DEF 14A: Definitive proxy statements
Published on April 12, 2004
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ______ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
TANGER FACTORY OUTLET CENTERS, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee require
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the dae of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
TANGER FACTORY OUTLET CENTERS, INC.
3200 NORTHLINE AVENUE, SUITE 360
GREENSBORO, NORTH CAROLINA 27408
PHONE: 336-292-3010
E-MAIL: tangermail@tangeroutlet.com
NYSE: SKT
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on May 14, 2004
Dear Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend
the 2004 Annual Meeting of Shareholders of Tanger Factory Outlet Centers, Inc.
to be held on Friday, May 14, 2004 at 10 o'clock a.m. at the O. Henry Hotel, 624
Green Valley Road, Greensboro, North Carolina, (336) 854-2000, for the following
purposes:
1. To elect directors to serve for the ensuing year;
2. To ratify the Amended and Restated Incentive Award Plan (the
"Incentive Award Plan") in order to add restricted shares
and other share-based grants to the plan, to reflect the
merger of the unit option plan of the Operating Partnership
(the " Unit Option Plan") into the plan and to amend the
plan in certain other respects;
3. To ratify the increase, from 2,250,000 to 3,000,000, in the
aggregate number of Common Shares which may be issued under
the Incentive Award Plan; and ,
4. To transact such other business as may properly come before
the meeting or any adjournment(s) thereof.
Only common shareholders of record at the close of business on March
31, 2004, will be entitled to vote at the meeting or any adjournment(s) thereof.
Information concerning the matters to be considered and voted upon at
the Annual Meeting is set out in the attached Proxy Statement. Our 2003 Annual
Report for the year ended December 31, 2003 is also enclosed.
It is important that your shares be represented at the 2004 Annual
Meeting regardless of the number of shares you hold and whether or not you plan
to attend the meeting in person. Please complete, sign and date the enclosed
proxy card and return it as soon as possible in the accompanying envelope. This
will not prevent you from voting your shares in person if you subsequently
choose to attend the meeting.
Sincerely,
Stanley K. Tanger
Chairman of the Board and
Chief Executive Officer
April 12, 2004
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TANGER FACTORY OUTLET CENTERS, INC.
3200 NORTHLINE AVENUE, SUITE 360
GREENSBORO, NORTH CAROLINA 27408
PHONE: 336-292-3010
E-MAIL: tangermail@tangeroutlet.com
NYSE: SKT
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
to be held on May 14, 2004
GENERAL INFORMATION
The Board of Directors of Tanger Factory Outlet Centers, Inc.
(NYSE:SKT), a self-administered and self-managed real estate investment trust,
referred to as a REIT, is soliciting your proxy for use at the Annual Meeting of
Shareholders of the Company to be held on Friday, May 14, 2004.
Unless the context indicates otherwise, the term "Company" refers to
Tanger Factory Outlet Centers, Inc., the term "Board" refers to our Board of
Directors, the term "meeting" refers to the Annual Meeting of Shareholders of
the Company to be held on May 14, 2004, and the term "Operating Partnership"
refers to Tanger Properties Limited Partnership. Our factory outlet centers and
other assets are held by, and all of our operations are conducted by, the
Operating Partnership. Accordingly, the descriptions of our business, employees
and properties are also descriptions of the business, employees and properties
of the Operating Partnership. The terms "we", "our" and "us" refer to the
Company or the Company and the Operating Partnership together, as the text
requires.
The proxy materials are being mailed on or about April 12, 2004 to
holders of record of our common shares, par value $.01 per share (the "Common
Shares"), on March 31, 2004. Any shareholder who does not receive a copy of the
proxy materials may obtain a copy at the meeting or by contacting Rochelle
Simpson, Secretary of our Company (phone number: 336-834-6836). Our principal
executive offices are located at 3200 Northline Avenue, Suite 360, Greensboro,
North Carolina 27408.
Date, Time and Place
We will hold the meeting on Friday, May 14, 2004 at 10 o'clock a.m. at
the O. Henry Hotel, 624 Green Valley Road, Greensboro, North Carolina, (336)
854-2000, subject to any adjournments or postponements.
Who Can Vote; Votes per share
All holders of record of the Common Shares as of the close of business
on the record date, March 31, 2004, are entitled to attend and vote at the
meeting. The outstanding Common Shares are the only class of securities entitled
to vote at the meeting. Each Common Share entitles the holder thereof to one
vote. At the close of business on March 19, 2004, 13,452,203 Common Shares were
issued and outstanding.
How to Vote
Common Shares represented by a properly executed proxy will be voted
as directed on the proxy card. To be voted, proxies must be filed with the
Secretary of the Company prior to voting.
If your Common Shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner of those Common
Shares and you have the right to instruct your broker, bank or other nominee how
to vote on your behalf. Brokerage firms and other nominees have the authority,
under New York Stock Exchange rules at the time of this Proxy Statement, to vote
Common Shares for the beneficial owner on certain "routine" matters for which
you do not provide voting instructions. The election of directors is considered
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a routine matter and where no specification is made on the properly executed and
returned form of proxy, the shares will be voted FOR the election of all
nominees for director. The proposals for (1) the ratification of the Amended and
Restated Incentive Award Plan and (2) the ratification of the increase, from
2,250,000 to 3,000,000, in the aggregate number of the Company's Common Shares
that may be issued under the Incentive Award Plan, are not considered "routine"
under the applicable rules. When a proposal is not a routine matter and the
broker or nominee has not received specific voting instructions from the
beneficial owner of the shares with respect to that proposal, the brokerage firm
or nominee cannot vote FOR or AGAINST the proposal for the beneficial owner.
This is called a "broker non-vote".
Quorum and Voting Requirements
Under the Company's By-Laws and North Carolina law, Common Shares
represented at the meeting by proxy for any purpose will be deemed present for
quorum purposes for the remainder of the meeting. Directors will be elected by
the vote of a plurality of the votes cast by the Common Shares entitled to vote
in the election, provided that a quorum is present. Accordingly, Common Shares
which are present at the meeting for any other purpose but which are not voted
in the election of directors will not affect the election of the candidates
receiving a plurality of the votes cast by the Common Shares entitled to vote in
the election at the meeting. All other proposals to come before the meeting
require a plurality of the votes cast regarding the proposal. Accordingly,
abstentions, broker non-votes and Common Shares which are present at the meeting
for any other purpose but which are not voted on a particular proposal will not
affect the outcome of the vote on the proposal unless the North Carolina
Business Corporation Act requires that the proposal be approved by a greater
number of affirmative votes than a plurality of the votes cast.
Revocation of Proxies
You may revoke your proxy at any time before it is voted by filing a
notice of such revocation, by filing a later dated proxy with the Secretary of
the Company or by voting in person at the meeting. You cannot revoke your proxy
by merely attending the meeting. If you dissent, you will not have any rights of
appraisal with respect to the matters to be acted upon at the meeting.
Proxy Solicitation
We will bear the costs of soliciting proxies from the holders of our
Common Shares. Proxies will initially be solicited by us by mail. We have
retained the services of Georgeson Shareholder to assist in the solicitation of
proxies for fee of $5,500, plus out-of-pocket expenses. Our Directors, officers
and employees may also solicit proxies by telephone, telegraph, fax, e-mail or
personal interview. We will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy material to shareholders.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's By-Laws provide that directors be elected at each Annual
Meeting of Shareholders. Pursuant to such By-Laws, our Board has fixed the
number of directors to be elected at five. The persons named as proxies in the
accompanying form of proxy intend to vote in favor of the election of the five
nominees for director designated below, all of whom are presently directors of
the Company, to serve until the next Annual Meeting of Shareholders and until
their successors are elected and shall qualify. It is expected that each of
these nominees will be able to serve, but if any such nominee is unable to serve
for any reason, the proxies reserve discretion to vote or refrain from voting
for a substitute nominee or nominees. All directors of the Company serve terms
of one year or until the election of their respective successors.
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Vote Required. The nominees will be elected by the affirmative vote of the
holders of a plurality of those votes cast at the meeting; provided that a
quorum is present. Accordingly, abstentions, broker non-votes and Common Shares
present at the meeting for any other purpose but which are not voted on this
proposal will not affect the outcome of the vote on the nominees unless the
North Carolina Business Corporation Act requires that the nominee be approved by
a greater number of affirmative votes than a plurality of the votes cast.
THE BOARD RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES SET FORTH ABOVE.
Director Independence
Our Corporate Governance Guidelines and the listing standards of the
New York Stock Exchange require that a majority of our directors must be
independent directors and every member of the Board's Audit Committee,
Compensation Committee, and Nominating and Corporate Governance Committee be
independent. Generally, independent directors are those directors who are not
concurrently serving as officers of the Company and who currently have no
material relationship to us that may interfere with the exercise of their
independence from management and the Company. Our Board has affirmatively
determined that the following nominees to our Board are independent, as that
term is defined under our Corporate Governance Guidelines and the general
independence standards in the listing standards of the New York Stock Exchange:
Jack Africk, William G. Benton, and Thomas E. Robinson. We presently have five
directors, including these three independent directors.
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Attendance at Board Meetings
The Board held five regular and seven special meetings during 2003.
Each of the above directors attended at least 75% of the meetings held during
2003 by the Board and the committees of which he was a member. The
non-management directors are required to meet in executive sessions
periodically, but no less than once a year. The non-management directors shall
designate the director who will preside at the executive sessions. The
independent directors should meet in executive session at least once a year. Our
policies for non-management and independent directors executive sessions were
adopted with our Corporate Governance Guidelines in 2004. The Company does not
have a formal policy of attendance for directors at our Annual Meeting of
Shareholders. Four of our five directors attended the Annual Meeting of
Shareholders in 2003.
Committees of the Board
Audit Committee. The Board has established an Audit Committee
consisting of our three independent directors. As restructured in February of
2004, the purpose of the Audit Committee is (i) to assist the Board in
fulfilling its oversight of the integrity of the Company's financial statements,
the Company's compliance with legal and regulatory requirements, the
qualifications and independence of the Company's independent auditors and the
performance of the Company's independent auditors and the Company's internal
audit function and (ii) to prepare any audit committee reports required by the
Securities Exchange Commission to be included in the Company's annual proxy
statement. The Audit Committee is directly responsible for the appointment,
compensation retention and oversight of the work of the Company's independent
auditors and approves in advance, or adopts appropriate procedures to approve in
advance, all audit and non-audit services provided by the independent auditors.
The Board has determined that each member of the Audit Committee is "financially
literate", as that term is defined in the listing requirements of the New York
Stock Exchange, and that each member of the committee is an "audit committee
financial expert", as that term is defined in Item 401(f) of Regulation S-K. The
Audit Committee acts under a written charter adopted by the Board. A copy of the
Audit Committee Charter is attached to this Proxy Statement as Appendix A and is
available on our website. Mr. Africk, Mr. Benton and Mr. Robinson currently
serve on the Audit Committee, with Mr. Africk serving as chairman. During 2003,
there were five meetings of the Audit Committee.
Compensation Committee. The Board has established a Compensation
Committee consisting of our three independent directors. The Compensation
Committee is charged with determining compensation for our chief executive
officer and making recommendations to the Board with respect to the compensation
of other officers. The Compensation Committee acts under a written charter
adopted by the Board. A copy of the Compensation Committee Charter is available
on our website. Mr. Africk, Mr. Benton, and Mr. Robinson currently serve on the
Compensation Committee, with Mr. Africk serving as chairman. During 2003, there
were two meetings of the Compensation Committee.
Nominating and Corporate Governance Committee. The Board has
established a Nominating and Corporate Governance Committee consisting of our
three independent directors. The Nominating and Corporate Governance Committee
makes recommendations to the Board of changes in the size of the Board or any
committee of the Board, recommends individuals for the Board to nominate for
election as directors, recommends individuals for appointment to committees of
the Board, establishes procedures for the Board's oversight of the evaluation of
the Board and management, and develops and recommends corporate governance
guidelines.
The Nominating and Corporate Governance Committee evaluates annually
the effectiveness of the Board as a whole and identifies any areas in which the
Board would be better served by adding new members with different skills,
backgrounds or areas of experience. The Board considers director candidates
based on a number of factors including: whether the Board member will be
"independent", in accordance with our Corporate Governance Guidelines and as
such term is defined by the New York Stock Exchange listing requirements;
personal qualities and characteristics, accomplishments and reputation in the
business community; experience with businesses and other organizations of
comparable size and current knowledge and contacts in the Company's industry or
other industries relevant to the Company's business; experience and
understanding of the Company's business and financial matters affecting its
business; ability and willingness to commit adequate time to Board and committee
matters; the fit of the individual's skills and personality with those of other
directors and potential directors in building a Board that is effective,
collegial and responsive to the needs of the Company; and diversity of
viewpoints, background, experience and other demographics.
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The Nominating and Corporate Governance Committee acts under a written
charter adopted by the Board. A copy of the Nominating and Corporate Governance
Committee Charter is available on our website. Mr. Africk, Mr. Benton and Mr.
Robinson currently serve on the Nominating and Corporate Governance Committee,
with Mr. Robinson serving as chairman. Since the committee was formed in
February 2004, there were no meetings of the Nominating and Corporate Governance
Committee during 2003.
Share and Unit Option Committee. The Board has established a Share and
Unit Option Committee (referred to as the "Option Committee") consisting of our
three independent directors. The Option Committee administers our Incentive
Award Plan (formerly known as the Share Option Plan) and the Operating
Partnership's Unit Option Plan (which will be merged into the Incentive Award
Plan). Mr. Africk, Mr. Benton, and Mr. Robinson currently serve on the Option
Committee, with Mr. Benton serving as chairman. During 2003, there was one
meeting of the Option Committee.
Shareholder Communications with Directors
Any shareholder may send communications to the Board and individual
members of the Board by sending a letter by mail addressed to the Board of
Directors (or an individual director) c/o Tanger Factory Outlet Centers, Inc.,
3200 Northline Avenue, Suite 360, Greensboro, North Carolina 27408, Attn:
Corporate Secretary.
Compensation of Directors
During 2003, we paid our independent directors an annual compensation
fee of $15,000 and a per meeting fee of $750 ($500 for telephone meetings) for
each Board meeting and each committee meeting attended. Effective for 2004, we
will pay our independent directors an annual compensation fee of $20,000 and a
per meeting fee of $1,000 ($500 for telephone meetings) for each Board meeting
and each committee meeting attended. In addition, the chairman of each
committee, except the Audit Committee, will be paid an annual compensation fee
of $2,500. The chairman of the Audit Committee will be paid an annual
compensation fee of $5,000.
On the date of his or her initial election to the Board and on each of
the first two anniversaries thereof, each independent director received an
option to purchase 3,000 Common Shares at an exercise price per Common Share
equal to the Fair Market Value (as defined in the Incentive Award Plan) of a
Common Share on the date of the option grant (except for the initial grant of
options to Mr. Africk and Mr. Benton as described below); 20% of such options
become exercisable on each of the first five anniversaries of the date of grant,
subject to the independent director's continued service as a director. On June
4, 1993, we granted to Mr. Africk and Mr. Benton options to purchase 3,000
Common Shares with an exercise price set at $22.50 per Common Share, the initial
public offering price of the Common Shares. Our employees who are also Directors
will not be paid any director fees and will not receive any options for their
services as Directors of the Company.
Upon approval of the entire Board, we may from time to time under the
Incentive Award Plan grant to any independent director additional options,
restricted or deferred shares, dividend equivalents or other awards. Upon
shareholder approval of the Incentive Award Plan, the Board plans to make grants
of restricted share awards to each of the independent directors with a value of
$15,000 to vest in three annual installments or, alternatively, at the time the
director leaves the Board. On January 6, 1998, January 8, 1999 and March 8,
2000, the Board granted to each of Mr. Africk, Mr. Benton and Mr. Robinson
options to purchase 5,000 Common Shares pursuant to the Incentive Award Option
Plan at an exercise price equal to the Fair Market Value as of such option grant
dates. On each of the first five anniversaries of the date of grant, 20% of
these options become exercisable subject to the director's continued service as
a director.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee has provided the following report:
The 2003 financial statements, which were prepared under accounting
principles generally accepted in the United States of America, have been
approved by the Board at the recommendation of the Audit Committee. The Audit
Committee reviewed the 2003 quarterly and annual financial results with
management and the Company's independent auditors. The Audit Committee has
discussed with the independent auditors and received the written disclosures and
confirmation from the independent auditors of their independence as required
under applicable standards for auditors of public companies and has discussed
the matters required to be discussed by Statement on Auditing Standards No. 61.
Based on this review of the financial results and these discussions with
management and the independent auditors, the Audit Committee has recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for 2003.
The Audit Committee has considered and discussed with the independent
auditors the compatibility of the non-audit services with maintaining auditor
independence.
The Audit Committee pre-approves all audit and non-audit services
provided by the independent auditor.
The Audit Committee has recommended to the Board that the firm of
PricewaterhouseCoopers LLP be appointed to audit the accounts of the Company
with respect to its operations for the fiscal year ending on December 31, 2004
and to perform such other services as may be required. See "Other Matters" in
this Proxy Statement.
The following is a summary of the fees billed to the Company by the
independent auditors for the fiscal years ended December 31, 2003 and 2002:
2003 2002
---- ----
Audit fees.................................$264,265 $183,000
Audit-related fees..........................116,065 22,800
Tax fees....................................213,362 180,128
All other fees.............................. --- ---
The audit fees for the years ended December 31, 2003 and 2002,
respectively, were for professional services rendered for the audits of our
consolidated financial statements and also included services related to the
issuance of comfort letters and assistance with the review of documents filed
with the Securities and Exchange Commission.
The audit-related fees for the years ended December 31, 2003 and 2002,
respectively, were for compliance with the Sarbanes-Oxley Act of 2002 and
consultation and special audit work for the acquisition of real estate and, for
2003 only, for assurances and related services associated with the
implementation of new accounting pronouncements and consultation services
regarding our joint ventures.
The tax fees for the year ended December 31, 2003 and 2002, were for
tax compliance and tax research and planning services, including tax return
preparation and tax advice regarding acquisitions and joint ventures.
THE AUDIT COMMITTEE
Jack Africk (Chairman)
William G. Benton
Thomas E. Robinson
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 19,
2004, available to us with respect to our Common Shares, and of units of
partnership interests in the Operating Partnership (the "Units") (i) held by
those persons known by us to be the beneficial owners (as determined under the
rules of the Securities and Exchange Commission, the "SEC") of more than 5% of
such shares, (ii) held individually by the directors and our executive officers
named elsewhere in this Proxy Statement, and (iii) held by our directors and all
of our executive officers as a group.
Executive Compensation
The following table sets forth the compensation earned for the fiscal
years ended December 31, 2003, 2002, and 2001 with respect to our CEO and our
four (4) most highly compensated executives other than our CEO whose cash
compensation exceeded $100,000 during such year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no options or share appreciation rights granted to our CEO
or our other four (4) most highly compensated executives during 2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information on option exercises in 2003
by our CEO and our other four (4) most highly compensated executives, and the
value of each such officer's unexercised options at December 31, 2003.
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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has provided the following report on
executive compensation:
Except as expressly described below, references to compensation (or
policies with respect thereto) paid by the Company refer to compensation paid by
both the Company and the Operating Partnership.
The purposes and responsibilities of the Compensation Committee of the
Board (the "Committee") include the following:
o Review and approve corporate goals and objectives relevant to the
compensation of the CEO, evaluate the CEO's performance and approve
the CEO's compensation level,
o Make recommendation to the Board with respect to compensation of
officers and directors other than the CEO,
o Periodically review the Company's incentive-compensation and
equity-based plans and approve any new or materially amended
equity-based plan, and
o Oversee, with management, regulatory compliance with respect to
compensation matters including the Company's compensation policies
with respect to Section 162(m) of the Internal Revenue Code of 1986
(the "Code").
Each of the members of the compensation Committee is independent within
the meaning of the Company's Corporate Governance Guidelines and the listing
standards of the New York Stock Exchange.
In carrying out its responsibilities, the Committee is authorized to
engage, and has engaged, outside advisers to consult with it as the Committee
deems appropriate.
The Committee believes that the Company's success is attributable in
large part to the management and leadership efforts of its executive officers.
The Company's management team has substantial experience in owning, operating,
managing, developing and acquiring interests in factory outlet centers. Stanley
K. Tanger, Chairman of the Board and Chief Executive Officer, and Steven B.
Tanger, President and Chief Operating Officer, provide us with strategic
business direction. Under the guidance of the committee, the Company is
committed to developing and maintaining compensation policies, plans and
programs which will provide additional incentives for the enhancement of cash
flows, and consequently real property and shareholder values, by aligning the
financial interests of the Company's senior management with those of its
shareholders.
The primary components of the Company's executive compensation program
are: (1) base salaries, (2) performance based annual bonuses and (3) share-based
awards. The Company's business is most competitive and the Committee believes
that it is extremely desirable for the Company to maintain employment contracts
with its senior executives. The Company currently has employment contracts with
each of the named executives on page 9 of this Proxy Statement. See "Employment
Contracts" in this Proxy Statement.
Base salaries for each of the named executive officers are approved by
the Committee and are determined after taking into account several factors which
include (1) salaries paid to officers by companies in the Company's select peer
group and other REITS, (2) the nature of the position and (3) the contribution
and experience of the officer. Under their employment agreements, the annual
base salaries of Stanley K. Tanger and Steven B. Tanger are determined annually
by agreement between each of them and the Committee; provided, however, if the
Company's per share fund from operations ("FFO") for the previous year equaled
or exceeded a targeted level, the annual base salary will not be less than the
annual base salary for the previous year increased to reflect any increase in
the Consumer Price Index (the "CPI").
The employment contracts for Stanley and Steven Tanger, the Company's
two most senior executives, provide for annual cash bonuses based upon the
Company's performance as measured by FFO per share. FFO is a widely accepted
financial indicator used by certain investors and analysts to analyze and
compare one equity REIT with another. FFO is generally defined as net income
(loss), computed in accordance with generally accepted accounting principles,
11
before extraordinary items and gains (losses) on sale or disposal of depreciable
operating properties, plus depreciation and amortization uniquely significant to
real estate and after adjustments for unconsolidated partnerships and joint
ventures. The Company may also consider the award of cash bonuses and awards to
any executive officers and key employees if certain performance criteria are
met.
Share-based compensation is also an important element of the Company's
compensation program. In contrast to bonuses, which are paid for prior year
accomplishments, grants of options to purchase the Common Shares and other
share-based awards may be structured as incentives tied to future share
appreciation. The Company maintains the Incentive Award Plan for the purpose of
attracting and retaining our Directors, executive officers and certain other
employees. The Share and Unit Option Committee of the Board determines in its
sole discretion, subject to the terms and conditions of the plan, the specific
terms of each award granted to an employee of the Company or Operating
Partnership based upon its subjective assessment of the individual's
performance, responsibility and functions and how this performance may have
contributed or may contribute in the future to the Company's performance. The
Committee has also approved the amendment and restatement of the Incentive Award
Plan to add restricted shares and other share-based grants to the Incentive
Award Plan and to amend the Incentive Award Plan in certain other respects to
promote greater flexibility with respect to the types of incentive awards
available to our employees and directors. The Compensation Committee believes
awards pursuant to the amended and restated Incentive Award Plan align the
interests of the Board and management with those of the Company's shareholders.
Under his employment agreement effective for 2003, Stanley K. Tanger,
the Company's Chief Executive Officer, was to receive an annual base salary and
was to receive a bonus if the Company achieved a targeted FFO amount for the
fiscal year:
o Mr. Tanger's annual base salary for 2003 was $451,474. His employment
contract provides that the annual base salary will be fixed each
fiscal year by agreement between Mr. Tanger and the Committee;
provided, however, if the Company's FFO per share for the previous
year equaled or exceeded a targeted level, the annual base salary is
not to be less than Mr. Tanger's annual base salary for that previous
year adjusted to reflect any increase in the CPI. The Company's FFO
per share for 2002 exceeded the targeted FFO amount in Mr. Tanger's
contract. For this reason and in view of Mr. Tanger's key
contributions to the Company's continued success in an increasingly
competitive environment, the Committee approved an annual base salary
of $451,474 for fiscal 2003.
o Mr. Tanger earned an annual bonus of $342,229 for 2003. Under his
employment agreement, a minimum bonus of $125,000 was payable for 2003
if the Company's FFO per share reached targeted levels and additional
bonus payments were due based on the percentage by which actual FFO
per share exceeded the targeted levels. No bonus was payable unless
the minimum targeted FFO was achieved. The Company's FFO for 2003
exceeded the minimum target level at which a bonus was payable.
The Company paid 20% of Mr. Tanger's 2003 annual base salary. The
Operating Partnership paid the remainder of his annual base salary. In lieu of
receiving the annual bonus amount in cash, Mr. Tanger will be granted restricted
share awards in 2004 subject to shareholder approval of the Incentive Award
Plan. 15% of the award will vest as of June 15, 2004.
In December of 2003 and continuing into the first quarter of 2004, the
Committee conducted a review and assessment of the terms of employment and
compensation packages of the Company's CEO, COO and CFO. The employment
contracts of the CEO and COO had provided for (1) base annual salaries agreed
upon annually by the Committee and the officer with minimum CPI increases under
certain circumstances and (2) annual cash bonuses based on the Company's
performance as measured by FFO per share. Additionally, the Company had approved
the award of cash bonuses to the CEO and COO on the Company's sales of shopping
centers and had granted the CEO and COO options. The CFO's compensation had
included an annual salary, share option grants and discretionary cash bonuses.
12
Consistent with the advice and recommendations of a compensation
consultant retained by the Committee, the Committee determined to effect the
following changes in the compensation arrangements of the CEO, COO and CFO:
o Remove the provisions for FFO cash bonuses and CPI increases in base
salary from the employment contracts of the CEO and COO,
o Implement a plan for the issuance of restricted shares and replace, at
least in part, cash bonuses to senior executives with grants of
restricted shares, and
o Cease payment of bonuses on the Company's future sales of shopping
centers.
In connection with these revisions, the Committee approved immediate
awards to the CEO, COO and CFO of restricted shares under the Incentive Award
Plan for several reasons. The CEO and COO agreed to accept a restricted share
award in lieu of the 2003 cash bonuses to which they were entitled under their
employment contracts and agreed to modify their employment contracts (which each
has a term of three years) prospectively to delete the provisions for cash
bonuses based solely upon achieving targeted FFO levels. The exemplary job
performance by the CEO, COO and CFO has been responsible for positioning the
Company as the nation's second largest owner and operator of manufacturer outlet
centers. The Company has not made any equity based compensation awards since
calendar year 2000. The awards, which are contingent on shareholder approval of
the amended and restated Incentive Award Plan, are as follows:
Name and Position Dollar Value (1) Number of Shares
----------------- ---------------- ----------------
Stanley K. Tanger, CEO $2,442,000 60,000
Steven B. Tanger, COO 1,628,000 40,000
Frank C. Marchisello, Jr., CFO 203,500 5,000
---------------- ----------
Total executive group $4,273,500 105,000
================ ==========
--------
(1) Estimated based on the closing price of our Common Shares on the New York
Stock Exchange on December 31, 2003 of $40.70.
These restricted shares will vest in the following percentages and on
the following dates if the executive does not terminate his employment with us:
DATE OF VESTING PERCENTAGE OF SHARES
======================== ===========================
6-15-04 15%
12-15-04 15%
12-15-05 15%
12-15-06 15%
12-15-07 20%
12-15-08 20%
======================== ===========================
If the shareholders do not approve the amended and restated
Incentive Award Plan, cash bonuses in amounts equivalent to the value of the
proposed restricted share grants will be made on the dates that the proposed
restricted shares would have become vested.
During 1993, the Code was amended to add Section 162(m), which denies
an income tax deduction to any publicly held corporation for compensation paid
to a "covered employee" (which is defined as the Chief Executive Officer and
each of the Company's other four most highly compensated officers) to the extent
that such compensation in any taxable year of the employee exceeds $1 million.
In addition to salaries, bonuses payable to the Company's executives under their
present employment contracts and compensation attributable to the exercise of
options and other share-based awards that may be granted under the amended and
restated Incentive Award Plan, constitute compensation subject to the Section
13
162(m) limitation. The Incentive Award Plan permits, but does not require, the
grant of share-based awards intended to qualify as "performance-based
compensation" which is exempt from application of the Section 162(m) limitation.
It is the Company's policy to take account of the implications of Section 162(m)
among all factors reviewed in making compensation decisions. The Company expects
that it will not be denied any deduction under Section 162(m) for compensation
paid during its taxable year ended December 31, 2003, although it is possible
that in some future year some portion of the compensation paid to a Company
executive will not be tax deductible by the Company under Section 162(m).
THE COMPENSATION COMMITTEE
Jack Africk (Chairman)
William G. Benton
Thomas E. Robinson
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board, which is composed entirely of
independent directors, is charged with determining compensation for our
executive officers. Mr. Africk, Mr. Benton and Mr. Robinson currently serve on
the Compensation Committee, with Mr. Africk serving as chairman. No executive
officer of the Company served as a member of the board of directors or
compensation committee of any other entity that has one or more executive
officers serving as a member of the Board or the Compensation Committee.
Share Price Performance
The following share price performance chart compares our performance to the
S&P 500 and the index of equity REITs prepared by the National Association of
Real Estate Investment Trusts ("NAREIT"). Equity REITs are defined as those that
derive more than 75% of their income from equity investments in real estate
assets. The NAREIT equity index includes all tax qualified real estate
investment trusts listed on the New York Stock Exchange, American Stock Exchange
or the NASDAQ National Market System. In previous years, we also provided a peer
group index. As a result of recent mergers and acquisitions, only one
significant member in our peer group remains a publicly traded REIT. As such, we
felt it was prudent to discontinue use of the peer group index in the graph
below.
All share price performance assumes an initial investment of $100 at the
beginning of the period and assumes the reinvestment of dividends. Share price
performance, presented for the five years ended December 31, 2003, is not
necessarily indicative of future results.
14
Employment Contracts
Each of Stanley K. Tanger and Steven B. Tanger will receive annual cash
compensation in the form of salary and bonus pursuant to a three-year employment
contract effective as of January 1, 2001. The employment contracts will be
automatically extended for one additional year on January 1 of each year unless
the executive's employment is terminated, or we give written notice to the
executive within 180 days prior to such January 1 that the contract term will
not be automatically extended. The base salary provided for in such contracts
may be increased each year.
Upon termination of employment, Stanley K. Tanger has agreed not to
compete with us for the remainder of his life. Upon termination of employment,
Steven B. Tanger has agreed not to compete with us for one year (or three years
if severance compensation is received) within a 50 mile radius of the site of
any commercial property owned, leased or operated by us or within a 50 mile
radius of any commercial property which we negotiated to acquire, lease or
operate within the six month period prior to termination. Each executive's
covenant not to compete mandates that, during the term of his employment
contract and during the effective period of the covenant, such executive direct
his commercial real estate activities through us, with exceptions for
development of properties which were owned collectively or individually by them,
by members of their families or by any entity in which any of them owned an
interest or which was for the benefit of any of them prior to the Company's
initial public offering (including the three factory outlet centers with a total
of 105,068 square feet in which Stanley K. Tanger is a 50% partner and a single
shopping center in Greensboro, North Carolina with a total of 24,440 square feet
(the "Excluded Properties")). In no event will either of the Tangers engage in
the development, construction or management of factory outlet shopping centers
or other competing retail commercial property outside of the Company or the
Operating Partnership during the effective period of the covenant not to compete
(with the exception of the Excluded Properties). See "Certain Relationships and
Related Transactions" in this Proxy Statement."
In addition, each executive will not engage in any active or passive
investment in property relating to factory outlet centers or other competing
retail commercial property, with the exception of the ownership of up to one
percent of the securities of any publicly traded company.
In its review of the terms of the Company's employment packages for our
CEO, COO and CFO, the Compensation Committee of the Board has determined, among
other things, that the provisions for bonuses based solely on FFO should not be
part of our CEO and COO's compensation packages. The Compensation Committee has
adopted such changes, subject to the amendment of our employment contracts with
the Tangers.
If the employment of either of the Tangers terminates without Cause, as
defined in the agreement, or such employment is terminated by the executive with
Good Reason, as defined in the agreement, the terminated executive shall receive
a severance benefit equal to 300% of the sum of (a) his annual base salary (b)
the higher of (i) the prior year's annual bonus or (ii) the average annual bonus
for the preceding three years, and (c) his automobile allowance for the current
year. If employment terminates by reason of death or disability, the executive
or his estate shall receive a lump sum amount equal to (a) his annual base
salary that would have been paid for the remaining contract term if employment
had not terminated, plus (b) the executive's annual bonus which would have been
paid during the year of termination had employment not terminated, multiplied by
a fraction the numerator of which is the number of days in the year prior to
termination and the denominator of which is 365.
The employment contracts with Stanley K. Tanger and Steven B. Tanger
also grant them certain registration rights with respect to the Common Shares
that they beneficially own.
Rochelle G. Simpson and Willard A. Chafin each have an employment
contract expiring December 31, 2004. Ms. Simpson and Mr. Chafin's contracts may
be extended by an additional three year period by mutual written agreement
between the executive and us. These contracts established base salaries for
calendar year 2002 of $231,525 for Ms. Simpson and $242,550 for Mr. Chafin. The
base salaries for subsequent years will be set by the Compensation Committee in
amounts not less than the 2002 salary.
If the employment of Ms. Simpson or Mr. Chafin is terminated by reason
of death or disability or if we materially breach the employment agreement, Ms.
Simpson or Mr. Chafin, as applicable, will be paid as additional compensation an
amount equal to the annual base salary for the contract year in which the
15
termination occurs. Further, if we elect not to extend the term of employment
for Ms. Simpson and Mr. Chafin for an additional one or more years, the
executive will receive a severance payment equal to the greater of $125,000 or
one-half of the annual base salary payable for the last contract year of the
contract term.
Frank C. Marchisello, Jr. has an employment contract expiring December
31, 2005. Mr. Marchisello's contract will be automatically extended for one
additional year on January 1 of each year unless the executive's employment is
terminated, or we give written notice to the executive within 180 days prior to
such January 1 that the contract term will not be automatically extended. The
contract established a base salary for calendar year 2003 of $243,101. Mr.
Marchisello's base salary for subsequent years will be set by the Compensation
Committee.
If Mr. Marchisello's employment is terminated by reason of death or
disability, he will receive as additional compensation an amount equal to his
annual base salary for the contract year in which the termination occurs.
Further, if Mr. Marchisello's employment is terminated by the Company without
Cause, or by Mr. Marchisello for Good Reason, as those terms are defined in the
agreement, Mr. Marchisello will receive a severance payment equal to 300% of his
annual base salary for the current contract year, to be paid monthly over the
succeeding 36 months.
During the respective term of employment and for a period of one year
thereafter (three years in the case of Mr. Marchisello if he receives a
severance payment of 300% of his annual base salary), each of Ms. Simpson, Mr.
Chafin and Mr. Marchisello is prohibited from engaging directly or indirectly in
any aspect of the factory outlet business within a radius of 100 miles of, or in
the same state as, any factory outlet center owned or operated by us.
Stanley K. Tanger and Steven B. Tanger are employed and compensated by
both the Operating Partnership and the Company. The Committee believes that the
allocation of such persons' compensation as between the Company and the
Operating Partnership reflects the services provided by such persons with
respect to each entity. The remainder of the employees are employed solely by
the Operating Partnership.
PROPOSAL 2
APPROVAL OF THE AMENDED AND RESTATED INCENTIVE AWARD PLAN
We propose to ratify the Amended and Restated Incentive Award Plan of
Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership
(the "Incentive Award Plan") in order to add restricted shares and other
share-based grants to the Incentive Award Plan, to reflect the merger of the
unit option plan of the Operating Partnership (the "Unit Option Plan") into the
Incentive Award Plan and to amend the Incentive Award Plan in certain other
respects.
The Incentive Award Plan (formerly known as the Share Option Plan for
Directors and Executive and Key Employees of Tanger Factory Outlet Centers, Inc.
or the "Share Option Plan") and the Unit Option Plan were originally approved by
the Board and the shareholders of the Company on May 28, 1993. The Incentive
Award Plan and the Unit Option Plan have subsequently been amended from time to
time as approved by the Company's shareholders.
The principal features of the Incentive Award Plan are summarized
below, but the summary is qualified in its entirety by reference to the
Incentive Award Plan, which is attached as Exhibit B to this Proxy Statement.
Shares Available Under the Incentive Award Plan
Without giving effect to the proposed increase to the number of Common
Shares reserved for issuance under the Incentive Award Plan (submitted for
shareholder approval under separate action - See Proposal 3), the Incentive
Award Plan provides for the issuance of up to 2,250,000 Common Shares (subject
to antidilution and other adjustment provisions), and Units of the Operating
Partnership issued upon exercise of an option awarded under the Unit Option Plan
will count against this share limit. Furthermore, with respect to any individual
in any single calendar year, the maximum number of shares subject to options
granted under the Incentive Award Plan (or the Unit Option Plan) cannot exceed
180,000; the maximum dollar value of cash performance awards and dividend
equivalents cannot exceed $1,000,000; and the maximum number of shares subject
to other awards cannot exceed 60,000, in each case subject to antidilution and
other adjustment provisions.
16
General Nature and Purpose
The principal purposes of the Incentive Award Plan are to provide
incentives for the Company's and the Operating Partnership's officers, employees
and non-employee directors through granting of options, restricted shares,
dividend equivalents, deferred shares and other incentive awards, thereby
stimulating their personal and active interest in the development and financial
success of the Company and inducing them to remain in the Company's or the
Operating Partnership's employ (or service).
Administration and Term of the Incentive Award Plan
Generally, the plan administrator will be the Committee with respect to
awards granted to employees of the Company and the Operating Partnership and
their subsidiaries, and the full Board with respect to awards granted to
non-employee directors ("Independent Directors"). The Committee will consist of
at least two Independent Directors, each of whom is a "non-employee director" as
defined by Rule 16b-3 of the Exchange Act and an "outside director" for purposes
of Section 162(m) of the Internal Revenue Code of 1986 (the "Code"). Except with
respect to matters that under Rule 16b-3 under the Exchange Act or Section
162(m) of the Code are required to be determined by the Committee, the full
Board may act as plan administrator.
The plan administrator has the authority to designate recipients of
awards and to determine the terms and provisions of awards, including the
exercise or purchase price, expiration date, vesting schedule and terms of
exercise.
The Incentive Award Plan will terminate on May 14, 2014, but any award
outstanding on that date will remain outstanding in accordance with their terms.
The plan administrator also has the authority to terminate, amend or modify the
plan at any time subject to shareholder approval requirements.
Awards under the Incentive Award Plan
The Incentive Award Plan provides that the plan administrator may grant
or issue options, restricted shares, deferred shares, dividend equivalents,
performance awards, share payments and other Common Share related benefits, or
any combination thereof, to any eligible employee or non-employee director of
the Company and the Operating Partnership and their subsidiaries. Each award
will be set forth in a separate agreement with the person receiving the award
and will indicate the type, terms and conditions of the award.
Nonqualified Share Options ("NQSOs") will provide for the right to
purchase Common Shares at a specified price which, except with respect to NQSOs
intended to qualify as performance-based compensation under Section 162(m) of
the Code, may be less than fair market value on the date of grant and usually
will become exercisable in one or more installments after the grant date,
subject to the participant's continued employment or other service with the
Company or Operating Partnership and/or subject to the satisfaction of business
or individual performance targets. Since May 28, 2003, the only type of options
that may be issued under the Incentive Award Plan are NQSOs.
Restricted Shares ("Restricted Shares") may be sold to participants at
various prices or awarded for no consideration if permitted under applicable law
and in either case made subject to such conditions and restrictions as may be
determined by the plan administrator. Typically, Restricted Shares may be
repurchased at a price not to exceed the original purchase price if the
conditions or restrictions are not met. In general, Restricted Shares may not be
sold or otherwise transferred until restrictions are removed or expire.
Purchasers of Restricted Shares, unlike recipients of options, will have voting
rights and typically will receive dividends prior to the time when the
restrictions lapse.
Deferred Shares ("Deferred Shares") may be awarded to participants
subject to vesting conditions based on continued employment or other service or
on performance criteria. Like Restricted Shares, Deferred Shares may not be sold
or otherwise transferred until vesting conditions are removed or expire. Unlike
Restricted Shares, however, Deferred Shares will not be issued until the
Deferred Shares award has vested, and recipients of Deferred Shares generally
will have no voting or dividend rights prior to the time when vesting conditions
are satisfied.
17
Dividend Equivalents ("Dividend Equivalents") represent the value of
the dividends per share paid by the Company, calculated with reference to the
number of shares covered by other awards held by the participant or otherwise.
These Dividend Equivalents may be paid in cash or in Common Shares or in a
combination of both.
Performance Awards ("Performance Awards") generally will be based upon
specific performance targets and may be paid in cash or in Common Shares or in a
combination of both. Performance Awards in the form of a cash bonus which are
intended to qualify as performance-based compensation as described in Section
162(m) of the Code may not exceed $1,000,000 to any individual in any calendar
year.
Share Payments may be authorized in the form of Common Shares or an
option or other right to purchase Common Shares as part of a deferred
compensation arrangement or otherwise in lieu of or in addition to all or any
part of compensation, including bonuses, that would otherwise be payable in cash
to the employee or non-employee director.
Securities Laws and Federal Income Taxes
The Incentive Award Plan is intended to conform to the extent necessary
with all provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission (the
"SEC") thereunder, including, without limitation, Rule 16b-3 under the Exchange
Act. To the extent permitted by applicable law, the Incentive Award Plan and
options or other awards granted thereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
General federal tax consequences. Under current federal laws,
recipients of awards and grants of nonqualified share options, restricted
shares, deferred shares, dividend equivalents, performance awards and shares
payments under the Incentive Award Plan are generally not taxed at the time of
grant but are taxed under Section 83 of the Code upon their receipt of cash
payments or receipt of Common Shares in connection with the exercise or vesting
of such awards or grants, and, subject to Section 162(m) of the Code, the
Company will be entitled to an income tax deduction with respect to the amounts
taxable to these recipients.
Section 162(m) limitation. In general, under Section 162(m) of the
Code, income tax deductions of publicly-held corporations may be limited to the
extent total compensation (including base salary, annual bonus, option
exercises, share and share-based awards, and non-qualified benefits) for certain
executive officers exceeds $1 million in any one year. However, under Section
162(m) of the Code, the deduction limit does not apply to certain
"performance-based compensation" established by an independent compensation
committee which is adequately disclosed to, and approved by, shareholders. In
particular, options will satisfy the "performance-based compensation" exception
if the awards are made by a qualifying compensation committee, the plan sets the
maximum number of shares that can be granted to any person within a specified
period and the compensation is based solely on an increase in the share price
after the grant date (that is, the option exercise price is equal to or greater
than the fair market value of the shares subject to the award on the grant
date). Rights and awards granted under the Incentive Award Plan other than
options will not qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code unless such rights and awards are granted or vest
upon preestablished objective performance goals, the material terms of which are
disclosed to and approved by shareholders.
The Company has attempted to structure the Incentive Award Plan in such
a manner that, subject to obtaining shareholder approval of the Incentive Award
Plan, the remuneration attributable to options and other rights and awards which
meet the other requirements of Section 162(m) of the Code will not be subject to
the $1,000,000 limitation. In particular, the Incentive Award Plan provides that
certain rights and awards under the Incentive Award Plan which are intended to
qualify as "performance-based compensation" under Section 162(m) of the Code
shall be based on one or more of the following objective business or individual
criteria with respect to the Company, the Operating Partnership, or any
subsidiary, division or operating unit of any of them: (i) net income; (ii)
pre-tax income; (iii) operating income; (iv) cash flow; (v) earnings per share;
(vi) return on equity; (vii) return on invested capital or assets; (viii) cost
reductions or savings; (ix) funds from operations; (x) appreciation in the Fair
Market Value (as defined in the Incentive Award Plan) of a Common Share; (xi)
total return performance on Common Shares as reported in the Company's annual
proxy statement; (xii) operating profit; (xiii) working capital; (xiv) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization; (xv) lease renewals; (xvi) occupancy rates; (xvii) average tenant
sales per square foot; and (xviii) rental rates. Additionally, the Incentive
Award Plan provides that such criteria shall be applied only to the extent
permissible with respect to such qualification under Section 162(m) of the Code.
As described above, the Incentive Award Plan states (i) that employees and
18
officers of the Company are eligible to receive rights and awards under the
Incentive Award Plan, (ii) the maximum number of shares which may be subject to
rights and awards granted under the Incentive Award Plan to any individual in
any calendar year, and that Performance Awards in the form of a cash bonus which
are intended to qualify as "performance-based compensation" may not exceed
$1,000,000 to any individual in any calendar year. The Company has not, however,
requested a ruling from the IRS or an opinion of counsel regarding the
applicability of Section 162(m) of the Code with respect to the Incentive Award
Plan.
Grants of Restricted Shares. Subject to shareholder approval of the
amended and restated Incentive Award Plan, the Compensation Committee will award
restricted shares to the CEO, COO and CFO under the restricted share plan of the
Incentive Award Program in recognition of the exemplary performance of those
officers in providing stabilizing management for the Company and having
positioned the Company as the second largest company in the manufacturers'
outlet center industry. See the Report of the Compensation Committee on
Executive Compensation included in this proxy statement.
Vote Required. Approval of the amended and restated Incentive Award
Plan requires approval by the affirmative vote of the holders of a plurality of
those votes cast at the meeting; provided that a quorum is present. Accordingly,
abstentions, broker non-votes and Common Shares present at the meeting for any
other purpose but which are not voted on this proposal will not affect the
outcome of the vote on the proposal unless the North Carolina Business
Corporation Act requires that the proposal be approved by a greater number of
affirmative votes than a plurality of the votes cast.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE AMENDED AND
RESTATED INCENTIVE AWARD PLAN.
PROPOSAL 3
AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES AVAILABLE
UNDER THE INCENTIVE AWARD PLAN
It is proposed that the Company's Incentive Award Plan be amended to
increase the number of the Common Shares which may be issued under the Incentive
Award Plan from 2,250,000 in the aggregate to 3,000,000 in the aggregate.
Vote Required. Approval of the amendment to the Incentive Award Plan to
increase from 2,250,000 to 3,000,000 the aggregate number of Common Shares which
may be issued under the Incentive Award Plan requires approval by the
affirmative vote of the holders of a plurality of those votes cast at the
meeting; provided that a quorum is present. Accordingly, abstentions, broker
non-votes and Common Shares present at the meeting for any other purpose but
which are not voted on this proposal will not affect the outcome of the vote on
the proposal unless the North Carolina Business Corporation Act requires that
the proposal be approved by a greater number of affirmative votes than a
plurality of the votes cast.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE AMENDMENT TO
INCREASE THE NUMBER OF COMMON SHARES AVAILABLE UNDER THE INCENTIVE AWARD PLAN.
19
The following table provides information as of December 31, 2003 with
respect to compensation plans under which the Company's equity securities are
authorized for issuance:
Certain Relationships and Related Transactions
We manage for a fee three factory outlet centers owned by joint
ventures with a total of 105,068 square feet, in which Stanley K. Tanger and a
third party each have a fifty percent interest. As a result, certain conflicts
of interest may arise between Mr. Tanger's duties and responsibilities to us and
his duties and responsibilities to the joint ventures in ensuring the adequate
provision of services. In addition, conflicts of interest may arise over the
allocation of management resources between our properties and the joint venture
properties. However, the arrangement under which we provide services to the
joint ventures can be terminated by either party, with or without cause, upon 30
days' notice. To minimize potential conflicts of interest, all significant
transactions between us and the joint ventures, including continuing the
arrangement for providing management services, will be approved by a
disinterested majority of the Board. As a general matter, we do not expect to
engage in any other transactions with any member of management in his or her
individual capacity. Revenues from managing the joint ventures accounted for
less than one-tenth of one percent of our revenues in 2003.
Other Matters -
Appointment of Independent Auditors. Upon the recommendation of the
Audit Committee, the Board has appointed the firm of PricewaterhouseCoopers LLP
to audit the accounts of the Company with respect to its operations for the
fiscal year ending on December 31, 2004 and to perform such other services as
may be required. Should the firm be unable to perform these services for any
reason, the Board will appoint other independent auditors to perform these
services. PricewaterhouseCoopers LLP served as our independent auditors for the
fiscal year ended December 31, 2003. There are no affiliations between the
Company and PricewaterhouseCoopers LLP, its partners, associates or employees,
other than its engagement as independent auditors for the Company.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting, will have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions from shareholders. See
the Report of the Audit Committee, included in this Proxy Statement, for
information relating to the fees billed to the Company by PricewaterhouseCoopers
LLP for the fiscal years ended December 31, 2003 and 2002.
Reference is hereby made to the Company's annual report on Form 10-K
for the year ended December 31, 2003 and the Company's Annual Report delivered
together with this Proxy Statement, and such documents incorporated herein by
reference for financial information and related disclosures required to be
include herein.
Section 16(a) Beneficial Ownership Reports. Section 16(a) of the
Exchange Act of 1934, as amended (the "Exchange Act"), requires our officers and
directors, and persons who own more than ten percent of a registered class of
our equity securities, to file reports of the ownership and changes in the
ownership (Forms 3, 4 and 5) with the SEC and the New York Stock Exchange.
Officers, directors and beneficial owners of more than ten percent of our Common
Shares are required by the SEC's regulations to furnish us with copies of all
such forms which they file.
20
Based solely on our review of the copies of Forms 3, 4 and 5 and the
amendments thereto received by us for the period ended December 31, 2003, or
written representations from certain reporting persons, we believe that no Forms
3, 4 or 5 were filed delinquently.
Shareholder Proposals and Nominations. This Proxy Statement and form of
proxy will be sent to shareholders in an initial mailing on or about April 12,
2004. Proposals of shareholders pursuant to Regulation 14a-8 of the Exchange Act
intended to be presented at our Annual Meeting of Shareholders to be held in
2005 must be received by us no later than December 13, 2004. Such proposals must
comply with the requirements as to form and substance established by the SEC for
such proposals in order to be included in the proxy statement. A shareholder who
wishes to make a proposal pursuant to Regulation 14a-8 of the Exchange Act at
our Annual Meeting of Shareholders to be held in 2005 without including the
proposal in the Company's proxy statement and form of proxy relating to that
meeting must notify the Company no later than February 26, 2005. If a
shareholder fails to give notice by February 26, 2005, then the persons named as
proxies in the proxies solicited by the Board for the Annual Meeting of
Shareholders to be held in 2005 may exercise discretionary voting power with
respect to any such proposal. Pursuant to the Company's By-Laws, generally, to
be properly considered at an annual meeting, all other shareholder proposals for
our Annual Meeting of Shareholders to be held in 2005 must be received by the
corporate secretary not earlier than 120 days and not later than 90 days prior
to the anniversary of this year's meeting.
Shareholders may nominate an individual for election as a director of
the Company in conformity with the requirements of the Company's By-Laws.
Generally, to be properly considered at our Annual Meeting of Shareholders to be
held in 2005, written notice of the nomination must be delivered to the
corporate secretary not earlier than 120 days and not later than 90 days prior
to the anniversary of this year's meeting. Such shareholder's notice shall set
forth as to each person whom the shareholder nominates for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected).
Board Committee Charters, Corporate Governance Guidelines and Code of
Business Conduct and Ethics. Each of the Board's Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee operate under
written charters adopted by the Board. The Board has also adopted written
Corporate Governance Guidelines in accordance with listing requirements of the
New York Stock Exchange and a written Code of Business Conduct and Ethics that
applies to directors, management and employees of the Company. We have made
available copies of our Board Committee Charters, Code of Business Conduct and
Ethics on the Company's website at www.tangeroutlet.com. Copies of these
documents may also be obtained by sending a request in writing to Tanger Factory
Outlet Centers, Inc., 3200 Northline Avenue, Suite 360, Greensboro, North
Carolina 27408, Attn: Corporate Secretary.
Documents Incorporated by Reference. This Proxy Statement incorporates
documents by reference which are not presented herein or delivered herewith.
These documents (except for certain exhibits to such documents, unless such
exhibits are specifically incorporated herein) are available upon request
without charge. Requests may be oral or written and should be directed to the
attention of the Secretary of the Company at the principal executive offices of
the Company. In addition, the Company's Web site is located at
http://www.tangeroutlet.com. On the Company's website you can obtain, free of
charge, a copy of the Company's annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after we file such material electronically with, or
furnish it to, the SEC.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the date
of the Meeting shall be deemed incorporated by reference into this Proxy
Statement and shall be deemed a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein (or subsequently filed
document which is also incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Proxy Statement, except as so modified or superseded.
21
Other Business. All Common Shares represented by the accompanying proxy
will be voted in accordance with the proxy. We know of no other business which
will come before the meeting for action. However, as to any such business, the
persons designated as proxies will have authority to act in their discretion.
22
APPENDIX A
TANGER FACTORY OUTLET CENTERS, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
1. PURPOSE. The purpose of the Audit Committee (the "Committee") shall be to:
A. Assist the Board in fulfilling its oversight of 1. the integrity of the
Company's financial statements; 2. the Company's compliance with legal and
regulatory requirements; 3. the qualifications and independence of the
Company's independent auditors; and 4. the performance of the Company's
independent auditors and the Company's internal audit function.
B. Prepare any audit committee reports required by the Securities and Exchange
Commission ("SEC") to be included in the Company's annual proxy statement.
Notwithstanding the foregoing, the Committee's responsibilities are
limited to oversight. Management of the Company is responsible for the
preparation, presentation and integrity of the Company's financial statements as
well as the Company's financial reporting process, accounting policies, internal
audit function, internal accounting controls and disclosure controls and
procedures. The independent auditors are responsible for performing an audit of
the Company's annual financial statements, expressing an opinion as to the
conformity of such annual financial statements with generally accepted
accounting principles and reviewing the Company's quarterly financial statements
in accordance with Statement of Auditing Standards No. 100. It is not the
responsibility of the Committee to plan or conduct audits or to determine that
the Company's financial statements and disclosure are complete and accurate and
in accordance with generally accepted accounting principles and applicable laws,
rules and regulations. Each member of the Committee shall be entitled to rely on
the integrity of those persons within the Company and of the professionals and
experts (including the Company's internal auditor (or others responsible for the
internal audit function, including contracted non-employee or audit or
accounting firms engaged to provide internal audit services) (the "internal
auditor") and the Company's independent auditors) from which the Committee
receives information and, absent actual knowledge to the contrary, the accuracy
of the financial and other information provided to the Committee by such
persons, professionals or experts.
Further, auditing literature, particularly Statement of Auditing
Standards No. 100, defines the term "review" to include a particular set of
required procedures to be undertaken by independent auditors. The members of the
Committee are not independent auditors, and the term "review" as used in this
Charter, unless otherwise specified, is not intended to have that meaning and
should not be interpreted to suggest that the Committee members can or should
follow the procedures required of auditors performing reviews of financial
statements.
2. STRUCTURE AND OPERATIONS
A. Composition and Qualifications
1. The Committee shall be comprised of at least three directors, each of
whom the Board has determined has no material relationship with the
Company and each of whom is otherwise "independent"under the rules of
the New York Stock Exchange ("NYSE") and Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934 (the "Exchange Act"). Any action duly
taken by the Committee shall be valid and effective, whether or not
the members of the Committee at the time of such action are later
determined not to have satisfied the requirements for membership
provided herein.
2. Each member of the Committee must be "financially literate" (or become
so within a reasonable period of time after his or her appointment to
the Committee). Members of the Committee are not required to be
engaged in the accounting and auditing profession and, consequently,
some members may not be expert in financial matters, or in matters
involving auditing or accounting. However, at least one member must
have "accounting or related financial management expertise" as each
such qualification is interpreted by the Board in its business
judgment. In addition, either at least one member of the Committee
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shall be an "audit committee financial expert" within the definition
adopted by the SEC or the Company shall disclose in its periodic
reports required pursuant to the Exchange Act the reasons why at least
one member of the Committee is not an "audit committee financial
expert."
3. No member of the Committee may serve on the audit committee of more
than two other public companies unless the Board determines that such
simultaneous service would not impair the ability of such member to
effectively serve on the Company's Audit Committee and discloses that
determination in the Company's annual proxy statement.
B. Appointment and Removal
Members shall be appointed by the Board based on nominations by the
Company's Nominating and Corporate Governance Committee and shall
serve at the pleasure of the Board and for such term or terms as the
Board may determine.
C. Chairman
The Board shall designate one member of the Committee as its
chairperson. If the Board does not designate a chairperson, the
members of the Committee shall designate a Chairman by the majority
vote of the Committee membership.
D. Compensation
A member of the Committee shall not receive from the Company or any of
its subsidiaries any consulting, advisory or other compensatory fee
other than for service as a member of the Board, the Committee or any
other Board committee that would cause such member not to be
"independent" for purposes of serving on the Committee under the
requirements of federal law or the rules of the NYSE. Dividends paid
on all shares of a class of stock or other investment income and
reimbursements for bona fide expenses shall not be deemed compensatory
income.
3. MEETINGS
The Committee chairperson (or in his or her absence, a member
designated by the chairperson) shall preside at each meeting of the
Committee and set the agenda for the meeting. The Committee shall have
the authority to establish its own rules and procedures for notice and
conduct of its meetings so long as they are not inconsistent with any
provisions of the Company's bylaws that are applicable to the
Committee.
The Committee shall meet at least quarterly, or more frequently if the
Committee deems it desirable, to discuss with the Company's management
and independent auditors the Company's annual audited financial
statements and quarterly financial statements, as applicable,
including the Company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
Periodically, the Committee should meet separately with management,
with the director of the Company's internal auditing department and
with the Company's independent auditors to discuss any matters that
the Committee or any of these persons or firms believe should be
discussed privately.
All non-management directors that are not members of the Committee may
attend and observe meetings of the Committee, but shall not
participate in any discussion or deliberation unless invited to do so
by the Committee, and in any event shall not be entitled to vote. In
its discretion, the Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditors
to attend a meeting of the Committee or to meet with any members of,
or consultants to, the Committee. Notwithstanding the foregoing, the
Committee may also exclude from its meetings any persons it deems
appropriate, including, but not limited to, any non-management
director that is not a member of the Committee.
Members of the Committee may participate in a meeting of the Committee
through or by the use of any means of communication by which all
members participating may simultaneously hear each other during the
meeting.
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4. DUTIES AND RESPONSIBILITIES
To carry out its purposes, the Committee shall have the duties and
responsibilities described in this Section 3.
A. Independent Auditors
1. To be directly responsible for the appointment, compensation,
retention and oversight of the work of the Company's independent
auditors (including the resolution of disagreements between management
and the independent auditors regarding financial reporting), who shall
report directly to the Committee.
2. To be directly responsible for the appointment, compensation,
retention and oversight of the work of any other registered public
accounting firm engaged for the purpose of preparing or issuing an
audit report or to perform audit, review or attestation services,
which firm shall also report directly to the Committee.
3. To approve in advance, or to adopt appropriate procedures to
approve in advance, all audit and non-audit services to be provided by
the independent auditors.
4. To obtain and review, at least annually, a formal written
statement containing (a) a report by the independent auditors
describing the auditors' internal quality-control procedures, any
material issues raised by the most recent internal quality-control
review or peer review of the auditors, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits
carried out by the auditors, and any steps taken to deal with any such
issues, (b) to assess the auditors' independence, all relationships
between the independent auditors and the Company, including each
non-audit service provided to the Company and at least the matters set
forth in Independence Standards Board Standard No. 1 and (c) whether
the independent auditor is in compliance with the SEC partner rotation
requirements.
5. To obtain and review, at least annually, a formal written
statement from the independent auditors of the fees billed to the
Company by the independent auditors in each of the last two fiscal
years for each of the following categories of services rendered by the
independent auditors: (i) the audit of the Company's annual financial
statements and the review of the financial statements included in the
Company's Quarterly Reports on Form 10-Q or services that are normally
provided by the independent auditors in connection with statutory and
regulatory filings or engagements; (ii) assurance and related services
not included in clause (i) that are reasonably related to the
performance of the audit or review of the Company's financial
statements, in the aggregate by each service; (iii) tax compliance,
tax advice and tax planning services, in the aggregate and by each
service; and (iv) all other products and services rendered by the
independent auditors, in the aggregate and by each service.
6. To obtain from the independent auditors in connection with any
audit a timely report relating to the Company's annual audited
financial statements describing (A) all critical accounting policies
and practices used, (B) all alternative treatments within generally
accepted accounting principles for policies and practices related to
material items that have been discussed with management, ramifications
of the use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditors, and (C) any material
written communications between the independent auditors and
management, such as any "management" letter or schedule of unadjusted
differences.
7. To consider from the information provided pursuant to this
Section A and such other information as the Committee deems relevant
the impact that any relationships between the auditor and the Company
or non-audit services provided by the auditor may have on the
objectivity and independence of the auditor and whether, to insure
continued auditor independence, there should be a regular rotation of
the annual audit among independent auditing firms.
A-3
B. Internal Audit.
1. to review the appointment and replacement of the director of
the internal auditing department.
2. to obtain and review summaries of and, as appropriate, the
significant reports to management prepared by the internal auditing
department and management's responses thereto.
3. to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant deficiencies
or material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report
financial information, and as to the existence of any fraud, whether
or not material, that involves management or other employees who have
a significant role in the Company's internal control over financial
reporting.
4. to discuss guidelines and policies governing the process by
which senior management of the Company and the relevant departments of
the Company assess and manage the Company's exposure to risk, and to
discuss the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures.
C. Accounting Principles and Policies.
1. to obtain from management, the internal auditing department
and the independent auditors a timely analysis of significant issues
and practices relating to accounting principles and policies,
financial reporting and internal control over financial reporting.
2. to consider any reports or communications (and management's
and/or the internal audit department's responses thereto) submitted to
the Committee by the independent auditors required by or referred to
in SAS 61 (as codified by AU Section 380), as it may be modified or
supplemented or other professional standards.
D. Financial Reporting Process
1. To review with management, the internal auditor and the
independent auditors:
(a) the scope of the annual audit, the procedures to be
followed and the staffing of the audit;
(b) the annual audited financial statements and quarterly
financial statements, including the Company's
disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations";
(c) any significant matters arising from any audit,
including any audit problems or difficulties, whether
raised by management, the internal auditing department
or the independent auditors, relating to the Company's
financial statements. Among the items the Committee
should consider reviewing are (a) any accounting
adjustments that were noted or proposed by the auditors
but were "passed" (as immaterial or otherwise); (b) any
communications between the audit team and the
independent auditors' national office respecting
auditing or accounting issues presented by the
engagement; and (c) any "management" or "internal
control" letter issued, or proposed to be issued, by
the independent auditors to the Company.
(d) any difficulties the independent auditors encountered
in the course of the audit, including any restrictions
on their activities or access to requested information
and any significant disagreements with management;
(e) any "management" or "internal control" letter issued,
or proposed to be issued, by the independent auditors
to the Company;
(f) the form of opinion the independent auditors propose to
render to the Board and shareholders;
A-4
(g) as appropriate: (i) any major issues regarding
accounting principles and financial statement
presentations, including any significant changes in the
Company's selection or application of accounting
principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps
adopted in light of material control deficiencies; (ii)
analyses prepared by management and/or the independent
auditors setting forth significant financial reporting
issues and judgments made in connection with the
preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on
the financial statements; and (iii) the effect of
regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial
statements of the Company; and
2. to obtain from the independent auditors assurance that the
audit was conducted in a manner consistent with Section 10A of the
Securities Exchange Act of 1934, as amended, which sets forth certain
procedures to be followed in any audit of financial statements
required under the Securities Exchange Act of 1934.
3. Based upon the discussions, reviews and disclosures provided
for herein, to determine whether to recommend to the Board that the
audited financial statements be included in the Company's Annual
Report on Form 10-K.
E. Legal/Compliance
1. to discuss with the Company's General Counsel any significant
legal, compliance or regulatory matters that may have a material
effect on the financial statements or the Company's business,
financial statements or compliance policies, including material
notices to or inquiries received from governmental agencies.
G. Reporting and Recommendations
1. to prepare any report or other disclosures, including any
recommendation of the Committee, required by the rules of the SEC to
be included in the Company's annual proxy statement;
2. to review this Charter at least annually and recommend any
changes to the full Board of Directors;
3. to report its activities to the full Board of Directors on a
regular basis and to make such recommendations with respect to the
above and other matters as the Committee may deem necessary or
appropriate; and
4. to prepare and review with the Board an annual performance
evaluation of the Committee, which evaluation must compare the
performance of the Committee with the requirements of this Charter.
The performance evaluation by the Committee shall be conducted in such
manner as the Committee deems appropriate. The report to the Board may
take the form of an oral report by the chairperson of the Committee or
any other member of the Committee designated by the Committee to make
this report.
H. Other
1. to discuss and review the type and presentation of information
to be included in earnings press releases (with particular focus on
any "pro forma" or "adjusted" non-GAAP information);
2. to discuss the types of financial information and earnings
guidance provided, and the types of presentations made, to analysts
and rating agencies;
3. to discuss with management the Company's policies with respect
to risk assessment and risk management, the Company's significant
financial risk exposures and the actions management has taken to
limit, monitor or control such exposures.
4. to establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by Company employees of concerns
regarding questionable accounting or auditing matters;
A-5
5. to review and discuss any reports concerning a material
violation of an applicable United States federal or state securities
law, a material breach of fiduciary duty arising under United States
federal or state law, or a similar material violation of any United
States federal or state law (a "material violation") submitted to it
by Company attorneys or outside counsel pursuant to the SEC attorney
professional responsibility rules (17 C.F.R. Part 205) or otherwise.
The Committee shall have the authority and responsibility :
(a) To inform the Company's chief legal officer and chief
executive officer of any report of evidence of a material
violation;
(b) To determine whether an investigation is necessary regarding
any report of evidence of a material violation by the
Company, its officers, directors, employees or agents and,
if it determines an investigation is necessary or
appropriate, to :
(i) Notify the full Board;
(ii) Initiate an investigation, which may be conducted
either by the chief legal officer or by outside
attorneys; and
(iii)Retain such additional expert personnel as the
Committee deems necessary.
(c) At the conclusion of any such investigation, to:
(i) Recommend, by majority vote, that the Company implement
an appropriate response to evidence of a material
violation; and
(ii) Inform the chief legal officer, chief executive officer
and the Board of the results of any such investigation
and the appropriate remedial measures to be adopted.
(d) Acting by majority vote, to take all other appropriate
action, including the authority to notify the SEC in the
event that the Company fails in any material respect to
implement any appropriate response that the Committee has
recommended the Company take.
6. to establish hiring policies for employees or former employees
of the independent auditors.
5. DELEGATION TO SUBCOMMITTEE
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee. The Committee
may, in its discretion, delegate to one or more of its members the authority to
approve in advance any audit or non-audit services to be performed by the
independent auditors, provided that any such approvals are presented to the
Committee at its next scheduled meeting.
6. RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to select,
retain, terminate, approve the fees and other retention terms of special or
independent counsel, accountants or other experts and advisors, as it deems
necessary or appropriate, without seeking approval of the Board or management.
The Company shall provide for appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of:
(1) Compensation to the independent auditors and any other public
accounting firm engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services for
the Company;
A-6
(2) Compensation of any experts or advisers employed by the Committee;
(3) Compensation for the Company's regular legal counsel or other advisers
of the Company; and
(4) Ordinary administrative expenses of the Committee that are necessary
or appropriate in carrying out its duties.
[Adopted 2-24-04]
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APPENDIX B
THE AMENDED AND RESTATED INCENTIVE AWARD PLAN
OF
TANGER FACTORY OUTLET CENTERS, INC. AND
TANGER PROPERTIES LIMITED PARTNERSHIP
Tanger Factory Outlet Centers, Inc., a corporation organized under the
laws of the state of North Carolina (the "Company"), adopted the Stock Option
Plan for Directors and Executive and Key Employees of Tanger Factory Outlet
Centers, Inc., (the "Plan") on May 28, 1993. The Plan has subsequently been
amended from time to time. Tanger Properties Limited Partnership, a partnership
organized under the laws of the state of North Carolina (the "Partnership")
adopted the Partnership Unit Option Plan for Employees of Tanger Properties
Limited Partnership (the "Unit Option Plan") on May 28, 1993, which plan has
also subsequently been amended from time to time. In order to conform the Plan
document to such amendments, to further amend the Plan in certain respects, and
to merge the Unit Option Plan into the Plan, the Plan has been amended, restated
and renamed and adopted by the Company and the Partnership, effective as of May
14, 2004. This Amended and Restated Incentive Award Plan of Tanger Factory
Outlet Centers, Inc. and Tanger Properties Limited Partnership constitutes a
complete amendment and restatement of the Plan in its entirety and a
continuation of the Plan. The Plan shall also serve as the successor to the Unit
Option Plan and no further options shall be granted under the Unit Option Plan
after May 14, 2004. All options outstanding under the Unit Option Plan on such
date shall be thereafter treated as outstanding options under the Plan. However,
each outstanding option so incorporated shall continue to be governed solely by
the terms of the documents evidencing such option, and no provision of the Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such incorporated options with respect to their acquisition of Units
or Common Shares.
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company and the Partnership by providing additional incentives to
directors and employees of the Company, the Partnership and their
subsidiaries, who have been or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of the Company's Common Shares and
thus to benefit directly from such growth, development and financial
success.
(2) To enable the Company, the Partnership and their subsidiaries to
obtain and retain the services of the types of professional, technical
and managerial employees and directors considered essential to the
long range success of the Company by providing and offering them an
opportunity to own Common Shares and/or rights which will reflect the
growth, development and financial success of the Company.
B-1
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.
Section 1.1 Administrator
"Administrator" shall mean the entity that conducts the general
administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Awards granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference to
the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 9.2.
Section 1.2 Award
"Award" shall mean an Option, a Restricted Share award, a Performance
Award, a Dividend Equivalents award, a Deferred Share award or a Share Payment
award which may be awarded or granted under the Plan (collectively, "Awards").
Section 1.3 Award Agreement
"Award Agreement" shall mean a written agreement executed by an
authorized officer of the Company, the Partnership or a Subsidiary, as
applicable, and the Holder which shall contain such terms and conditions with
respect to an Award as the Administrator shall determine, consistent with the
Plan.
Section 1.4 Award Limit
"Award Limit" shall mean (a) with respect to Options, 180,000 Common
Shares; (b) with respect to Performance Awards and Dividend Equivalents,
$1,000,000; and (c) with respect to all other Awards, 60,000 Common Shares, in
each case as adjusted pursuant to Section 10.3.
Section 1.5 Board
"Board" shall mean the Board of Directors of the Company.
Section 1.6 Change in Control
"Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding Common Shares (the "Outstanding Common Shares")
or (ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 1.6; or
B-2
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Shares and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Common Shares and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
For purposes of this Plan, the Partnership Units shall be treated as, and
aggregated with, the Common Shares and/or the Outstanding Company Voting
Securities to the extent such Partnership Units are convertible into Common
Shares or voting securities, respectively.
Section 1.7 Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.8 Committee
"Committee" shall mean the Share and Unit Option Committee of the
Board, appointed as provided in Section 9.1.
Section 1.9 Common Shares
"Common Shares" shall mean the common shares of the Company, par
value $0.01 per share.
Section 1.10 Company
"Company" shall mean Tanger Factory Outlet Centers, Inc., a North
Carolina corporation.
Section 1.11 Company Employee
"Company Employee" shall mean any employee (as defined in accordance
with Section 3401(c) of the Code) of the Company or of any Company Subsidiary.
B-3
Section 1.12 Company Subsidiary
"Company Subsidiary" shall mean (i) a corporation, association or other
business entity of which 50% or more of the total combined voting power of all
classes of capital stock is owned, directly or indirectly, by the Company or by
one or more Company Subsidiaries or by the Company and one or more Company
Subsidiaries, (ii) any partnership or limited liability company of which 50% or
more of the capital and profits interests is owned, directly or indirectly, by
the Company or by one or more Company Subsidiaries or by the Company and one or
more Company Subsidiaries, and (iii) any other entity not described in clauses
(i) or (ii) above of which 50% or more of the ownership and the power, pursuant
to a written contract or agreement, to direct the policies and management or the
financial and other affairs thereof, are owned or controlled by the Company or
by one or more other Company Subsidiaries or by the Company and one or more
Company Subsidiaries; provided, however, that "Company Subsidiary" shall not
include the Partnership or any Partnership Subsidiary.
Section 1.13 Deferred Shares
"Deferred Shares" shall mean Common Shares awarded under Article VIII
of the Plan.
Section 1.14 Director
"Director" shall mean a member of the Board.
Section 1.15 Dividend Equivalent
"Dividend Equivalent" shall mean a right to receive the equivalent
value (in cash or Common Shares) of dividends paid on Common Shares, awarded
under Article VIII.
Section 1.16 Employee
"Employee" shall mean any Company Employee or Partnership Employee.
Section 1.17 Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.18 Fair Market Value
"Fair Market Value" of a Common Share as of a given date shall be (i)
the closing price of the Common Shares, on the principal exchange on which
Common Shares are trading, on the trading day previous to such date, or, if
Common Shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; (ii) if such Common Shares
are not traded on an exchange but are quoted on Nasdaq or a successor quotation
system, (A) the last sales price (if the Common Shares are then listed as
National Market Issue under the Nasdaq National Market System) or (B) the mean
between the closing representative bid and asked prices for the Common Shares on
the trading day previous to such date as reported by Nasdaq or such successor
quotation system; or (iii) if such Common Shares are not publicly traded on an
exchange and not quoted on Nasdaq or a successor quotation system, the fair
market value of a Common Share as established by the Administrator acting in
good faith.
Section 1.19 Holder
"Holder" shall mean a person who has been granted or awarded an Award.
Section 1.20 Incentive Share Option
"Incentive Share Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Share Option by the Administrator.
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Section 1.21 Independent Director
"Independent Director" shall mean a member of the Board who is not an
Employee.
Section 1.22 Non-Qualified Share Option
"Non-Qualified Share Option" shall mean an Option which is not
designated as an Incentive Share Option by the Administrator.
Section 1.23 Option
"Option" shall mean an option to purchase Common Shares granted under
Article IV of this Plan. An Option granted under this Plan shall, as determined
by the Administrator, be either a Non-Qualified Share Option or an Incentive
Share Option; provided, however, that Options granted to Independent Directors
and to individuals other than Company Employees shall be Non-Qualified Share
Options.
Section 1.24 Partnership
"Partnership" shall mean Tanger Properties Limited Partnership, a
partnership organized under the laws of the state of North Carolina.
Section 1.25 Partnership Agreement
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of Tanger Properties Limited Partnership, dated as of
December 30, 1999, as the same may be amended, modified or restated from time to
time.
Section 1.26 Partnership Employee
"Partnership Employee" shall mean any employee (as defined in
accordance with Section 3401(c) of the Code) of the Partnership or of any
Partnership Subsidiary.
Section 1.27 Partnership Holder Purchased Shares
"Partnership Holder Purchased Shares" shall have the meaning set forth
in Section 6.4.
Section 1.28 Partnership Purchase Price
"Partnership Purchase Price" shall have the meaning set forth in
Section 6.4.
Section 1.29 Partnership Purchased Shares
"Partnership Purchased Shares" shall have the meaning set forth in
Section 6.4.
Section 1.30 Partnership Subsidiary
"Partnership Subsidiary" shall mean (i) a corporation, association or
other business entity of which 50% or more of the total combined voting power of
all classes of capital stock is owned, directly or indirectly, by the
Partnership or by one or more Partnership Subsidiaries or by the Partnership and
one or more Partnership Subsidiaries, (ii) any partnership or limited liability
company of which 50% or more of the capital and profits interests is owned,
directly or indirectly, by the Partnership or by one or more Partnership
Subsidiaries or by the Partnership and one or more Partnership Subsidiaries, and
(iii) any other entity not described in clauses (i) or (ii) above of which 50%
or more of the ownership and the power, pursuant to a written contract or
agreement, to direct the policies and management or the financial and other
affairs thereof, are owned or controlled by the Partnership or by one or more
other Partnership Subsidiaries or by the Partnership and one or more Partnership
Subsidiaries.
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Section 1.31 Partnership Unit; Unit
"Partnership Unit" shall have the meaning ascribed to such term in the
Partnership Agreement and may be referred to herein as a "Unit".
Section 1.32 Performance Award
"Performance Award" shall mean a cash bonus, share bonus or other
performance or incentive award that is paid in cash, Common Shares or a
combination of both, awarded under Article VIII of this Plan.
Section 1.33 Performance Criteria
"Performance Criteria" shall mean (a) the following business criteria
with respect to the Company, the Partnership or any Subsidiary or any division
or operating unit of either of them: (i) net income; (ii) pre-tax income; (iii)
operating income; (iv) cash flow; (v) earnings per share; (vi) return on equity;
(vii) return on invested capital or assets; (viii) cost reductions or savings;
(ix) funds from operations; (x) appreciation in the Fair Market Value of a
Common Share; (xi) total return performance on Common Shares as reported in the
Company's annual proxy statement; (l) operating profit; (m) working capital; and
(n) earnings before any one or more of the following items: interest, taxes,
depreciation or amortization; provided, that each of the business criteria
described in subsections (a) through (n) shall be determined in accordance with
generally accepted accounting principles ("GAAP"); and (b) the following
objective performance criteria as applied to any Employee: (i) lease renewals;
(ii) occupancy rates; (iii) average tenant sales per square foot; and (iv)
rental rates. For each fiscal year of the Company, the Committee may provide for
objectively determinable adjustments, as determined in accordance with GAAP, to
any of the business criteria described in subsections (a) and (b) for one or
more of the items of gain, loss, profit or expense: (A) determined to be
extraordinary or unusual in nature or infrequent in occurrence; (B) related to
the disposal of a segment of a business; (C) related to a change in accounting
principles under GAAP; (D) related to discontinued operations that do not
qualify as a segment of a business under GAAP; (E) attributable to the business
operations of any entity acquired by the Company or the Partnership during the
fiscal year and (F) reflecting adjustments to funds from operations with respect
to straight-line rental income as reported in the Company's Exchange Act
reports.
Section 1.34 Plan
"Plan" shall mean The Amended and Restated Incentive Award Plan of
Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership.
Section 1.35 REIT
"REIT" shall mean a real estate investment trust within the meaning of
Sections 856 through 860 of the Code.
Section 1.36 Restricted Share
"Restricted Share" shall mean a Common Share awarded under Article VII.
Section 1.37 Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act,
as such Rule may be amended from time to time.
Section 1.38 Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.39 Section 162(m) Participant
"Section 162(m) Participant" shall mean any Employee designated by the
Administrator as an individual whose compensation for the fiscal year of such
designation or a future fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.
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Section 1.40 Share Payment
"Share Payment" shall mean (a) a payment in the form of Common Shares,
or (b) an option or other right to purchase Common Shares, as part of a deferred
compensation arrangement, made in lieu of all or any portion of the
compensation, including without limitation, salary, bonuses and commissions,
that would otherwise become payable to an Employee or Independent Director in
cash, awarded under Article VIII of the Plan.
Section 1.41 Subsidiary
"Subsidiary" shall mean any Company Subsidiary or Partnership Subsidiary.
Section 1.42 Termination of Directorship
"Termination of Directorship" shall mean the time when a Holder who is
an Independent Director ceases to be a Director for any reason, including, but
not by way of limitation, a termination by resignation, failure to be elected,
death or retirement. The Board, in its sole discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship with
respect to Independent Directors.
Section 1.43 Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between a Holder and the Company, the Partnership
or any Subsidiary of either of them is terminated for any reason, with or
without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i) a
termination where there is a simultaneous reemployment or continuing employment
of such Holder by the Company, the Partnership or any Subsidiary of either of
them, (ii) at the discretion of the Administrator, a termination which results
in a temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Administrator, a termination which is followed by the
simultaneous establishment of a consulting relationship by the Company, the
Partnership or any Subsidiary of either of them with the former employee. The
Administrator, in its sole discretion, shall determine the effect of all matters
and questions relating to Termination of Employment, including, but not by way
of limitation, the question of whether a Termination of Employment resulted from
a discharge for good cause, and all questions of whether a particular leave of
absence constitutes a Termination of Employment; provided, however, that, unless
otherwise determined by the Administrator in its discretion, a leave of absence,
change in status from an Employee to an independent contractor or other change
in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section.
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1 Shares Subject to Plan
(a) Subject to Section 2.2 and adjustment pursuant to Section 10.3, the
aggregate number of Common Shares (or Units) which may be issued with respect to
Awards under the Plan shall not exceed 3,000,000. Such limitation shall be
reduced by one for each Unit issued pursuant to the exercise of options granted
under the Unit Option Plan. The Common Shares issuable with respect to Awards
may be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of Common Shares which may be subject to Awards
granted under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit.
Section 2.2 Share Counting
Notwithstanding Section 2.1(a): (i) the Administrator may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards), and make
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adjustments if the number of Common Shares actually delivered differs from the
number of shares previously counted in connection with an Award; (ii) Common
Shares that are potentially deliverable under any Award that expires or is
canceled, forfeited, settled in cash or otherwise terminated without a delivery
of such shares to the Holder will not be counted as delivered under the Plan;
(iii) Common Shares that have been issued in connection with any Award (e.g.,
Restricted Shares) that is canceled, forfeited, or settled in cash such that
those shares are returned to the Company will again be available for Awards; and
(iv) Common Shares withheld in payment of the exercise price or taxes relating
to any Award and shares equal to the number surrendered in payment of any
exercise price or taxes relating to any Award shall be deemed to constitute
shares not delivered to the Holder and shall be deemed to be available for
Awards under the Plan; provided, however, that, no shares shall become available
pursuant to this Section 2.2 to the extent that (x) the transaction resulting in
the return of shares occurs more than ten years after the date of the most
recent shareholder approval of the Plan, or (y) such return of shares would
constitute a "material revision" of the Plan subject to shareholder approval
under then applicable rules of the New York Stock Exchange (or any other
applicable exchange or quotation system). In addition, in the case of any Award
granted in substitution for an award of a company or business acquired by the
Company, the Partnership or any Subsidiary, Common Shares issued or issuable in
connection with such substitute Award shall not be counted against the number of
shares reserved under the Plan, but shall be available under the Plan by virtue
of the Company's assumption of the plan or arrangement of the acquired company
or business. This Section 2.2 shall apply to the share limit imposed to conform
to the regulations promulgated under the Code with respect to Incentive Share
Options only to the extent consistent with applicable regulations relating to
Incentive Share Options under the Code. Because shares will count against the
number reserved in Section 2.1 upon delivery, the Administrator may, subject to
the share counting rules under this Section 2.2, determine that Awards may be
outstanding that relate to a greater number of shares than the aggregate
remaining available under the Plan, so long as Awards will not result in
delivery and vesting of shares in excess of the number then available under the
Plan. The payment of Dividend Equivalents in conjunction with any outstanding
Awards shall not be counted against the shares available for issuance under the
Plan. For purposes of this Section 2.2, Units under options granted under the
Unit Option Plan will be treated as, and aggregated with, Common Shares.
ARTICLE III.
GRANTING OF AWARDS
Section 3.1 Award Agreement
Each Award shall be evidenced by an Award Agreement. Award Agreements
evidencing Awards intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code.
Section 3.2 Provisions Applicable to Section 162(m) Participants
(a) The Committee, in its discretion, may determine whether or not an Award
is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the Committee
may, in its sole discretion, grant any Award to a Section 162(m) Participant,
including Restricted Shares the restrictions with respect to which lapse upon
the attainment of performance goals which are related to one or more of the
Performance Criteria, and any performance or incentive award described in
Article VIII that vests or becomes exercisable or payable upon the attainment of
performance goals which are related to one or more of the Performance Criteria.
(c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Award granted under Articles VII or VIII to a Section 162(m) Participant
which is intended by the Committee to qualify as performance-based compensation,
no later than ninety (90) days following the commencement of any fiscal year in
question or any other designated fiscal period or period of service (or such
other time as may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the Performance Criteria applicable to the fiscal year
or other designated fiscal period or period of service, (iii) establish the
various performance targets, in terms of an objective formula or standard, and
amounts of such Awards, as applicable, which may be earned for such fiscal year
or other designated fiscal period or period of service, and (iv) specify the
relationship between Performance Criteria and the performance targets and the
amounts of such Awards, as applicable, to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period or period of
service. Following the completion of each fiscal year or other designated fiscal
period or period of service, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other
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designated fiscal period or period of service. Except as otherwise provided by
any written agreement between the Company and any applicable Holder, in
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or period of
service.
(d) Furthermore, notwithstanding any other provision of the Plan, any Award
which is granted to a Section 162(m) Participant and which is intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.
Section 3.3 Limitations Applicable to Section 16 Persons
Notwithstanding any other provision of the Plan, the Plan and any Award
granted or awarded to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule.
Section 3.4 Consideration
In consideration of an Award under the Plan, the Holder shall agree, in
the written Award Agreement, to remain in the employ of (or to serve as a
Director of, as applicable) the Company, the Partnership or a Subsidiary for a
period of one year from the date of Award grant (or, in the case of a Director,
until the next annual meeting of shareholders of the Company), or such shorter
period as may be fixed by the Administrator in the Award Agreement or by action
of the Administrator following grant of the Award.
Section 3.5 At-Will Employment
Nothing in the Plan or in any Award Agreement hereunder shall confer
upon any Holder any right to continue in the employ of the Company, the
Partnership or any Subsidiary, or as a Director of the Company, or shall
interfere with or restrict in any way the rights of the Company, the Partnership
or any Subsidiary, which are hereby expressly reserved, to discharge any Holder
at any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in a written employment agreement between
the Holder and the Company, the Partnership or any Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS
Section 4.1 Eligibility
Any Employee selected by the Committee pursuant to Section 4.3(a)(i)
shall be eligible to be granted an Option. Any Independent Director selected by
the Board pursuant to Section 4.3(b)(i) shall be eligible to be granted an
Option.
Section 4.2 Qualification of Incentive Share Options
No Incentive Share Option shall be granted to any person who is not a
Company Employee.
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Section 4.3 Granting of Options
(a) The Committee shall from time to time, in its sole discretion,
and subject to applicable limitations of this Plan:
(i) Select from among the Employees (including Employees who
have previously received Awards) such of them as in its
opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected
Employees;
(iii)Subject to Section 4.2, determine whether such Options are
to be Incentive Share Options or Non-Qualified Share Options
and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the
Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms
and conditions of Options intended to qualify as
performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited
to, such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code.
(b) The Board shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Independent Directors (including Independent
Directors who have previously received Options) such of them
as in its opinion should be granted Options; and
(ii) Determine the terms and conditions of such Options,
consistent with this Plan.
(c) Upon the selection of an Employee or Independent Director to be
granted an Option, the Administrator shall instruct the Secretary
to issue the Option and may impose such conditions on the grant
of the Option as it deems appropriate.
ARTICLE V.
TERMS OF OPTIONS
Section 5.1 Exercise Price
The exercise price per share of the shares subject to each Option shall
be set by the Administrator in its discretion; provided, however, that such
price shall be no less than the Fair Market Value of a Common Share on the date
the Option is granted, and, in the case of Incentive Share Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of shares of the
Company or any subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code) such price shall not be less than 110% of the Fair
Market Value of a Common Share on the date the Option is granted.
Section 5.2 Option Term
The term of an Option shall be set by the Administrator in its
discretion; provided, however, that (i) in the case of Incentive Share Options,
the term shall not be more than ten (10) years from the date the Incentive Share
Option is granted, or five (5) years from such date if the Incentive Share
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of shares of the Company or any subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Share Options, the Administrator may extend the term of
any outstanding Option in connection with any Termination of Employment or
Termination of Directorship, or amend any other term or condition of such Option
relating to such a termination.
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Section 5.3 Option Vesting
(a) The period during which the right to exercise an Option in whole or in
part vests in the Holder shall be set by the Administrator and the
Administrator may determine that an Option may not be exercised in
whole or in part for a specified period after it is granted. At any
time after grant of an Option, the Administrator may, in its sole
discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment or Termination of Directorship shall thereafter become
exercisable, except as may be otherwise provided by the Administrator
(other than with respect to Options granted to Independent Directors)
either in the Award Agreement or by action of the Administrator
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of shares with
respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by a Holder during any
calendar year (under the Plan and all other incentive stock option
plans of the Company and any subsidiary) exceeds $100,000, such
Options shall be treated as Non-Qualified Share Options to the extent
required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking options into account in
the order in which they were granted. For purposes of this Section
5.3(c), the Fair Market Value of shares shall be determined as of the
time the option with respect to such shares is granted.
(d) In the event of a Change in Control, each Option granted to an
Independent Director or to an Employee shall be exercisable as to all
shares covered thereby immediately prior to the consummation of such
Change in Control and subject to such consummation, notwithstanding
anything to the contrary in this Section 5.3 or the vesting schedule
of such Option.
ARTICLE VI.
EXERCISE OF OPTIONS
Section 6.1 Partial Exercise
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Administrator may require that, by the terms of the Option, a partial exercise
be with respect to a minimum number of shares.
Section 6.2 Manner of Exercise
All or a portion of an exercisable Option shall be deemed exercised
upon delivery of all of the following to the Secretary or his office prior to
the time when such Option or such portion becomes unexercisable under the Plan
or the applicable Award Agreement:
(a) A written notice complying with the applicable rules established by
the Administrator stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Holder or other person
then entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Administrator, in its sole
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and
any other federal or state securities laws or regulations. The
Administrator may, in its sole discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section
10.1 by any person or persons other than the Holder, appropriate proof
of the right of such person or persons to exercise the Option; and
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(d) Full cash payment to the Secretary for the shares with respect to
which the Option, or portion thereof, is exercised. However, the
Administrator may in its discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the
delivery of Common Shares owned by the Holder, duly endorsed for
transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part,
through the surrender of Common Shares then issuable upon exercise of
the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised
portion thereof; (iv) allow payment, in whole or in part, through the
delivery of property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no
less than such rate as shall then preclude the imputation of interest
under the Code) and payable upon such terms as may be prescribed by
the Administrator; (vi) allow payment, in whole or in part, through
the delivery of a notice that the Holder has placed a market sell
order with a broker with respect to Common Shares then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of
such proceeds is then made to the Company upon settlement of such
sale; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii),
(iv), (v) and (vi). In the case of a promissory note, the
Administrator may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the
Company, the Partnership or any Subsidiary when or where such loan or
other extension of credit is prohibited by law, and payment in the
manner prescribed by the preceding sentences shall not be permitted to
the extent that the Administrator determines that payment in such
manner may result in an extension or maintenance of credit, an
arrangement for the extension of credit, or a renewal of an extension
of credit in the form of a personal loan to or for any Director or
executive officer of the Company that is prohibited by Section 13(k)
of the Exchange Act or other applicable law.
Section 6.3 Transfer of Shares to a Company Employee or Independent Director
As soon as practicable after receipt by the Company, pursuant to
Section 6.2(d), of payment for the shares with respect to which an Option (which
in the case of a Company Employee or Independent Director was issued to and is
held by such Holder in such capacity), or portion thereof, is exercised by a
Holder who is a Company Employee or Independent Director, then, with respect to
each such exercise, the Company shall transfer to the Holder the number of
shares equal to
(a) The amount of the payment made by the Holder to the Company
pursuant to Section 6.2(d), divided by
(b) The price per share of the shares subject to the Option as
determined pursuant to Section 5.1.
Section 6.4 Transfer of Shares to a Partnership Employee
As soon as practicable after receipt by the Company, pursuant to
Section 6.2(d), of payment for the shares with respect to which an Option (which
was issued to and is held by a Partnership Employee in such capacity), or
portion thereof, is exercised by a Holder who is a Partnership Employee, then,
with respect to each such exercise:
(a) the Company shall transfer to the Holder the number of shares
equal to (A) the amount of the payment made by the Holder to the Company
pursuant to Section 6.2(d) divided by (B) the Fair Market Value of a share
of Common Stock at the time of exercise (the "Partnership Holder Purchased
Shares");
(b) the Company shall sell to the Partnership the number of shares
(the "Partnership Purchased Shares") equal to the excess of (i) the amount
obtained by dividing (A) the amount of the payment made by the Holder to
the Company pursuant to Section 6.2(d) by (B) the price per share of the
shares subject to the Option as determined pursuant to Section 5.1, over
(ii) the number of Partnership Holder Purchased Shares. The price to be
paid by the Partnership to the Company for the Partnership Purchased Shares
(the "Partnership Purchase Price") shall be an amount equal to the product
of (x) the number of Partnership Purchased Shares and (y) the Fair Market
Value of a share of Common Stock at the time of the exercise; and
(c) as soon as practicable after receipt of the Partnership Purchased
Shares by the Partnership, the Partnership shall transfer such shares to
the Holder at no additional cost, as additional compensation.
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Section 6.5 Transfer of Payment to the Partnership
As soon as practicable after receipt by the Company of the amounts
described in Sections 6.2(d) and 6.4(b), the Company shall contribute to the
Partnership an amount of cash equal to such payments and the Partnership shall
issue an additional interest in the Partnership on the terms set forth in the
Partnership Agreement.
Section 6.6 Conditions to Issuance of Share Certificates
Neither the Company nor the Partnership shall be required to issue or
deliver any certificate for Common Shares purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such series or class of shares is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Administrator shall, in its sole discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its sole
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and
(e) The receipt by the Company or the Partnership of full payment for
such shares, including payment of any applicable withholding tax.
Section 6.7 Rights as Shareholders
The Holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company or the Partnership to
such Holders.
Section 6.8 Ownership and Transfer Restrictions
The Administrator, in its sole discretion, may impose such restrictions
on the ownership and transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Award Agreement or other written agreement between the Company
and the Holder and may be referred to on the certificates evidencing such
shares.
ARTICLE VII.
AWARD OF RESTRICTED SHARES
Section 7.1 Eligibility
Subject to the Award Limit, Restricted Shares may be awarded to any
Employee or Independent Director.
Section 7.2 Award of Restricted Shares
(a) The Administrator may from time to time, in its sole discretion:
(i) Select from among Employees and Independent Directors
(including Employees and Independent Directors who have previously
received other Awards under the Plan) such of them as in its opinion
should be awarded Restricted Shares; and
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(ii) Determine the purchase price, if any, and other terms and
conditions (including, without limitation, in the case of awards to
Employees of the Partnership or any Partnership Subsidiary, the
mechanism for the transfer of the Restricted Shares and payment
therefor, and any surrender of such Restricted Shares pursuant to
Section 7.4) applicable to such Restricted Shares, consistent with the
Plan.
(b) The Administrator shall establish the purchase price, if any, and
form of payment for Restricted Shares; provided, however, that such
purchase price, if any, shall be no less than the par value of the Common
Shares to be purchased, unless otherwise permitted by applicable state law.
In all cases, legal consideration shall be required for each issuance of a
Restricted Share.
(c) Upon the selection of an Employee or Independent Director to be
awarded Restricted Shares, the Administrator shall instruct the Secretary
to issue such Restricted Shares and may impose such conditions on the
issuance of such Restricted Shares as it deems appropriate.
Section 7.3 Rights as Shareholders
Subject to Section 7.4, upon delivery of the Restricted Shares to the
Holder or the escrow holder pursuant to Section 7.6, the Holder shall have,
unless otherwise provided by the Administrator, all the rights of a shareholder
with respect to said shares, subject to the restrictions in his or her Award
Agreement, including the right to receive all dividends and other distributions
paid or made with respect to the shares; provided, however, that in the
discretion of the Administrator, any extraordinary distributions with respect to
the Common Shares shall be subject to the restrictions set forth in Section 7.4.
Section 7.4 Restriction
All Restricted Shares issued under the Plan (including any shares
received by holders thereof with respect to Restricted Shares as a result of
share dividends, share splits or any other form of recapitalization) shall, in
the terms of each individual Award Agreement, be subject to such restrictions as
the Administrator shall provide, which restrictions may include, without
limitation, restrictions concerning voting rights and transferability and
restrictions based on duration of employment with the Company, the Partnership
or any Subsidiary or performance of the Company, the Partnership or a Subsidiary
or individual performance; provided, however, that, except with respect to
Restricted Shares granted to Section 162(m) Participants, by action taken after
the Restricted Shares are issued, the Administrator may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the
restrictions imposed by the terms of the Award Agreement. Restricted Shares may
not be sold or encumbered until all restrictions are terminated or expire.
Except as otherwise provided by any written agreement between the Company, the
Partnership or any Subsidiary, as applicable, and any applicable Holder, if no
cash consideration was paid by the Holder upon issuance, a Holder's rights in
unvested Restricted Shares shall lapse, and such Restricted Shares shall be
surrendered to the Company, the Partnership or the Subsidiary, as applicable,
without consideration, upon a Termination of Employment or Termination of
Directorship.
Section 7.5 Repurchase of Restricted Shares
Except as otherwise provided by the individual Award Agreement, the
Company, the Partnership or a Subsidiary shall have the right to repurchase from
the Holder the Restricted Shares then subject to restrictions under the Award
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Directorship, at a cash price per share equal to the lesser of
(i) the Fair Market Value of a Common Share on the date of Termination of
Employment or Termination of Directorship, as applicable, and (ii) the price per
share paid by the Holder for such Restricted Shares.
Section 7.6 Escrow
Except as otherwise provided in any Award Agreement, the Secretary or
such other escrow holder as the Administrator may appoint shall retain physical
custody of each certificate representing Restricted Shares until all of the
restrictions imposed under the Award Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
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Section 7.7 Legend
In order to enforce the restrictions imposed upon Restricted Shares
hereunder, the Administrator shall cause a legend or legends to be placed on
certificates representing all Restricted Shares that are still subject to
restrictions under Award Agreements, which legend or legends shall make
appropriate reference to the conditions imposed thereby.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED SHARES, SHARE PAYMENTS
Section 8.1 Eligibility
Subject to the Award Limit, one or more Performance Awards, Dividend
Equivalents, awards of Deferred Shares and/or Share Payments may be granted to
any Employee or Director whom the Administrator determines should receive such
an Award.
Section 8.2 Performance Awards
(a) Any Employee or Independent Director selected by the Administrator
may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to any one or more of the Performance
Criteria or other specific performance criteria determined appropriate by
the Administrator, in each case on a specified date or dates or over any
period or periods determined by the Administrator. In making such
determinations, the Administrator shall consider (among such other factors
as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular
Employee or Independent Director.
(b) Without limiting Section 8.2(a), the Administrator may grant Performance
Awards to any 162(m) Participant in the form of a cash bonus payable upon the
attainment of objective performance goals which 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. Any such bonuses paid to 162(m) Participants shall be based
upon objectively determinable bonus formulas established in accordance with the
provisions of Section 3.2. The maximum amount of any Performance Award payable
to a 162(m) Participant under this Section 8.2(b) shall not exceed the Award
Limit with respect to any calendar year. Unless otherwise specified by the
Administrator at the time of grant, the Performance Criteria with respect to a
Performance Award payable to a 162(m) Participant shall be determined on the
basis of generally accepted accounting principles.
Section 8.3 Dividend Equivalents
(a) Any Employee or Independent Director selected by the Administrator may be
granted Dividend Equivalents based on the dividends declared on Common Shares,
to be credited as of dividend payment dates, during the period between the date
an Award is granted and the date such Award is exercised, vests or expires, or
for such other period, as determined by the Administrator. Such Dividend
Equivalents shall be converted to cash or additional Common Shares by such
formula and at such time and subject to such limitations as may be determined by
the Administrator.
(b) Dividend Equivalents granted with respect to Options intended to be
qualified performance-based compensation for purposes of Section 162(m) of the
Code shall be payable, with respect to pre-exercise periods, regardless of
whether such Option is subsequently exercised.
Section 8.4 Share Payments
Any Employee or Independent Director selected by the Administrator may
receive Share Payments in the manner determined from time to time by the
Administrator. The number of shares shall be determined by the Administrator and
may be based upon the Performance Criteria or other specific criteria determined
appropriate by the Administrator, determined on the date such Share Payment is
made or on any date thereafter.
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Section 8.5 Deferred Shares
Any Employee or Independent Director selected by the Administrator may
be granted an award of Deferred Shares in the manner determined from time to
time by the Administrator. The number of Deferred Shares shall be determined by
the Administrator and may be linked to the Performance Criteria or other
specific criteria determined to be appropriate by the Administrator, in each
case on a specified date or dates or over any period or periods determined by
the Administrator. Common Shares underlying a Deferred Share award will not be
issued until the Deferred Share award has vested, pursuant to a vesting schedule
or performance criteria set by the Administrator. Unless otherwise provided by
the Administrator, a Holder of Deferred Shares shall have no rights as a Company
shareholder with respect to such Deferred Shares until such time as the Award
has vested and the Common Shares underlying the Award have been issued.
Section 8.6 Term
The term of a Performance Award, Dividend Equivalent, award of Deferred
Shares and/or Share Payment shall be set by the Administrator in its discretion.
Section 8.7 Exercise or Purchase Price
The Administrator may establish the exercise or purchase price of a
Performance Award, Deferred Share award or shares received as a Share Payment;
provided, however, that such price shall not be less than the par value of a
share of Common Share, unless otherwise permitted by applicable state law.
Section 8.8 Exercise Upon Termination of Employment or Termination of
Directorship
A Performance Award, Dividend Equivalent, award of Deferred Shares
and/or Share Payment is exercisable or payable only while the Holder is an
Employee or Independent Director, as applicable; provided, however, that, except
with respect to Performance Awards granted to Section 162(m) Participants, the
Administrator in its sole discretion may provide that the Performance Award,
Dividend Equivalent, award of Deferred Shares and/or Share Payment may be
exercised or paid subsequent to a Termination of Employment or Termination of
Directorship, or following a Change in Control, or because of the Holder's
retirement, death or disability, or otherwise.
Section 8.9 Form of Payment
Payment of the amount determined under Section 8.2 or 8.3 above shall
be in cash, in Common Shares or a combination of both, as determined by the
Administrator. To the extent any payment under this Article VIII is effected in
Common Shares, it shall be made subject to satisfaction of all provisions of
Section 6.6.
ARTICLE IX.
ADMINISTRATION
Section 9.1 Share and Unit Option Committee
The Share and Unit Option Committee shall consist of two or more
Directors, appointed by and holding office at the pleasure of the Board, none of
whom shall be an Employee and each of whom is both a "non-employee director" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
Section 9.2 Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, the Award Agreements and to adopt
such rules for the administration, interpretation and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
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Any such interpretations and rules with respect to Incentive Share Options shall
be consistent with the provisions of Section 422 of the Code. The Committee
shall have the power to amend any Award Agreement provided that the rights or
obligations of the Holder of the Award that is the subject of any such Award
Agreement are not affected adversely; provided, however, that without the
approval of the shareholders of the Company, neither the Committee nor the Board
shall authorize the amendment of any outstanding Option to reduce its exercise
price. Notwithstanding anything contained herein, no Option shall be canceled
and replaced with the grant of an Option having a lower exercise price without
the approval of the shareholders of the Company. Grants or Awards under the Plan
need not be the same with respect to each Holder. In its sole discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan except with respect to matters which
under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole discretion of the
Committee. Notwithstanding the foregoing, the full Board, acting by a majority
of its members in office, shall conduct the general administration of the Plan
with respect to Awards granted to Independent Directors.
Section 9.3 Majority Rule
The Committee shall act by a majority of its members in attendance at a
meeting where quorum is present or by a memorandum or other written instrument
signed by all members of the Committee.
Section 9.4 Compensation; Professional Assistance; Good Faith Actions
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or the Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan or any Award, and all members of the Committee and the
Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1 Not Transferable
(a) Awards under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or, with the consent of the Administrator, pursuant to a
transfer to the spouse and/or lineal descendants of the Holder and/or to a
trust, partnership or other entity the sole beneficiaries, partners or
other members of which are such Holder's spouse and/or lineal descendants,
unless and until such Awards have been exercised, or the shares underlying
such Awards have been issued, and all restrictions applicable to such
shares have lapsed. No Award or interest or right therein shall be liable
for the debts, contracts or engagements of the Holder or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof
shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.
(b) During the lifetime of the Holder, only he may exercise an Option
or other Award (or any portion thereof) granted to him under the Plan,
unless it has been disposed of pursuant to the foregoing paragraph. After
the death of the Holder (or transferee), any exercisable portion of an
Option or other Award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Award Agreement or other
agreement, be exercised by the personal representative of, or by any person
empowered to do so under, the deceased Holder's (or transferee's) will or
under the then applicable laws of descent and distribution.
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Section 10.2 Amendment, Suspension or Termination of this Plan
The plan will expire on, and no Award may be granted pursuant to the
Plan after, May 14, 2014; and any Award outstanding on such date shall remain in
force according to the terms of the applicable Award Agreement. In addition,
this Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board or the Committee;
provided, however, that (a) to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required, and (b) shareholder approval is required for any amendment to the
Plan that (i) increases the number of shares available under the Plan (other
than any adjustment as provided by Section 10.3), (ii) permits the Administrator
to grant Options with an exercise price that is below Fair Market Value on the
date of grant, or (iii) permits the Administrator to extend the exercise period
for an Option beyond ten years from the date of grant. The Award Limit may be
increased by the Board or the Committee at any time and from time to time, and
Awards may be granted with respect to a number of shares not in excess of such
increased Award Limit; provided, however, that no such increase of the Award
Limit shall be effective unless and until such increase is approved by the
Company's shareholders and if such approval is not obtained all Awards granted
with respect to a number of shares in excess of the Award Limit in effect prior
to such increase shall be canceled and shall become null and void. No amendment,
suspension or termination of this Plan shall, without the consent of the Holder
alter or impair any rights or obligations under any Awards theretofore granted,
unless the Award Agreement itself otherwise expressly so provides. No Award may
be granted during any period of suspension or after termination of this Plan,
and in no event may any Incentive Share Option be granted under this Plan after
May 28, 2003.
Section 10.3 Changes in Common Shares or Assets of the Company; Acquisition
or Liquidation of the Company and Other Corporate Events
(a) Subject to Section 10.3(d), in the event that the Administrator
determines that any dividend or other distribution (whether in the form of
cash, Common Shares, other securities or other property), recapitalization,
reclassification, share split, reverse share split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited
to, a Change in Control), or exchange of Common Shares or other securities
of the Company, issuance of warrants or other rights to purchase Common
Shares or other securities of the Company, or other similar corporate
transaction or event, in the Administrator's sole discretion, affects the
Common Shares such that an adjustment is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan or with respect to an Award, then the
Administrator shall, in such manner as it may deem equitable, adjust any or
all of:
(i) The number and kind of Common Shares (or other
securities or property) with respect to which Awards may be
granted or awarded (including, but not limited to, adjustments of
the limitations in Section 2.1 on the maximum number and kind of
shares which may be issued and adjustments of the Award Limit);
(ii) The number and kind of Common Shares (or other
securities or property) subject to outstanding Awards; and
(iii) The grant or exercise price with respect to any Award.
(b) Subject to Section 10.3(d), except as otherwise provided in any
Award Agreement, in the event of any transaction or event described in
Section 10.3(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate thereof (including, without
limitation, any Change in Control), or of changes in applicable laws,
regulations or accounting principles, the Administrator, in its sole
discretion, and on such terms and conditions as it deems appropriate,
either by the terms of the applicable Award Agreement or by action taken
prior to the occurrence of such transaction or event and either
automatically or upon the Holder's request, is hereby authorized to take
any one or more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:
(i) To provide for either the purchase of any such Award for
an amount of cash equal to the amount that could have been
attained upon the exercise of such Award or realization of the
Holder's rights had such Award been currently exercisable or
payable or fully vested or the replacement of such Award with
other rights or property selected by the Administrator in its
sole discretion;
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(ii) To provide that the Award cannot vest, be exercised or
become payable after such event;
(iii) To provide that such Award shall be exercisable as to
all shares covered thereby, notwithstanding anything to the
contrary in Section 5.3 or 5.4 or the provisions of such Award;
(iv) To provide that such Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for similar options, rights or awards
covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to
the number and kind of shares and prices;
(v) To make adjustments in the number and type of Common
Shares (or other securities or property) subject to outstanding
Awards, and in the number and kind of outstanding Restricted
Shares or Deferred Shares and/or in the terms and conditions of
(including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options,
rights and awards which may be granted in the future; and
(vi) To provide that, for a specified period of time prior
to such event, the restrictions imposed under an Award Agreement
upon some or all Restricted Shares or Deferred Shares may be
terminated, and, in the case of Restricted Shares, some or all of
such Restricted Shares may cease to be subject to repurchase
under Section 7.5 or forfeiture under Section 7.4 after such
event.
(c) Subject to Sections 3.2, 3.3 and 10.3(d), the Administrator may, in its
discretion, include such further provisions and limitations in any Award,
agreement or certificate, as it may deem equitable and in the best interests of
the Company.
(d) With respect to Awards which are granted to Section 162(m) Participants
and are intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section 10.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 10.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of Common Shares
subject to any Award shall always be rounded to the next whole number.
(e) The existence of the Plan, the Award Agreement and the Awards granted
hereunder shall not affect or restrict in any way the right or power of the
Company or the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of shares or of options, warrants or rights to purchase shares or of bonds,
debentures, preferred or prior preference shares whose rights are superior to or
affect the Common Shares or the rights thereof or which are convertible into or
exchangeable for Common Shares, or the dissolution or liquidation of the
company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
Section 10.4 Approval of Plan by Shareholders.
The Plan will be submitted for the approval of the Company's
shareholders after the date of the Board's initial adoption of the Plan, and any
amendment to the Plan increasing the aggregate number of Common Shares issuable
under the Plan will be submitted for the approval of the Company's shareholders
after the date of the Board's adoption of such amendment. Awards may be granted
or awarded prior to such shareholder approval, provided that such Awards shall
not be exercisable nor shall such Awards vest prior to the time when the Plan is
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approved by the shareholders, and provided further that if such approval is not
obtained, all Awards previously granted or awarded under the Plan shall
thereupon be canceled and become null and void. In addition, if the Board
determines that Awards other than Options which may be granted to Section 162(m)
Participants should continue to be eligible to qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria
must be disclosed to and approved by the Company's shareholders no later than
the first shareholder meeting that occurs in the fifth year following the year
in which the Company's shareholders previously approved the Performance
Criteria.
Section 10.5 Tax Withholding
The Company or the Partnership, as applicable, shall be entitled to
require payment in cash or deduction from other compensation payable to each
Holder of any sums required by federal, state or local tax law to be withheld
with respect to the issuance, vesting, exercise or payment of any Award. The
Administrator may in its discretion and in satisfaction of the foregoing
requirement allow such Holder to elect to have the Company or the Partnership,
as applicable, withhold Common Shares otherwise issuable under such Award (or
allow the return of Common Shares) having a Fair Market Value equal to the sums
required to be withheld. Notwithstanding any other provision of the Plan, the
number of Common Shares which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the
Holder of such Award within six months after such Common Shares were acquired by
the Holder from the Company) in order to satisfy the Holder's federal and state
income and payroll tax liabilities with respect to the issuance, vesting,
exercise or payment of the Award shall be limited to the number of Common Shares
which have a Fair Market Value on the date of withholding or repurchase equal to
the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal and state tax income and payroll tax purposes that
are applicable to such supplemental taxable income.
Section 10.6 Loans
The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise or receipt of an Award granted or
awarded under the Plan, or the issuance of Restricted Shares or Deferred Shares
awarded under the Plan. The terms and conditions of any such loan shall be set
by the Committee. Notwithstanding the foregoing, no loan shall be made to an
Employee under this Section to the extent such loan shall result in an extension
or maintenance of credit, an arrangement for the extension of credit, or a
renewal of an extension of credit in the form of a personal loan to or for any
Director or executive officer of the Company that is prohibited by Section 13(k)
of the Exchange Act or other applicable law. In the event that the Committee
determines in its discretion that any loan under this Section may be or will
become prohibited by Section 13(k) of the Exchange Act or other applicable law,
the Committee may provide that such loan shall be immediately due and payable in
full and may take any other action in connection with such loan as the Committee
determines in its discretion to be necessary or appropriate for the repayment,
cancellation or extinguishment of such loan.
Section 10.7 Effect of Plan Upon Options and Compensation Plans
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, the Partnership or any Subsidiary.
Nothing in this Plan shall be construed to limit the right of the Company, the
Partnership or any Subsidiary (i) to establish any other forms of incentives or
compensation for Employees or Independent Directors or (ii) to grant or assume
options or other rights or awards otherwise than under this Plan in connection
with any proper corporate purpose including but not by way of limitation, the
grant or assumption of options in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of the business, securities or assets
of any corporation, partnership, limited liability company, firm or association.
Section 10.8 Section 83(b) Election Prohibited
No Holder may make an election under Section 83(b) of the Code, or any
successor section thereto, with respect to any award or grant under the Plan
without the consent of the Administrator, which the Administrator may grant or
withhold at its sole discretion.
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Section 10.9 Grants of Awards to Certain Employees
The Company, the Partnership and any Subsidiary may provide through the
establishment of a formal written policy or otherwise for the method by which
Common Shares and/or payment therefor may be exchanged or contributed between
the Company and such other party, or may be returned to the Company upon any
forfeiture of Common Shares by the Holder, for the purpose of ensuring that the
relationship between the Company and the Partnership or such Subsidiary remains
at arm's-length.
Section 10.10 Restrictions on Awards
This Plan shall be interpreted and construed in a manner consistent
with the Company's status as a REIT. No Award shall be granted or awarded, and
with respect to an Option already granted under the Plan, such Option shall not
be exercisable:
(a) to the extent such Award or Option exercise could cause the Holder to
be in violation of the Ownership Limit (as defined in the Company's Articles of
Incorporation, as amended from time to time); or
(b) if, in the discretion of the Administrator, such Award or Option
exercise could result in income to the Company which, when considered in light
of the Company's other income, could cause the Company to fail to satisfy the
gross income limitations set forth in Code Section 856(c) or otherwise impair
the Company's status as a REIT.
Section 10.11 Compliance with Laws
The Plan, the granting and vesting of Awards under the Plan and the
issuance and delivery of Common Shares and the payment of money under the Plan
or under Awards granted or awarded hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith; provided, however, that the foregoing shall not relieve
the Company of its obligations under any Award. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
Section 10.12 Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Plan.
Section 10.13 Governing Law
This Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the state of North Carolina
without regard to conflicts of laws thereof.
Section 10.14 Conflicts
Notwithstanding any other provision of the Plan, no Holder shall
acquire or have any right to acquire any Common Shares, and shall not have other
rights under the Plan, which are prohibited under the Company's Articles of
Incorporation, as amended from time to time.
B21
IN WITNESS WHEREOF, the parties below have caused the foregoing Plan to be
approved by their officers duly authorized on April ___, 2004.
TANGER FACTORY OUTLET CENTERS, INC.
a North Carolina corporation
By:
---------------------------------------------------------
Stanley K. Tanger
Chief Executive Officer
TANGER PROPERTIES LIMITED PARTNERSHIP
a North Carolina limited partnership
By: Tanger GP Trust
a Maryland business trust
Its General Partner
By:
------------------------------------------------
Stanley K. Tanger
Chairman of the Board
B-22
[FRONT SIDE OF CARD]
PROXY
TANGER FACTORY OUTLET CENTERS, INC.
Appointment of Proxy for Annual Meeting on May 14, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of TANGER FACTORY OUTLET CENTERS, INC., a North
Carolina corporation, hereby constitutes and appoints Stanley K. Tanger and
Rochelle G. Simpson, and each of them, proxies with full power of substitution
to act for the undersigned and to vote the shares which the undersigned may be
entitled to vote at the Annual Meeting of the Shareholders of such corporation
on May 14, 2004, and at any adjournment or adjournments thereof, as instructed
on the reverse side upon the proposals which are more fully set forth in the
Proxy Statement of Tanger Factory Outlet Centers, Inc. dated April 12, 2004
(receipt of which is acknowledged) and in their discretion upon any other
matters as may properly come before the meeting, including but not limited to,
any proposal to adjourn or postpone the meeting. Any appointment of proxy
heretofore made by the undersigned for such meeting is hereby revoked.
Tanger Factory Outlet Centers, Inc. recommends a vote FOR all Nominees listed in
Proposal 1, FOR Proposal 2, and FOR Proposal 3.
(SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE (SEE REVERSE
SIDE) SIDE)
[BACK SIDE OF CARD]
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark
votes as
in this example.
The shares represented hereby will be voted in accordance with the directions
given in this appointment of proxy. If not otherwise directed herein, shares
represented by this proxy will be voted FOR Proposal 1, FOR Proposal 2 and FOR
Proposal 3; provided however, shares held by a broker or nominee who has not
received specific voting instruction from the beneficial owner will not be voted
FOR or AGAINST Proposal 2 and Proposal 3.
1. To elect Directors to serve for the ensuing year.
Nominees:
(1) Stanley K. Tanger, (2) Steven B. Tanger, (3) Jack Africk,
(4) William G. Benton and (5) Thomas E. Robinson
FOR WITHHELD
ALL FROM ALL
NOMINEES [ ] [ ] NOMINEES
[ ]
----------------------------------------
For all nominees except as written above
2. To ratify the Amended and Restated Incentive Award Plan in order to add
restricted shares and other share-based grants to the plan, to reflect the
merger of the unit option plan of the Operating Partnership into the plan
and to amend the plan in certain other respects.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the increase, from 2,250,000 to 3,000,000, in the aggregate
number of Common Shares which may be issued under the Incentive Award Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE ENCLOSED.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, give full title as such. If a corporation, sign in full
corporate name by president or other authorized officer. If a partnership, sign
in partnership name by authorized person.
Signature: Date: Signature: Date:
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