result, if the 2017 Plan is approved, these shares will not be utilized. As of March 2, 2017, the number of shares to be issued upon the exercise of
outstanding options, warrants and rights for which we have reserved shares under the 2008 Plan is equal to 328,434, which includes: (i) 157,946 shares issuable pursuant to performance share
awards if maximum performance is achieved (none of which were vested), (ii) 46,263 shares issuable pursuant to outstanding deferred share awards (24,944 of which were unvested) and
(iii) 124,225 common shares subject to outstanding options (all of which were vested and exercisable). The weighted average exercise price and term to maturity of these outstanding
options was $39.37 per share and 1.0 year, respectively. In addition, an aggregate of 443,556 unvested restricted shares granted under the 2008 Plan were outstanding as of March 2, 2017.
Shares
underlying awards that are forfeited, canceled or otherwise terminated (other than by exercise) under the 2017 Plan and the 2008 Plan will be added back to the shares available
for issuance under the 2017 Plan. Shares tendered or held back for taxes or to cover the exercise price of an option will not be added back to the reserved pool under the 2017 Plan.
As
of March 2, 2017, the Company had 98,849,553 common shares outstanding. As of March 2, 2017, the Company's Operating Partnership had 3,405,391 common units outstanding
that were not owned by the Company and are exchangeable into common shares on a one-for-one basis, subject to certain conditions.
Burn Rate
The following table sets forth information regarding historical awards granted (or, for awards subject to performance-based vesting, vested) for
each of the last three fiscal years and our corresponding annual burn rate calculated in the manner described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Share Options Granted (A)
|
|
|
|
|
|
|
|
|
|
|
Time-Based Full-Value Shares Granted(1)
|
|
|
256,881
|
|
|
225,080
|
|
|
216,607
|
|
Performance-Based Full-Value Shares Vested(2)
|
|
|
42,906
|
|
|
15,289
|
|
|
40,309
|
|
Total Full Value Shares (B)
|
|
|
299,787
|
|
|
240,369
|
|
|
256,916
|
|
Weighted average common shares/units outstanding during the fiscal year (C)(3)
|
|
|
98,135,000
|
|
|
97,606,000
|
|
|
91,989,000
|
|
Annual Burn Rate ((A+(B*3))/C)
(4)
|
|
|
0.92
|
%
|
|
0.74
|
%
|
|
0.84
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Three Year Average Burn Rate
(5)
|
|
|
|
|
|
|
|
|
0.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Reflects
the sum of restricted share and deferred share award grants during the year.
-
(2)
-
Represents
common shares issued in settlement of vested PSUs.
-
(3)
-
For
each year, represents the weighted average number of common shares of the Company and common units of the Company's Operating Partnership outstanding during the
year. Because the Company is a real estate investment trust that conducts substantially all of its operations through an operating partnership, both common shares of the Company and common units of
the Company's Operating Partnership not owned by the Company are included for purposes of
57
Table of Contents
calculating
our burn rate. Each common unit of the Company's Operating Partnership is exchangeable into common shares on a one-for-one basis, subject to certain conditions.
-
(4)
-
Burn
rate represents: (a) the sum of (i) share options granted plus (ii) (A) the sum of the number of shares subject to time-based
full-value awards granted during the year and the number of shares subject to performance-based full-value awards that vested during the year multiplied by (B) 3.0, which is a multiplier that
is intended to reflect the greater value delivered by full-value awards as compared to share options for purposes of comparing burn rates among companies that may utilize different forms of equity
awards, divided by (b) the weighted average number of common shares of the Company and common units of the Company's Operating Partnership outstanding during the year.
-
(5)
-
As
illustrated in the table above, our three-year average burn rate for the last three fiscal years was 0.83%, which is well below the ISS industry category burn
rate threshold of 2.55%.
Summary of the 2017 Plan
The following description of certain material features of the 2017 Plan is intended to be a summary only. The summary is qualified in its
entirety by the full text of the 2017 Plan that is attached hereto as
Annex B
.
Shares Available.
The maximum number of common shares to be issued under the 2017 Plan is 3,400,000. Based solely on the closing price
of our common
shares as reported on the NYSE on March 2, 2017, the maximum aggregate market value of the 3,400,000 shares that could potentially be issued under the 2017 Plan is $115.1 million. Shares
underlying awards that are forfeited, canceled or otherwise terminated (other than by exercise) under the 2017 Plan and the 2008 Plan will be added back to the shares available for issuance under the
2017 Plan.
No Liberal Share Recycling.
Shares tendered or held back for taxes or to cover the exercise price of an option will not be added back
to the reserved
pool under the 2017 Plan. Upon the exercise of a share appreciation right that is settled in common shares, the full number of shares underlying the award will be charged to the reserved pool.
Additionally, shares we reacquire on the open market will not be added to the reserved pool. In the event we repurchase shares on the open market, such shares shall not be added to the shares
available for issuance under the 2017 Plan.
Types of Awards.
The types of awards permitted under the 2017 Plan will include share options, share appreciation rights, restricted
share unit
awards, restricted share awards, unrestricted share awards, cash-based awards, dividend equivalent rights and other equity-based awards.
Eligibility.
All officers, employees, non-employee trustees and consultants of the Company and its subsidiaries will be eligible to
receive awards
under the 2017 Plan. Persons eligible to participate in the 2017 Plan will be those officers, employees, non-employee trustees and consultants of the Company and its subsidiaries as selected from time
to time by the Administrator (as defined below). Approximately 387 individuals are currently eligible to participate in the 2017 Plan.
Plan Administration.
The 2017 Plan will be administered by either the Compensation Committee of the Board, the Board or by such other
committee of
the Board performing the functions of the Compensation Committee (in either case, the "Administrator"). The Administrator has full power to select, from among the individuals eligible for awards, the
individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, including the right to accelerate
vesting of awards, subject to the provisions of the 2017 Plan. Subject to applicable law, unless the Administrator determines others, in its sole discretion, the Chief Executive Officer of the Company
is authorized to exercise any and all of the Administrator's
58
Table of Contents
power
and authority with respect to awards held by individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act.
Change in Control.
The 2017 plan does not provide for any automatic vesting in the event of a "change in control" (as defined in the
2017 Plan). The
Administrator may terminate all outstanding share options and share appreciation rights granted under the 2017 Plan in the event of a change in control, in which case the share options and share
appreciation rights will become fully vested and exercisable as of the effective time of such transaction and the Administrator may (i) make or provide for a payment, in cash or in kind, for
each share subject to such a share option or share appreciation right, in exchange for the cancellation thereof, in an amount equal to the difference between the per share consideration received in
the transaction and the exercise price of such award or (ii) permit holders of share options and share appreciation rights to exercise such awards (to the extent exercisable as of the
consummation of the transaction) within a specified period of time prior to the transaction.
Clawback Policy.
All awards granted under the 2017 Plan will be subject to our clawback policy in effect from time to time.
Term.
No awards may be granted under the 2017 Plan ten years or more after the date of shareholder approval.
Repricing.
The Administrator may not reprice or reduce the exercise price of any outstanding options or share appreciation rights,
other than as a
result of a proportionate adjustment made in connection with a reorganization, recapitalization, reclassification, share dividend, share split, reverse share split, extraordinary dividend or other
similar event.
Limitations on Individual Grants of Options or Share Appreciation Rights.
The maximum award of options or share appreciation rights
granted to any
one individual will not exceed 1,360,000 shares (subject to adjustment for share splits and similar events) for any calendar year period.
Limitations on Awards to Non-Employee Trustees.
The maximum value of awards under the 2017 Plan to any non-employee trustee in any
calendar year,
other than the chairman of the Board or lead trustee, if any, will not exceed $500,000.
Performance-Based Compensation.
To ensure that certain awards granted under the 2017 Plan to a "Covered Employee" (as defined in the
Code) qualify as
"performance-based compensation" under Section 162(m) of the Code, the 2017 Plan provides that the Administrator may require that the vesting of such awards be conditioned on the satisfaction
of performance criteria that may include any or all of the following: (1) earnings before interest, taxes, depreciation and/or amortization, (2) net income (loss) (either before or after
interest, taxes, depreciation and/or amortization), (3) changes in the market price of our common shares, (4) economic value-added, (5) funds from operations, adjusted funds from
operations or similar measure, (6) sales or revenue, (7) acquisitions, dispositions or strategic transactions, (8) operating income (loss), (9) cash flow (including, but
not limited to, operating cash flow and free cash flow), (10) return on capital, assets, equity, or investment, (11) shareholder returns, (12) return on sales, (13) gross
or net profit levels, (14) productivity, (15) expense, (16) margins, (17) operating efficiency, (18) customer satisfaction, (19) working capital,
(20) earnings (loss) per share, (21) rent growth, (22) objectively determinable expense management, (23) capital deployment, (24) development milestones,
(25) sales or market shares and (26) number of customers, any of which may be measured either in absolute terms, or on a per share basis, as compared to any incremental increase or as
compared to results of a peer group. The Administrator may adjust any evaluation of performance under a performance criteria to exclude any of the following events that occurs during a performance
cycle in order to prevent the dilution or enlargement of the rights of an individual: (i) asset write-downs or impairments, (ii) litigation or claim judgments or settlements,
(iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reporting results,
59
Table of Contents
(iv) accruals
for reorganizations and restructuring programs and (v) any item of an unusual nature or of a type that indicates infrequency of occurrence, or both, including those
described in the Financial Accounting Standards Board's authoritative guidance and/or in management's discussion and analysis of financial condition of operations appearing in the Company's annual
report to shareholders for the applicable year, provided, that the Administrator may not exercise such discretion in a manner that would increase the "performance based compensation" to an employee
who is a "Covered Employee" within the meaning of Section 162(m) of the Code. The Administrator will select the particular performance criteria within 90 days following the commencement
of a performance cycle. Subject to adjustments for share splits and similar events, the maximum award granted to any one individual that is intended to qualify as "performance-based compensation"
under Section 162(m) of the Code will not exceed 700,000 shares of common shares for any performance cycle. If a performance-based award is payable in cash to any executive, it cannot exceed
$10,000,000 for any performance cycle.
Share Options.
The 2017 Plan permits the granting of (1) options intended to qualify as incentive stock options under
Section 422 of
the Code and (2) options that do not so qualify. Options granted under the 2017 Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on
incentive stock options. Non-qualified options may be granted to any persons eligible to receive incentive options and to non-employee trustees and consultants. The exercise price of each option will
be determined by the Administrator but may not be less than 100% of the fair market value of our common shares on the date of grant.
The
term of each option will be fixed by the Administrator and may not exceed ten years from the date of grant. The Administrator will determine at what time or times each option may be
exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator. Options may be exercised in whole or in part by giving written or
electronic notice to the Company or its designee.
Upon
exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Administrator, or by delivery
(or attestation to the ownership following such procedures as we may prescribe) of shares that are not subject to restrictions under any Company plan. Subject to applicable law, the exercise price may
also be delivered to the Company by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, the Administrator may permit non-qualified options to be exercised using
a net exercise feature which reduces the number of shares issued to the optionee by the number of shares with a fair market value equal to the exercise price.
To
qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options that first become
exercisable by a participant in any one calendar year.
Share Appreciation Rights.
The Administrator may award share appreciation rights to participants subject to such conditions and
restrictions as the
Administrator may determine, provided that the exercise price may not be less than 100% of the fair market value of our common shares on the date of grant. Share appreciation rights are settled in
common shares. In addition, no share appreciation right shall be exercisable more than ten years after the date the share appreciation right is granted.
Restricted Share Units.
Restricted share unit awards are ultimately payable in the form of common shares and may be subject to such
conditions and
restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a
specified vesting period. In the Administrator's sole discretion, and subject to the participant's compliance with the procedures established by the Administrator and requirements of
Section 409A of the Code, it may permit a participant to make an
60
Table of Contents
advance
election to receive a portion of his or her future cash compensation otherwise due in the form of a restricted share unit award.
Restricted Shares.
The Administrator may award shares to participants subject to such conditions and restrictions as the Administrator
may determine.
These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified restriction period. Cash dividends on restricted
shares that remain subject to the attainment of performance criteria must be retained by, or repaid by the grantee to, the Company; provided that, an amount equal to such cash dividends retained or
repaid by the grantee may be paid to the grantee upon the lapsing of such performance-criteria.
Unrestricted Shares.
The 2017 Plan gives the Administrator discretion to grant share awards free of any
restrictions. Unrestricted shares may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant.
Cash-Based Awards.
Each cash-based award shall specify a cash-denominated payment amount, formula or payment ranges as determined by
the
Administrator. Payment, if any, with respect to a cash-based award may be made in cash or in common shares, as the Administrator determines.
Dividend Equivalent Rights.
Dividend equivalent rights are awards entitling the grantee to current or deferred payments equal to
dividends on a
specified number of common shares. Dividend equivalent rights may be settled in cash or shares and are subject to other conditions as the Administrator shall determine. Dividend equivalents payable
with respect to awards with vesting tied to the attainment of performance criteria shall not be paid unless and until such performance conditions are attained. Dividend equivalent rights shall not be
granted to any grantee as a component of an option or a share appreciation right.
Other Equity-Based Awards.
The Administrator may grant units or any other membership or ownership interests (which may be expressed as
units or
otherwise) in a subsidiary (or other affiliate of the Company), with any shares being issued in connection with the conversion of (or other distribution on account of) an interest granted under the
provisions of the 2017 Plan.
Dividends on Unearned Performance-Based Awards.
Cash dividends on other equity-based awards that remain subject to the attainment of
performance
criteria must be retained by, or repaid by the grantee to, the Company; provided that, an amount equal to such cash dividends retained or repaid by the grantee may be paid to the grantee upon the
lapsing of such performance-criteria.
Adjustments for Stock Dividends, Stock Splits, Etc.
The 2017 Plan requires the Administrator to make appropriate adjustments to the
number of shares
of common stock that are subject to 2017 Plan, to certain limits in the 2017 Plan, and to any outstanding awards to reflect stock dividends, stock splits, extraordinary cash dividends and similar
events.
Tax Withholding.
Participants in the 2017 Plan are responsible for the payment of any federal, state or local taxes that we are
required by law to
withhold upon any option exercise or vesting of other awards. Subject to approval by the Administrator, participants may elect to have the tax withholding obligations satisfied by authorizing the
Company to withhold shares to be issued pursuant to an option exercise or other award. Additionally, the Administrator may provide for mandatory share withholding up to the required withholding
amount.
Amendments and Termination.
Generally, under current NYSE rules, all material amendments to the 2017 Plan, including those that
materially increase
the number of shares available, expand the types of awards available or the persons eligible to receive awards, extend the term of the 2017 Plan, change the method of determining the exercise price of
options or delete or limit any provision prohibiting the repricing of options, must be approved by our common shareholders. The Board may determine to
61
Table of Contents
make
amendments subject to the approval of the common shareholders for purposes of complying with the rules of the NYSE or to preserve the qualified status of incentive options or ensure that
compensation earned under the 2017 Plan qualifies as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the "Code"). Otherwise, our Board may amend or
discontinue the 2017 Plan at any time.
Tax Aspects Under the Code
The following is a summary of the principal federal income tax consequences of certain transactions under the 2017 Plan. It does not describe
all federal tax consequences under the 2017 Plan, nor does it describe state or local tax consequences.
Incentive Options.
No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares
issued to an
optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (1) upon sale of such
shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital
loss, and (2) we will not be entitled to any deduction for federal income tax
purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.
An
incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of
termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.
If
shares acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally:
(1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares at exercise (or, if less, the amount
realized on a sale of such shares) over the option price thereof; and (2) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the
incentive option is paid by tendering shares.
Non-Qualified Options.
No taxable income is generally realized by the optionee upon the grant of a non-qualified option. Generally:
(1) at
exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares on the date of exercise, and we receive a
tax deduction for the same amount; and (2) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on
how long the shares have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares. Upon exercise, the optionee will also
be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.
Other Awards.
We will generally be entitled to a tax deduction in connection with an award under the 2017 Plan in an amount equal to
the ordinary
income realized by the participant at the time the participant recognizes such income. Participants typically are subject to income tax and recognize such tax at the time that an award is exercised,
vests or becomes non-forfeitable, unless the award provides for a further deferral.
Parachute Payments.
The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change in
control may cause
a portion of the payments with respect to such accelerated awards to be treated as "parachute payments," as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in
part, and may subject the recipient to a
62
Table of Contents
non-deductible
20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Limitation on the Company's Deductions.
As a result of Section 162(m) of the Code, our deduction for certain awards under the 2017
Plan may be
limited to the extent that the Chief Executive Officer or other executive officer whose compensation is required to be reported in the summary compensation table receives compensation in excess of
$1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). The 2017 Plan is structured to allow certain grants to
qualify as performance-based compensation.
New Plan Benefits
Because the grant of awards under the 2017 Plan is within the discretion of the Administrator, we cannot determine the dollar value or number of
shares of common stock that will in the future be received by or allocated to any participant in the 2017 Plan.
Vote Required
Because this proposal is required to be approved by shareholders under the rules of the New York Stock Exchange, the affirmative vote of a
majority of the votes cast on this proposal (including votes for and against and abstentions as votes cast) will be required for approval. For these purposes, abstentions will be treated as votes cast
and broker non-votes will not be treated as votes cast.
Recommendation
The Board recommends a vote "FOR" approval of the 2017 Plan.
Equity Compensation Plan Information
The table below provides information as of December 31, 2016 regarding our compensation plans under which equity securities are
authorized for issuance to employees or non-employees in exchange for consideration in the form of goods and services.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a)
|
|
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities in Column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
342,354
|
(1)
|
$
|
43.35
|
(2)
|
|
1,157,284
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
342,354
|
|
$
|
43.35
|
|
|
1,157,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Includes
the following:
-
i.
-
94,991
shares issuable pursuant to 49,466 PSUs outstanding as of December 31, 2016. The 94,991 shares includes 85,207 shares that would be issuable in
settlement of 40,617 unvested PSUs at the maximum level of performance and 9,784 shares issuable in settlement of 8,849 vested but unsettled PSUs based on an actual payout of 100% of the award target,
as such amount was determinable as of December 31, 2016; these amounts include the effect of aggregate dividends declared through December 31, 2016.
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-
ii.
-
46,263
shares issuable pursuant to outstanding deferred share awards (24,944 of which were unvested as of December 31, 2016); and
-
iii.
-
201,100
common shares subject to outstanding options (all of which were vested and exercisable).
-
(2)
-
Because
there is no exercise price associated with PSUs or deferred share awards, these awards are not included in the weighted-average exercise price calculation.
-
(3)
-
Represents
shares available under the 2008 Plan after reserving for shares issuable pursuant to the outstanding PSU awards, deferred share awards and options
included in column (a) of the table above. Because each share issued pursuant to full-value awards count against the number of shares remaining available as 1.81 shares, the number of shares
remaining available equates to full-value awards for 639,383 shares.
The
table above excludes 371,247 RSs that the Company had outstanding as of December 31, 2016.
As
of March 2, 2017, the Company had 98,849,553 common shares outstanding. As of March 2, 2017, the Company's Operating Partnership had 3,405,391 common units outstanding
that were not owned by the Company and are exchangeable into common shares on a one-for-one basis, subject to certain conditions.
As
of March 2, 2017, there were 655,503 shares available under the 2008 Plan (equating to full-value awards for 362,156 shares). We will not grant any awards under the 2008 Plan
prior to the Annual Meeting and, as a result, if the 2017 Plan is approved, these shares will not be utilized. As of March 2, 2017, the number of shares to be issued upon the exercise of
outstanding options, warrants and rights
for which we have reserved shares under the 2008 Plan is equal to 328,434, which includes: (i) 157,946 shares issuable pursuant to performance share awards if maximum performance is
achieved (none of which were vested), (ii) 46,263 shares issuable pursuant to outstanding deferred share awards (24,944 of which were unvested) and (iii) 124,225 common shares subject to
outstanding options (all of which were vested and exercisable). The weighted average exercise price and term to maturity of these outstanding options was $39.37 per share and 1.0 year,
respectively. In addition, an aggregate of 443,556 unvested restricted shares granted under the 2008 Plan were outstanding as of March 2, 2017.
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Table of Contents
ANNEX A
CORPORATE OFFICE PROPERTIES TRUST
ARTICLES OF AMENDMENT
THIS
IS TO CERTIFY THAT:
FIRST: The Amended and Restated Declaration of Trust of Corporate Office Properties Trust, a Maryland real estate investment trust (the
"Trust"), is
hereby amended by deleting Section 6.9 of Article VI of the Amended and Restated Declaration of Trust in its entirety and replacing it with the following:
"Section 6.9
Declaration and Bylaws
. All shareholders are subject to the provisions of the Declaration of Trust and the
Bylaws of the Trust. Except as otherwise specifically required by law, the Trustees and the Shareholders shall each have the power to adopt, amend and modify the Bylaws of the Trust in the manner set
forth in the Bylaws as the same may be amended or modified from time to time."
SECOND: The amendment to the Amended and Restated Declaration of Trust as set forth above has been duly advised by the board of
trustees of the Trust
and approved by the shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on such amendment.
THIRD: The undersigned President and Chief Executive Officer acknowledges these Articles of Amendment to be the corporate act of the
Trust and as to
all matters or facts required to be verified under oath, the undersigned President and Chief Executive Officer acknowledges that to the best of the President and Chief Executive Officer's knowledge,
information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
IN
WITNESS WHEREOF, the Trust has caused these Articles to be signed in its name and on its behalf by its President and Chief Executive Officer and attested to by its Secretary on this
day of May, 2017.
|
|
|
|
|
ATTEST:
|
|
CORPORATE OFFICE PROPERTIES TRUST
a Maryland real estate investment trust
|
|
|
By:
|
|
(SEAL)
|
David L. Finch,
Secretary
|
|
|
|
Stephen E. Budorick,
President and Chief Executive Officer
|
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Table of Contents
SECOND AMENDMENT TO
AMENDED AND RESTATED
BYLAWS OF
CORPORATE OFFICE PROPERTIES TRUST
(THE "TRUST")
(effective on , 2017)
The
following amendment is effective as of , 2017 as approved by the unanimous written consent of the Trust's
Board of Trustees:
1. Article XIVArticle XIV
of the Amended and Restated Bylaws is hereby deleted in its entirety and replaced with the following provision:
"ARTICLE XIV
AMENDMENT OF BYLAWS
The
Trustees shall have the power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws; provided, that no amendment or revisions shall be made to clauses (a) or
(b) of Article II, Section 8 or to this Article XIV unless such amendment or revision is approved by a vote of the shareholders of the Trust taken in accordance with
clause (c) of Article II, Section 8. The shareholders shall also have the power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws by the affirmative
vote of a majority of all the votes entitled to be cast on the matter; provided, that the shareholders shall not have the power to amend, alter, revise or supplement this Article XIV in any
manner that alters the Trustees' power to adopt, alter or repeal any provision of these Bylaws or to make new Bylaws."
2. In
the event of any conflict between this amendment and the Amended and Restated Bylaws, this amendment shall prevail.
3. All
other terms and provisions of the Amended and Restated Bylaws shall remain in full force and effect.
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Annex B
CORPORATE OFFICE PROPERTIES TRUST
2017 OMNIBUS EQUITY AND INCENTIVE PLAN
SECTION 1.
GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The
name of the plan is the Corporate Office Properties Trust 2017 Omnibus Equity and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers,
employees, Non-Employee Trustees and Consultants of Corporate Office Properties Trust (the "Company") and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for
the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company and its shareholders, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company.
The
following terms shall be defined as set forth below:
"Act"
means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
"Administrator"
means either the Board or the compensation committee of the Board or a similar committee performing the functions of the
compensation committee and which is comprised of not less than two Non-Employee Trustees who are independent.
"Award"
or
"Awards,"
means an award under the Plan and, except where referring to a
particular category of grant under the Plan, shall include Incentive Options, Non-Qualified Options, Share Appreciation Rights, Restricted Share Unit Awards, Restricted Share Awards, Unrestricted
Share Awards, Cash-Based Awards, Dividend Equivalent Rights, Units and other equity-based Awards as contemplated herein.
"Award Certificate"
means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the
Plan. Each Award Certificate is subject to the terms and conditions of the Plan.
"Board"
means the Board of Trustees of the Company.
"Cash-Based Award"
means an Award entitling the recipient to receive a cash-denominated payment.
"Change in Control"
means (i) the consummation of the acquisition by any person (as such term is defined in Section 13(d) or
14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or more of the combined voting power
embodied in the then outstanding voting securities of the Company; (ii) the consummation of: (a) a merger or consolidation of the Company, if the shareholders of the Company immediately
before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than 50 percent of the combined voting power of the then outstanding
voting securities of the entity resulting from such merger or consolidation in substantially the same proportion as was represented by their ownership of the combined voting power of the voting
securities of the Company outstanding immediately before such merger or consolidation; or (b) a sale or other disposition of all or substantially all of the assets of the Company;
(iii) the approval by the shareholders of the Company of a dissolution or liquidation of all or substantially all of the Company's assets or (iv) the members of the Board at the
beginning of any consecutive 24-calendar-month period (the "Incumbent Trustees") cease for any reason to constitute at least a majority of the members of the Board; provided that any member of the
Board whose election, or nomination for election by the Company's shareholders, was approved by
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a
vote of at least a majority of the Incumbent Trustees, shall be deemed to be an Incumbent Trustee; provided further, however, that no individual initially elected or nominated as a member of the
Board as a result of an actual or threatened election contest with respect to the members of the Board or as a result of any other actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be deemed to be an Incumbent Trustee.
"Code"
means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
"Consultant"
means any natural person that provides bona fide services to the Company, and such services are not in connection with the
offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities.
"Covered Employee"
means an employee who is a "Covered Employee" within the meaning of Section 162(m) of the Code.
"Dividend Equivalent Right"
means an Award entitling the grantee to receive credits based on dividends 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 grantee.
"Effective Date"
means the date on which the Plan becomes effective as set forth in Section 21.
"Exchange Act"
means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Fair Market Value"
of the Shares on any given date means the fair market value of the Shares determined in good faith by the
Administrator; provided, however, that if the Shares are listed on the New York Share Exchange ("NYSE") or another national securities exchange, the determination shall be made by reference to market
quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
"Family-Member"
of a grantee means a grantee's child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
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, any person sharing the grantee's household (other
than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 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 50 percent of the voting interests.
"Incentive Option"
means any Option designated and qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Employee Trustee"
means a member of the Board who is not an employee of the Company or any Subsidiary; provided, however,
"Non-Employee Trustees" may serve as consultants to the Company or a Subsidiary.
"Non-Qualified Option"
means any Option that is not an Incentive Option.
"Operating Partnership"
means Corporate Office Properties, L.P., a Delaware limited partnership.
"Option"
means any option to purchase Shares granted pursuant to Section 5.
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Table of Contents
"Performance-Based Award"
means any Restricted Share Award, Restricted Share Unit Award, Units or Cash-Based Award granted to a Covered
Employee that is intended to qualify as "performance-based compensation" under Section 162(m) of the Code and the regulations promulgated thereunder.
"Performance Criteria"
means the criteria that the Administrator selects for purposes of establishing the Performance Goal or Performance
Goals for an individual for a Performance Cycle. The Performance Criteria (which shall be applicable to the organizational level specified by the Administrator, including, but not limited to, the
Company or a unit, division, group, or Subsidiary of the Company) that will be used to establish Performance Goals are limited to one or more of the following: earnings before interest, taxes,
depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes in the market price of the Shares, economic value-added, funds from
operations, adjusted funds from operations or similar measure, sales or revenue, acquisitions, dispositions or strategic transactions, operating income (loss), cash flow (including, but not limited
to, operating cash flow and free cash flow), return on capital, assets, equity, or investment, shareholder returns, return on sales, gross or net profit levels, productivity, expense, margins,
operating efficiency, customer satisfaction, working capital, earnings (loss) per share, rent growth, objectively determinable expense management, capital deployment, development milestones, sales or
market shares and number of customers, any of which may be measured either in absolute terms, or on a per share basis as compared to any incremental increase or as compared to results of a peer group.
The Administrator may adjust any evaluation of performance under a Performance Criterion to exclude any of the following events that occurs during a Performance Cycle in order to prevent the dilution
or enlargement of the rights of an individual: (i) asset write-downs or impairments, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reporting results, (iv) accruals for reorganizations and restructuring programs, and (v) any item of an unusual nature or
of a type that indicates infrequency of occurrence, or both, including those described in the Financial Accounting Standards Board's authoritative guidance and/or in management's discussion and
analysis of financial condition of operations appearing in the Company's annual report to shareholders for the applicable year; provided, however, that the Administrator may not exercise such
discretion in a manner that would increase the Performance-Based Award granted to a Covered Employee.
"Performance Cycle"
means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select,
over which the attainment of one or more Performance Criteria will be measured for the purpose of determining a grantee's right to and the payment of a Performance-Based Award. Each period shall not
be less than 12 months.
"Performance Goals"
means, for a Performance Cycle, the specific goals established in writing by the Administrator for a Performance Cycle
based upon the Performance Criteria.
"Restricted Shares"
means the Shares underlying a Restricted Share Award that remain subject to a risk of forfeiture or the Company's
right of repurchase.
"Restricted Share Award"
means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may
determine at the time of grant.
"Restricted Share Units"
means the units underlying a Restricted Share Unit Award, each of which represents the right to receive one Share
or a cash payment equal to the Fair Market Value of one Share at the time and upon the conditions applicable to the Restricted Share Unit Award.
"Restricted Share Unit Award"
means an Award of Restricted Share Units subject to such restrictions and conditions as the Administrator
may determine at the time of grant.
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"Section 409A"
means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
"Shares"
means the common shares of beneficial interest, $.01 par value per share of the Company, subject to adjustments pursuant to
Section 3.
"Share Appreciation Right"
means an Award entitling the recipient to receive Shares having a value equal to the excess of the Fair Market
Value of the Shares on the date of exercise over the exercise price of the Share Appreciation Right multiplied by the number of Shares with respect to which the Share Appreciation Right shall have
been exercised.
"Subsidiary"
means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent
interest, either directly or indirectly.
"Ten Percent Owner"
means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10 percent of the combined voting power of all classes of shares of beneficial interest in the Company or any parent or subsidiary corporation.
"Units"
means units of partnership interest, including one or more classes of profit interests, in the Operating Partnership.
"Unrestricted Share Award"
means an Award of Shares free of any restrictions.
SECTION 2.
ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a)
Administration of Plan.
The Plan shall be administered by the Administrator; provided that any grants of
Awards may be made subject to the approval of the Board to the extent deemed advisable for legal or regulatory reasons.
(b)
Powers of Administrator.
The Administrator shall have the power and authority to grant Awards consistent
with the terms of the Plan, including the power and authority:
(i) to
select the individuals to whom Awards may from time to time be granted;
(ii) to
determine the time or times of grant, and the extent, if any, of Awards granted to any one or more grantees;
(iii) to
determine the number of Shares to be covered by any Award;
(iv) to
determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and
conditions may differ among individual Awards and grantees, and to approve the form of written instruments evidencing the Awards;
(v) to
accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject
to the provisions of Section 5(a)(ii), to extend at any time the period in which Options may be exercised; and
(vii) at
any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem
advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
B-4
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All
decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
(c)
Delegation of Authority to CEO.
Subject to applicable law, the Administrator, in its discretion, may
delegate to the Chief Executive Officer of the Company all or part of the Administrator's power and authority with respect to the granting of Awards to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act. Any such delegation by the Administrator may include limitations as to the number of Shares underlying Awards that may be granted during
the period of the delegation and/or on the terms of any such Awards. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions
of the Administrator's delegate that were consistent with the terms of the Plan. In addition, subject to applicable law, unless the Administrator determines otherwise, in its discretion, the Chief
Executive Officer of the Company is authorized to exercise any and all of the Administrator's power and authority with respect to Awards held by individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act.
(d)
Award Certificate.
Awards under the Plan shall be evidenced by Award Certificates that set forth the terms,
conditions and limitations for each Award, which may include, without limitation, the term of an Award, the provisions applicable in the event employment or service terminates, and the Company's
authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
(e)
Indemnification.
Neither the Board nor the Administrator, nor any member of either or any delegate thereof,
shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any
delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company's declaration of trust or bylaws or any directors' and officers' liability insurance
coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.
(f)
Foreign Award Recipients.
Notwithstanding any provision of the Plan to the contrary, in order to comply with
the laws in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the
power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan;
(iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan
as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or
after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the
foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or
any other applicable United States governing statute or law.
SECTION 3.
SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a)
Shares Issuable.
The maximum number of Shares reserved and available for issuance under the Plan shall be
3,400,000
Shares, subject to adjustment as provided in Section 3(b). Subject to the overall limitations described below, Shares may be issued up
to such maximum number pursuant to any type or types of Award; provided, however, that Options or Share Appreciation Rights with respect to
B-5
Table of Contents
no
more than 1,360,000 Shares may be granted to any one individual grantee during any one calendar year period. Additionally, no more than 3,400,000 Shares shall be issued in the form of Incentive
Options. For purposes of these limitations, the Shares underlying any awards that are forfeited, canceled or otherwise terminated (other than by exercise) on or after the Effective Date under this
Plan and the Corporate Office Properties Trust Amended and Restated 2008 Omnibus Equity and Incentive Plan (the "2008 Plan") shall be added back to the Shares available for issuance under the Plan.
Shares tendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall not be available for future issuance under the Plan. In the event
the Company repurchases Shares on the open market, such Shares shall not be added to the Shares available for issuance under the Plan. In addition, upon exercise of Share Appreciation Rights, the
gross number of Shares exercised shall be deducted from the total number of Shares remaining available for issuance under the Plan. The Shares available for issuance under the Plan may be authorized
but unissued Shares or Shares reacquired by the Company. In addition, following the Effective Date, no further awards will be granted pursuant to the 2008 Plan.
(b)
Changes in Shares.
Subject to Section 3(c) hereof, if, as a result of any reorganization,
recapitalization, reclassification, share dividend, share split, reverse share split or other similar change that affects the Shares, the outstanding Shares are increased or decreased or are exchanged
for a different number or kind of shares or other securities of the Company, or additional Shares or new or different shares or other securities of the Company or other non-cash assets are distributed
with respect to such Shares or other securities, or, if, as a result of any merger, consolidation, conversion, sale of all or substantially all of the assets of the Company or similar event involving
the Company, the outstanding Shares are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an
appropriate or proportionate adjustment in (i) the maximum number of Shares reserved for issuance under the Plan, including the maximum number of Shares that may be issued in the form of
Incentive Options, (ii) the number of Options or Share Appreciation Rights that can be granted to any one individual grantee and the maximum number of Shares that may be granted under a
Performance-Based Award, (iii) the number and kind of Shares or other securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share
subject to each outstanding Restricted Share Award, and (v) the exercise price for each Share subject to any then outstanding Options and Share Appreciation Rights under the Plan, without
changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Options and Share Appreciation Rights) as to which such Options and Share Appreciation Rights remain
exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of Shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards
to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive.
No fractional Shares shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.
(c)
Termination of Options and SARs in Connection with Mergers and Other Transactions.
In the event of a merger,
consolidation, conversion, sale of all or substantially all of the assets of the Company or similar event involving the Company and one or more other entities, at least one of which is not a
Subsidiary or other affiliate of the Company, unless otherwise provided in the Award Certificate for a particular Award, the Administrator shall have the right to terminate any or all outstanding
Options or Share Appreciation Rights. In the event of such a termination, each Option and Share Appreciation Right that is terminated shall become vested and fully exercisable as of the effective time
of such transaction and the Company will take one of the following actions with respect to each such Option and Share Appreciation Right (with the choice among the following options to be made by the
Administrator in its sole discretion): (A) make or provide for a payment, in cash or in kind, to the grantee holding such Option or Share Appreciation Right, in exchange for the cancellation
thereof, in an amount equal to the excess, if any, of (i) the value of the consideration received or to be
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received
with respect to each Share in such transaction (as determined by the Administrator) multiplied by the number of Shares subject to such Option or Share Appreciation Right (to the extent then
exercisable (after taking into account any acceleration hereunder) at prices not in excess of the per Share amount of such consideration) above (ii) the aggregate exercise price for such Shares
pursuant to such Option or Share Appreciation Right; or (B) permit the grantee holding such Option or Share Appreciation Right, within a specified period of time prior to such termination, as
determined by the
Administrator, to exercise such Option or Share Appreciation Right as of, and subject to, the consummation of the transaction pursuant to which such Option or Share Appreciation Right is to be
terminated (to the extent such Option or Share Appreciation Right would be exercisable as of the consummation of such transaction (after taking into account any acceleration hereunder)).
(d)
Maximum Awards to Non-Employee Trustees.
Notwithstanding anything to the contrary in this Plan, the value of
all Awards awarded under this Plan to any Non-Employee Trustee (other than the Chairman or lead Trustee, if any) in any calendar year shall not exceed $500,000. For the purpose of this limitation, the
value of any Award shall be its grant date fair value, as determined in accordance with ASC 718 or successor provision but excluding the impact of estimated forfeitures related to service-based
vesting provisions.
SECTION 4.
ELIGIBILITY
Grantees
under the Plan will be such full or part-time officers or other employees, Non-Employee Trustees and Consultants of the Company and its Subsidiaries as are selected from time to
time by the Administrator in its sole discretion (the "Eligible Grantees").
SECTION 5.
OPTIONS
Any
Option granted under the Plan shall be in such form as the Administrator may from time to time approve.
Options
granted under the Plan may be either Incentive Options or Non-Qualified Options. Incentive Options may be granted only to employees of the Company or any Subsidiary that is a
"subsidiary corporation" within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Option, it shall be deemed a Non-Qualified Option.
(a)
Options Granted to Eligible Grantees.
The Administrator in its discretion may grant Options to Eligible
Grantees. Options granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as the Administrator shall deem desirable. The Administrator, at the Administrator's discretion, shall have the right to provide the Eligible Grantees with the choice between
receiving cash compensation or Options, subject to such terms and conditions as the Administrator may establish.
(i)
Exercise Price.
The exercise price per Share covered by an Option granted pursuant to this Section 5
shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Option that is
granted to a Ten
Percent Owner, the option price of such Incentive Option shall not be less than 110 percent of the Fair Market Value on the grant date.
(ii)
Option Term.
The term of each Option shall be fixed by the Administrator, but no Option shall be
exercisable more than ten years after the date the Option is granted. In the case of an Incentive Option that is granted to a Ten Percent Owner, the term of such Option shall be no more than five
years from the date of grant.
(iii)
Exercisability; Rights of a Shareholder.
Options shall become exercisable at such time or times, whether
or not in installments, as shall be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Option. An
optionee shall have the rights of a shareholder only as to Shares acquired upon the exercise of an Option and not as to unexercised Options.
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(iv)
Method of Exercise.
Options may be exercised in whole or in part, by giving written
or electronic notice of exercise to the Company or its designee, specifying the number of Shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to
the extent provided in the Option Award Certificate:
(A) In
cash, by certified or bank check or other instrument acceptable to the Administrator;
(B) Through
the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of Shares that are not then subject to restrictions under
any Company plan. Such surrendered Shares shall be valued at Fair Market Value on the exercise date;
(C) With
respect to Options that are not Incentive Options, by a "net exercise" arrangement pursuant to which the Company will reduce the number of Shares issuable upon
exercise by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other payment from the
optionee to the extent
of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole Shares to be issued; provided further, however, that Shares will no longer be
outstanding under an Option and will not be exercisable thereafter to the extent that Shares are used to pay the exercise price pursuant to the "net exercise; or
(D) By
the optionee delivering to the Company or its designee a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment procedure.
Payment
instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the Shares to be purchased pursuant to the exercise
of an Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Option) by the Company of the full purchase price for such
Shares and the fulfillment of any other requirements contained in the Option Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is
obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares
transferred to the optionee upon the exercise of the Option shall be net of the number of attested Shares. In the event that the Company establishes, for itself or using the services of a third party,
an automated system for the exercise of Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Options may be permitted through the use of
such an automated system.
(v)
Annual Limit on Incentive Options.
To the extent required for "incentive stock option" treatment under
Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Options granted under this Plan and any other plan of
the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Option exceeds
this limit, it shall constitute a Non-Qualified Option.
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SECTION 6.
SHARE APPRECIATION RIGHTS
(a)
Exercise Price of Share Appreciation Rights.
The exercise price of a Share Appreciation Right shall not be
less than 100 percent of the Fair Market Value of the Shares on the date of grant.
(b)
Grant and Exercise of Share Appreciation Rights.
Share Appreciation Rights may be granted by the
Administrator independently of any Option granted pursuant to Section 5 of the Plan.
(c)
Terms and Conditions of Share Appreciation Rights.
Share Appreciation Rights shall be subject to such terms
and conditions as shall be determined from time to time by the Administrator.
(d)
Share Appreciation Rights Term.
The term of each Share Appreciation Right shall be fixed by the
Administrator, but no Share Appreciation Rights shall be exercisable more than ten years after the date the Share Appreciation Right is granted.
SECTION 7.
RESTRICTED SHARE AWARDS
(a)
Nature of Restricted Share Awards.
The Administrator shall determine the restrictions and conditions
applicable to each Restricted Share Award at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals
and objectives. The grant of a Restricted Share Award may be contingent on the grantee executing the Restricted Share Award Certificate. The terms and conditions of each such Award shall be determined
by the Administrator, and such terms and conditions may differ among individual Awards and grantees.
(b)
Rights as a Shareholder.
Upon issuance of Restricted Shares, a grantee shall have the rights of a
shareholder with respect to the voting of the Restricted Shares, subject to such conditions contained in the Restricted Share Award Certificate. Unless the Company shall otherwise determine,
(i) uncertificated Restricted Shares shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such
Restricted Shares are vested as provided in Section 7(d) below, and (ii) certificated Restricted Shares shall remain in the possession of the Company until such Restricted Shares are
vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Company may prescribe.
Notwithstanding the foregoing, cash dividends on Restricted Shares that remain subject to potential forfeiture due to failure to meet performance-based conditions (i.e., conditions other than
the continued service or employment of the grantee through a certain date) must be retained by, or repaid by the grantee to, the Company; provided that, to the extent provided for in the applicable
Restricted Share Award Certificate or by the Administrator, an amount equal to such cash dividends retained or repaid by the grantee may be paid to the grantee upon the lapsing of such
performance-based conditions with respect to such Restricted Shares.
(c)
Restrictions.
Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of except as specifically provided herein or in the Restricted Share Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to
Section 18 below, in writing after the Award Certificate is issued if a grantee's
employment (or other service relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Share that has not vested at the time of termination shall automatically and
without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from
such grantee or such grantee's legal representative simultaneously with such termination of employment (or other service relationship), and thereafter shall cease to represent any ownership of the
Company by the grantee or rights of the grantee as a shareholder. Following such deemed reacquisition of unvested Restricted Shares that are represented by physical certificates, a grantee shall
surrender such certificates to the Company upon request without consideration.
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(d)
Vesting of Restricted Shares.
The Administrator at the time of grant shall specify the date or dates and/or
the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the Shares on which all restrictions have lapsed shall no
longer be Restricted Shares and shall be deemed "vested."
SECTION 8.
RESTRICTED SHARE UNIT AWARDS
(a)
Nature of Restricted Share Unit Awards.
The Administrator shall determine the restrictions and conditions
applicable to each Restricted Share Unit Award at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance
goals and objectives. The grant of a Restricted Share Unit Award may be contingent on the grantee executing the Restricted Share Unit Award Certificate. The terms and conditions of each such Award
shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. Each Restricted Share Unit Award, to the extent vested, shall be settled in
Shares or, to the extent provided in the relevant Award Certificate, in cash at the time and subject to the conditions applicable to such Award. Each Restricted Share Unit Award that is subject to
Section 409A shall contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A.
(b)
Election to Receive Restricted Share Unit Award in Lieu of Compensation.
The Administrator may, in its sole
discretion, permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of a Restricted Share Unit Award. Any such election shall be made in
writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the
Administrator. Unless otherwise provided by the Administrator, any such future cash compensation that the grantee elects to defer shall be converted to a Restricted Share Unit Award for a fixed number
of Restricted Share Units based on the Fair Market Value of Shares on the date the compensation would
otherwise have been paid to the grantee if such payment had not been deferred as provided herein. The Administrator 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 Administrator deems appropriate.
(c)
Rights as a Shareholder.
A grantee shall have the rights as a shareholder only as to Shares acquired by the
grantee upon settlement of a Restricted Share Unit Award; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to a Restricted Share Unit Award, subject to
such terms and conditions as the Administrator may determine.
(d)
Termination.
Except as may otherwise be provided by the Administrator either in the Award Certificate or,
subject to Section 18 below, in writing after the Award Agreement is issued, a grantee's right in all Restricted Share Unit Awards that have not vested shall automatically terminate upon the
grantee's termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.
SECTION 9.
UNRESTRICTED SHARE AWARDS
The
Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Share Award under the Plan.
Unrestricted Share Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
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SECTION 10.
CASH-BASED AWARDS
The
Administrator may, in its sole discretion, grant Cash-Based Awards to any grantee in such number or amount and upon such terms, and subject to such conditions, as the Administrator
shall determine at the time of grant. The Administrator shall determine the maximum duration of the Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon
which the Cash-Based Award shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount,
formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award shall be made in cash and in accordance with the terms of the Award as the
Administrator determines.
SECTION 11.
PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
(a)
Performance-Based Awards.
Any Eligible Grantee who is selected by the Administrator may be granted one or
more Performance-Based Awards in the form of a Restricted Share Award, Restricted Share Unit Award, Cash-Based Award or other equity-based Award payable upon the attainment of Performance Goals that
are established by the Administrator and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Administrator. The
Administrator shall define in an objective fashion the manner of calculating the Performance Criteria it selects to use for any Performance Cycle. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. Each
Performance-Based Award shall comply with the provisions set forth below.
(b)
Grant of Performance-Based Awards.
With respect to each Performance-Based Award granted to a Covered
Employee, the Administrator shall select, within the first 90 days of a Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the
Performance Criteria for such grant, and the Performance Goals with respect to each Performance Criterion (including a threshold level of performance below which no amount will become payable with
respect to such Award). Each Performance-Based Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets.
The Performance Criteria established by the Administrator may be (but need not be) different for each Performance Cycle and different Performance Goals may be applicable to Performance-Based Awards to
different Covered Employees.
(c)
Payment of Performance-Based Awards.
Following the completion of a Performance Cycle, the Administrator
shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-Based Awards earned for the Performance Cycle. The Administrator shall then determine the actual size of each Covered Employee's Performance-Based Award, and, in doing so, to
the extent permitted in the Award Certificate pursuant to which the Performance-Based Award was granted, may reduce or eliminate the amount of the Performance-Based Award for a Covered Employee if, in
its sole judgment, such reduction or elimination is appropriate.
(d)
Maximum Award Payable.
The maximum Performance-Based Award payable to any one Covered Employee under the
Plan for a Performance Cycle is 700,000 Shares (subject to adjustment as provided in Section 3(b) hereof) or $10,000,000 in the case of a Performance-Based Award that is a Cash-Based Award.
SECTION 12.
DIVIDEND EQUIVALENT RIGHTS
(a)
Dividend Equivalent Rights.
A Dividend Equivalent Right may be granted hereunder to any grantee as a
component of a Restricted Share Unit Award or Restricted Share Award or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the
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Award
Certificate. A Dividend Equivalent Right shall not be granted hereunder to any grantee as a component of an Option or a Share Appreciation Right. The terms and conditions of Dividend Equivalent
Rights shall be specified in the Award Certificate. 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 or such other price as may then apply under a dividend
reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single installment or installments. A Dividend Equivalent
Right granted as a component of a Restricted Share Unit Award or Restricted Share Award may provide that such Dividend Equivalent Right shall be settled upon 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 a Restricted Share Unit Award or Restricted Share Award may also contain terms and conditions different from such other Award. Furthermore, a Dividend Equivalent Right granted with
respect to an Award subject to performance-based vesting, or forfeiture based on the failure to meet performance-based conditions (i.e., conditions other than the continued service or
employment of the grantee through a certain date), may not be exercisable or payable unless and until the performance-based conditions have been met.
(b)
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 grant for interest equivalents at such rate as is determined by the Administrator, 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.
(c)
Termination.
Except as may otherwise be provided by the Administrator either in the Award Certificate or,
subject to Section 18 below, in writing after the Award Certificate is issued, a grantee's rights in all Dividend Equivalent Rights or interest equivalents granted as a component of a
Restricted Share Unit Award or Restricted Share Award that has not vested shall automatically terminate upon the grantee's termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.
SECTION 13.
OTHER EQUITY-BASED AWARDS
The
Administrator shall have the right to grant Units or any other membership or ownership interests (which may be expressed as units or otherwise) in a Subsidiary (or other affiliate of
the Company), with any Shares being issued in connection with the conversion of (or other distribution on account of) an interest granted under the authority of this Section 13 to be subject to
Section 3 and the other provisions of the Plan. Notwithstanding the foregoing, any cash dividends or distributions otherwise payable pursuant to an Award granted pursuant to this
Section 13 that remains subject to performance-based vesting, or forfeiture based on the failure to meet performance-based conditions (i.e., conditions other than the continued service
or employment of the grantee through a certain date), must be retained by, or repaid by the grantee to, the Company or the applicable entity granting the Award; provided that, to the extent provided
for in the applicable Award Certificate or by the Administrator, an amount equal to such cash dividends or distributions retained or repaid by the grantee may be paid to the grantee upon the
satisfaction or lapsing of such performance-based conditions with respect to such Award.
SECTION 14.
TRANSFERABILITY OF AWARDS
(a)
Transferability.
Except as provided in Section 14(b) below, during a grantee's lifetime, his or her
Awards shall be exercisable only by the grantee, or by the grantee's legal representative or guardian in the event of the grantee's incapacity. No Awards shall be sold, assigned, transferred or
otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or
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pursuant
to a domestic relations order. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and
void.
(b)
Administrator Action.
Notwithstanding Section 14(a), the Administrator, in its discretion, may
provide either in the Award Certificate regarding a given Award or by subsequent written approval that the grantee (who is an employee or trustee) may transfer his or her Awards (other than any
Incentive Options) to his or her Family Members for no value or consideration; provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this
Plan and the applicable Award.
(c)
Designation of Beneficiary.
To the extent permitted by the Company, each grantee to whom an Award has been
made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee's death. Any such designation shall be on
a form provided for that purpose by the Company and shall not be effective until received by the Company in the manner provided in such form. If no beneficiary has been designated by a deceased
grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee's estate.
SECTION 15.
TAX WITHHOLDING
(a)
Payment by Grantee.
Each grantee shall, no later than the date as of which the value of an Award or of any
Shares or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to
the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company's obligation to deliver evidence of book entry (or Share
certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.
(b)
Payment in Shares.
Subject to approval by the Administrator, a grantee may elect to have the Company's tax
withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from Shares to be issued pursuant to any Award a number of Shares with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that to the extent necessary to avoid adverse accounting treatment such share withholding may
be limited to the minimum required tax withholding obligation. The Administrator may also require Awards to be subject to mandatory share withholding up to the required withholding amount. For
purposes of share withholding, the Fair Market Value of withheld Shares shall be determined in the same manner as the value of Shares includible in income of the grantees.
SECTION 16.
SECTION 409A AWARDS.
To
the extent that any Award is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A (a "409A Award"), the Award shall be subject to
such additional rules and requirements as specified by the Administrator from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon
a "separation from service" (within the meaning of Section 409A) to a grantee who is then considered a "specified employee" (within the meaning of Section 409A), then no such payment
shall be made prior to the date that is the earlier of (i) six months and one day after the grantee's separation from service, or (ii) the grantee's death, but only to the extent such
delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any such Award may not be
accelerated except to the extent permitted by Section 409A.
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SECTION 17.
TRANSFER, LEAVE OF ABSENCE, ETC.
For
purposes of the Plan, the following events shall not be deemed a termination of employment (or service relationship):
(a) a
transfer of employment from a Subsidiary to the Company or from the Company to a Subsidiary, or from one Subsidiary to another;
(b) an
approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to re-employment is guaranteed
either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing; or
(c) any
other change in the grantee's employment or service relationship as determined by the Administrator, in its sole discretion, including without limitation, a change
from employee to Consultant.
SECTION 18.
AMENDMENTS AND TERMINATION
The
Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or
for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the grantee's consent. Except as provided in Section 3(b) or 3(c), in no event
may the Administrator exercise its discretion to reduce the exercise price of outstanding Options or Share Appreciation Rights or cancel, exchange, substitute, buyout or surrender outstanding Options
or Share Appreciation Rights in exchange for cash, other Awards or Options or Share Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Share
Appreciation Rights without shareholder approval. The Board, in its discretion, may determine to make any Plan amendments subject to the approval of the Company's shareholders for purposes of
complying with the rules of any securities exchange or market system on which the Shares are listed, ensuring that Incentive Options granted under the Plan are qualified under Section 422 of
the Code, or ensuring that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code. Nothing in this Section 18 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).
SECTION 19.
STATUS OF PLAN
With
respect to the portion of any Award that has not been exercised and any payments in cash, Shares or other consideration not received by a grantee, a grantee shall have no rights
greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator
may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Shares or make payments with respect to Awards hereunder, provided that the existence of such
trusts or other arrangements is consistent with the foregoing sentence.
SECTION 20.
GENERAL PROVISIONS
(a)
No Distribution.
The Administrator may require each person acquiring Shares pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.
(b)
Delivery of Share Certificates.
Notwithstanding anything herein to the contrary, the Company shall not be
required to issue or deliver any certificates evidencing Shares pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the
Administrator deems such advice necessary or advisable), that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if
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applicable,
the requirements of any exchange on which the Shares are listed, quoted or traded. All Share certificates delivered pursuant to the Plan shall be subject to any stop-transfer orders and
other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Shares are
listed, quoted or traded. The Administrator may place legends on any Share certificate to reference restrictions applicable to the Shares. In addition to the terms and conditions provided herein, the
Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply
with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or
exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.
(c)
Other Compensation Arrangements; No Employment Rights.
Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
(d)
Trading Policy Restrictions.
Option exercises and other Awards under the Plan shall be subject to such
Company's insider trading policy and procedures, as in effect from time to time.
(e)
Clawback Policy.
Awards under the Plan shall be subject to the Company's clawback policy, as in effect from
time to time, which, as of the Effective Date, includes the Company's Incentive Award Recoupment Policy dated as of March 28, 2012.
SECTION 21.
EFFECTIVE DATE OF PLAN
This
Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of shareholders at which a quorum is present. No grants of Options and other
Awards may be made hereunder after the tenth anniversary of the Effective Date; provided, however, no grants of Incentive Options may be made hereunder after the tenth anniversary of the date this
Plan is approved by the Board.
SECTION 22.
GOVERNING LAW
This
Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Maryland, applied without regard to conflict of law
principles.
DATE
PLAN APPROVED BY BOARD OF TRUSTEES: March 8, 2017
DATE
PLAN APPROVED BY SHAREHOLDERS:
B-15
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 10, 2017. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. CORPORATE OFFICE PROPERTIES TRUST 6711 COLUMBIA GATEWAY DRIVE, SUITE 300 COLUMBIA, MD 21046 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time May 10, 2017. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E20746-P87041-Z69430 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. CORPORATE OFFICE PROPERTIES TRUST The Board of Trustees recommends that you vote "FOR" the listed nominees: 1. Election of Trustees Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a) Thomas F. Brady The Board of Trustees recommends you vote "FOR" Proposals 2, 3, 5 and 6 and "1 Year" for Proposal 4. 1b) Stephen E. Budorick For Against Abstain 2. Approve Amendment to Amended and Restated Declaration of Trust Granting Shareholders the Right to Amend Company's Bylaws. Ratification of the Appointment of Independent Registered Public Accounting Firm. 1 Year ! ! 2 Years ! ! 3 Years ! ! Abstain 1c) Robert L. Denton, Sr. 1d) Philip L. Hawkins 3. 1e) Elizabeth A. Hight 4. Vote, on an Advisory Basis, on Frequency of Future Advisory Votes on Named Executive Officer Compensation. ! ! For ! Against ! Abstain 1f) David M. Jacobstein 1g) Steven D. Kesler ! ! ! ! ! ! 1h) C. Taylor Pickett 5. Approval, on an Advisory Basis, of Named Executive Officer Compensation. Approve Adoption of the 2017 Omnibus Equity and Incentive Plan. 6. 1i) Richard Szafranski For address changes and/or comments, please check this box and write them on the back where indicated. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. ! Yes ! No Please indicate if you plan to attend this meeting. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date V.1.1
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E20747-P87041-Z69430 CORPORATE OFFICE PROPERTIES TRUST Annual Meeting of Shareholders May 11, 2017 9:30 AM This proxy is solicited by the Board of Trustees This proxy is solicited by the Board of Trustees for use at the Annual Meeting on May 11, 2017. The common shares held in this account or in a dividend reinvestment account will be voted as you specify on the reverse side. If no choice is specified, the proxy will be voted "FOR" each of the trustees nominated for election in Proposal 1, "FOR" Proposals 2, 3, 5 and 6 and "1 Year" for Proposal 4. By signing the proxy, you revoke all prior proxies and appoint Stephen E. Budorick and Anthony Mifsud, and each of them acting in the absence of the other, with full power of substitution, to vote these shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and all adjournments. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side V.1.1 Address Changes/Comments: