UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to §240.14a-12
AMREP CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
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AMREP CORPORATION
(An Oklahoma corporation)
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
September 20, 2006
NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of Shareholders of
AMREP Corporation (the "Company") will be held at the Conference Center at
Normandy Farm, Route 202 and Morris Road, Blue Bell, Pennsylvania on September
20, 2006 at 9:00 A.M. for the following purposes:
(1) To elect two directors;
(2) To approve an amendment to the Certificate of Incorporation of
the Company allowing vacancies in the Board of Directors
resulting from an increase in the number of directors to be
filled by the Board;
(3) To approve the adoption of the Company's 2006 Equity Compensation
Plan; and
(4) To consider and act upon such other business as may properly come
before the meeting.
In accordance with the By-Laws, the Board of Directors has fixed the close
of business on July 31, 2006 as the record date for the determination of
shareholders of the Company entitled to notice of and to vote at the meeting and
any continuation or adjournment thereof. The list of such shareholders will be
available for inspection by shareholders during the ten days prior to the
meeting at the offices of the Company, 212 Carnegie Center, Suite 302,
Princeton, New Jersey.
Whether or not you expect to be present at the meeting, please mark, date
and sign the enclosed proxy and return it to the Company in the self-addressed
envelope enclosed for that purpose. The proxy is revocable and will not affect
your right to vote in person in the event you attend the meeting.
Order of the Board of Directors
Joseph S. Moran, Secretary
Dated: August 14, 2006
Princeton, New Jersey
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Upon the written request of any shareholder of the Company, the Company will
provide to such shareholder a copy of the Company's annual report on Form 10-K
for fiscal 2006, including the financial statements and the schedules thereto,
filed with the Securities and Exchange Commission. Any request should be
directed to Joseph S. Moran, Secretary, AMREP Corporation, 212 Carnegie Center,
Suite 302, Princeton, New Jersey 08540. There will be no charge for such report
unless one or more exhibits thereto are requested, in which case the Company's
reasonable expenses of furnishing exhibits may be charged.
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AMREP CORPORATION
212 Carnegie Center, Suite 302
Princeton, New Jersey 08540
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
To be Held at 9:00 A.M. on September 20, 2006
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AMREP Corporation (the "Company") for use
at the Annual Meeting of Shareholders of the Company to be held on September 20,
2006 and at any continuation or adjournment thereof (the "Annual Meeting").
Anyone giving a proxy may revoke it at any time before it is exercised by giving
the Secretary of the Company written notice of the revocation, by submitting a
proxy bearing a later date or by attending the Annual Meeting and voting. This
Proxy Statement and the accompanying Notice of Annual Meeting and proxy form are
first being sent to shareholders on or about August 14, 2006.
All properly executed, unrevoked proxies in the enclosed form which are
received in time will be voted in accordance with the shareholders' directions
and, unless contrary directions are given, will be voted for the election as
directors of the nominees named below and for approval of the proposed amendment
to the Certificate of Incorporation and adoption of the 2006 Equity Compensation
Plan. The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock of the Company authorized to vote will
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted in determining whether a quorum
is present at the Annual Meeting.
Directors are elected by a plurality of the votes of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote on the
election of directors, and abstentions and broker non-votes have no effect. The
favorable vote of the holders of at least two-thirds of the outstanding shares
of Common Stock is required to approve the proposed amendment to the Certificate
of Incorporation, and the favorable vote of a majority of the shares of Common
Stock present in person or by proxy at the meeting and entitled to vote on the
proposal is required to approve the adoption of the 2006 Equity Compensation
Plan. Abstentions will have the effect of negative votes on both proposals.
Broker non-votes will have the effect of negative votes on the proposal to amend
the Certificate of Incorporation and will be treated as not entitled to vote on
the Equity Compensation Plan proposal and, therefore, will have no effect on
that vote.
A copy of the 2006 Annual Report of the Company for the fiscal year ended
April 30, 2006, including financial statements, accompanies this Proxy
Statement. Such Annual Report does not constitute a part of the proxy
solicitation material.
Only shareholders of record at the close of business on July 31, 2006, the
date fixed by the Board of Directors in accordance with the By-Laws, are
entitled to notice of and to vote at the Annual Meeting. As of July 31, 2006,
the Company had issued and outstanding 6,645,112 shares of Common Stock, par
value $.10 per share. Each share of Common Stock is entitled to one vote on
matters to come before the Annual Meeting.
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the following table is information concerning the ownership of
the Common Stock of the Company by the persons who, to the knowledge of the
Company, own beneficially more than 5% of the outstanding shares. The table also
sets forth the same information concerning beneficial ownership for each
director of the Company, each executive officer of the Company and all directors
and executive officers of the Company as a group. Unless otherwise indicated,
reported ownership is as of July 31, 2006, and the Company understands that the
beneficial owners have sole voting and investment power with respect to the
shares beneficially owned by them. In the case of directors and executive
officers, the information below has been provided by such persons at the request
of the Company.
Shares Owned % of
Beneficial Owner Beneficially(1) Class
---------------- ------------ -----
Nicholas G. Karabots (Director) 3,645,953 (2) 54.9
P.O. Box 736
Fort Washington, PA 19034
Albert V. Russo (Director) 1,214,490 (3) 18.3
Lena Russo, Clifton Russo,
Lawrence Russo
American Simlex Company
401 Broadway
New York, NY 10012
Dimensional Fund Advisors Inc. 387,936 (4) 5.8
1299 Ocean Avenue
Santa Monica, CA 90401
Other Directors and Executive Officers
Edward B. Cloues II 15,250 *
Lonnie A. Coombs 12,250 *
Michael P. Duloc 5,000 (5) *
Elmer F. Hansen, Jr. 1,750 *
Joseph S. Moran - -
Peter M. Pizza - -
Samuel N. Seidman 13,250 *
James Wall 8,057 (6) *
Directors and Executive Officers as a Group
(10 persons) 4,916,000 (2),(3),(5),(6) 73.9
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* Indicates less than 1%.
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(1) The shareholdings include 500 shares for each of Messrs. Karabots, Cloues
and Hansen, 1,500 shares for Mr. Coombs, 1,000 shares for Mr. Seidman and
1,500 shares for Albert V. Russo which such persons have the right to
acquire pursuant to options issued under the Company's Non-Employee
Directors Option Plan that are now exercisable or will become so on
September 22, 2006.
(2) Includes 580,615 shares owned by The Karabots Foundation, a private
non-profit corporation founded by Mr. Karabots and of which he is the
President, Foundation Manager and one of two directors. Mr. Karabots
disclaims beneficial ownership of the shares owned by The Karabots
Foundation.
(3) Albert V. Russo, Lena Russo, Clifton Russo and Lawrence Russo have reported
that they share voting power as to these shares and that each of them has
sole dispositive power as to the following numbers of such shares
representing the indicated percentages of the outstanding Common Stock:
Albert V. Russo - 683,491 (10.3%); Lena Russo - 48,740 (0.7%); Clifton
Russo - 262,317 (3.9%); and Lawrence Russo - 219,942 (3.3%).
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of these shares, all of
which are held in portfolios of four registered investment companies or
other investment vehicles, including commingled group trusts, for which
Dimensional serves as investment manager or investment advisor. Dimensional
disclaims beneficial ownership of all such shares. This ownership is
reported in a February 6, 2006 amendment to the Schedule 13G filed by
Dimensional with the Securities and Exchange Commission.
(5) Held jointly with Mr. Duloc's spouse.
(6) Includes 287 shares held in the Company's Savings and Salary Deferral Plan
allocated to the account of Mr. Wall.
ELECTION OF DIRECTORS
The Board of Directors of the Company is a classified board divided into
three classes - Class I consisting of two directors, Class II consisting of two
directors and Class III consisting of three directors. Each class of directors
serves for a term of three years. At this Annual Meeting, two Class I directors
will be elected to serve until the 2009 Annual Meeting and until their
successors are elected and qualified.
The Board of Directors is nominating Edward B. Cloues II and James Wall,
who are incumbent Class I directors, for election at the Annual Meeting.
Although the Board of Directors does not expect that either of the persons
nominated will be unable to serve as a director, should either of them become
unavailable for election it is intended that the shares represented by proxies
in the accompanying form will be voted for the election of a substitute nominee
or nominees selected by the Board.
The Board of Directors unanimously recommends a vote "for" the two Class I
nominees.
The following table sets forth information regarding the nominees of the
Board of Directors for election and the directors whose terms of office do not
expire this year.
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Year First
Elected As Principal Occupation For Past
Name Age A Director Five Years and Current Directorships
---- --- ---------- ------------------------------------
Nominees to serve until the 2009 Annual Meeting (Class I)
Edward B. Cloues II 58 1994 Chairman and Chief Executive Officer
of K-Tron International, Inc., a
material handling equipment
manufacturer; Director of K-Tron
International, Inc., Penn Virginia
Corporation and Penn Virginia
Resource GP, the general partner of
Penn Virginia Resource Partners, L.P.
James Wall 69 1991 Chairman of the Board, President and
Chief Executive Officer of AMREP
Southwest Inc., a wholly-owned
subsidiary of the Company; Senior
Vice President of the Company.
Directors continuing in office until the 2008 Annual Meeting (Class III)
Elmer F. Hansen, Jr. 69 2005 President/Chief Executive Officer of
Hansen Properties, Inc., a company
engaged in the development and
management of real estate investments.
Nicholas G. Karabots 73 1993 Chairman of the Board and Chief
Executive Officer of Kappa Media
Group, Inc., Spartan Organization,
Inc., Jericho National Golf Club,
Inc. and other private companies,
which companies are engaged
primarily in the publishing,
printing, recreational sports and
real estate businesses.
Albert V. Russo 52 1996 Managing Partner, Russo Associates,
Pioneer Realty, real estate entities;
Partner, American Simlex Company,
textile exports. Also, Managing
Partner of 401 Broadway Building, a
real estate company that acquired its
principal asset in 2006 from a Court
appointed receiver for 401 Broadway
Realty Company, of which Mr. Russo was
a general partner, in connection with
the resolution of a dispute among the
partners.
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Year First
Elected As Principal Occupation For Past
Name Age A Director Five Years and Current Directorships
---- --- ---------- ------------------------------------
Directors continuing in office until the 2007 Annual Meeting (Class II)
Samuel N. Seidman 72 1977 President of Seidman & Co., Inc.,
economic consultants and investment
bankers; Director, Chairman of the
Board and Chief Executive Officer
of Productivity Technologies Corp.,
manufacture of metal forming and
handling automation equipment and a
wirer of control panels.
Lonnie A. Coombs 58 2001 Certified Public Accountant, Lonnie
A. Coombs, CPA, accounting, tax and
business consulting services.
Each current director has served continuously since the year in which he
was first elected.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Common Stock is listed on the New York Stock Exchange, and
the Company is subject to the Exchange's Corporate Governance Standards (the
"Governance Standards"). The Governance Standards, among other things, generally
require a listed company to have independent directors within the meaning of the
Governance Standards as a majority of its board of directors and for the board
to have a nominating/corporate governance committee and a compensation committee
composed entirely of independent directors. However, the Company is a
"controlled company" within the meaning of the Governance Standards because
Nicholas G. Karabots and entities related to him have the power to vote more
than a majority of the outstanding Common Stock, and the Governance Standards
permit a controlled company to choose not to comply with those requirements. The
Board has chosen not to have a nominating/corporate governance committee. Also,
the Board has chosen not to comply with the Governance Standards applicable to
compensation committees. Although the Board has a Compensation and Human
Resources Committee, not all of its members are independent directors as is
required by the Governance Standards.
Under the Governance Standards, a director of the Company will not be
considered independent if such person has any material relationship with the
Company, either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company. The Governance Standards
also provide that the presence of any of the following particular relationships
will preclude a determination of independence:
(1) the director is, or has been within the last three years, an employee
of the Company, or an immediate family member is, or has been within the
last three years, an executive officer of the Company;
(2) the director has received, or has an immediate family member who has
received, during any twelve-month period within the last three years, more
than $100,000 in direct compensation from the Company, other than director
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and committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service);
(3) (A) the director or an immediate family member is a current partner of
a firm that is the Company's internal or external auditor; (B) the director
is a current employee of such a firm; (C) the director has an immediate
family member who is a current employee of such a firm and who participates
in the firm's audit, assurance or tax compliance (but not tax planning)
practice; or (D) the director or an immediate family member was within the
last three years (but is no longer) a partner or employee of such a firm
and personally worked on the Company's audit within that time;
(4) the director or an immediate family member is, or has been within the
last three years, employed as an executive officer of another company where
any of the Company's present executive officers at the same time serves or
served on that company's compensation committee; or
(5) the director is a current employee, or an immediate family member is a
current executive officer, of a company that has made payments to, or
received payments from, the Company for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of $1
million or 2% of such other company's consolidated gross revenues.
Mr. Karabots does not qualify as an independent director under the
Governance Standards. He owns and he and certain of his family members are
executives of publishers that are customers for the Company's distribution and
fulfillment services for which the payments involved are in amounts greater than
permitted under the Governance Standards for a director to be considered
independent. Also, his son-in-law, Michael P. Duloc, is the chief operating
officer of the Company's fulfillment and distribution services businesses. Mr.
Wall is a Company employee and therefore does not qualify as an independent
director under the Governance Standards.
Based principally on their responses to questions to these persons
regarding the relationships addressed by the Governance Standards and
discussions with them, the Board has determined that, except for Messrs.
Karabots and Wall, all of its members meet the director independence
requirements of the Governance Standards. The Board was informed that Mr.
Coombs, who is a certified public accountant, for many years has provided, and
expects to continue to provide, business and tax consulting services to
companies owned by Mr. Karabots, including companies which are customers for the
Company's distribution and fulfillment services. The revenues from such business
and tax consulting services for the Company's last three fiscal years have
accounted for from 16.5% to 7.7% of Mr. Coombs' professional service revenues
over those years. However, the Board concluded that Mr. Coombs' relationship
with Mr. Karabots and his companies is as an independent contractor, and not as
an employee, partner, shareholder or officer, and would not interfere with Mr.
Coombs' independence from the Company's management.
The nominees for election as directors are selected by the whole Board of
Directors. The Board has no charter addressing the director nomination process
or any specific qualifications for nominees to meet. If the Board determines in
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the future to seek any new director, it will consider the qualifications for the
position at that time. The Board will consider candidates for director
recommended by shareholders on the same basis as any other proposed nominees.
Any shareholder desiring to propose a candidate for selection as a nominee of
the Board for election at the 2007 Annual Meeting may do so by sending a written
communication no later than May 1, 2007 to AMREP Corporation, 212 Carnegie
Center, Suite 302, Princeton, New Jersey 08540, Attention: Corporate Secretary,
identifying the proposing shareholder, specifying the number of shares of Common
Stock held and stating the name and address of the proposed nominee and the
information concerning such person that the regulations of the Securities and
Exchange Commission require be included in a proxy statement relating to such
person's election as a director. Shareholders should recognize that so long as
Mr. Karabots remains the Company's controlling shareholder, his concurrence is
necessary for the election of any director.
In July 2004 in response to the Governance Standards, the Board adopted
Corporate Governance Guidelines (the "Guidelines") which address various matters
involving the Board and the conduct of its business. The Board also adopted a
new Code of Business Conduct and Ethics setting forth principles of business
conduct applicable to the directors, officers and employees of the Company. The
Guidelines and Code of Business Conduct and Ethics, as well as the charters of
the Board's Audit Committee and Compensation and Human Resources Committee, may
be viewed under "Corporate Governance" on the Company's website at
www.amrepcorp.com, and written copies will be provided to any shareholder upon
request to the Company at AMREP Corporation, 212 Carnegie Center, Suite 302,
Princeton, New Jersey 08540, Attention: Corporate Secretary. The Company intends
to disclose on its website any amendment to or waiver of any provision of the
Code of Business Conduct and Ethics that applies to any of its executive
officers, including its principal financial and accounting officer.
Directors are expected to attend Annual Meetings of Shareholders, and all
of the incumbent directors attended last year's Annual Meeting. The Board held
four meetings during the last fiscal year, and all of the incumbent directors
attended at least 75% of the total of those meetings and the meetings during
such year of the Board Committees of which they were members. Pursuant to the
Guidelines, the Board has established a policy that the non-management directors
meet in executive session at least two times per year and that the independent
directors also meet in executive session at least twice per year. The Chairman
of the Board (currently, Edward B. Cloues II), if in attendance, will be the
presiding director at each such executive session; otherwise, those attending
will select a presiding director.
Any shareholder wishing to communicate with the Board or any of the
directors may send a written communication to AMREP Corporation, 212 Carnegie
Center, Suite 302, Princeton, New Jersey 08540, Attention: Corporate Secretary
for forwarding to the intended person or persons.
The Board has an Executive Committee which generally has the power of the
Board and acts, as needed, between meetings of the Board. Also, in the absence
of a Chief Executive Officer (the Company has not had a CEO since January 1996),
the Committee is charged with the oversight of the Company's business. The
current members of the Committee are Messrs. Cloues, Karabots and Russo. Mr.
Cloues is Chairman of the Board and of the Committee and is compensated for his
services in those positions at the rate of $135,000 per year. Mr. Karabots is
Vice-Chairman of the Board and of the Committee, and the Company pays a monthly
fee of $10,000 to a company that he owns for making him available to act in such
positions. These payments for Messrs. Cloues and Karabots are in addition to the
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other fees paid to them as directors and members of the Compensation and Human
Resources Committee. During the last fiscal year, the Executive Committee met
four times on a formal basis and frequently on an informal basis
The Board also has an Audit Committee and a Compensation and Human
Resources Committee. For fiscal 2006, the fee payable to members of the Audit
Committee for each Committee meeting attended was $1,000. For fiscal 2006, the
fee payable to members of the Compensation and Human Resources Committee for
each Committee meeting attended was $750.
Each member of the Audit Committee is an independent director, as defined
by the Governance Standards. The Committee operates under a written charter
adopted by the Board of Directors, most recently on July 13, 2004. The duties of
the Audit Committee include (i) appointing the Company's independent registered
public accounting firm, approving the services to be provided by that firm and
its compensation and reviewing that firm's independence and performance of
services, (ii) reviewing the scope and results of the yearly audit by the
independent registered public accounting firm, (iii) reviewing the Company's
system of internal controls and procedures, (iv) reviewing with management and
the independent registered public accounting firm the Company's annual and
quarterly financial statements, (v) reviewing the Company's financial reporting
and accounting standards and principles, and (vi) overseeing the administration
of the Guidelines. This Committee reports regularly to the Board concerning its
activities. The current members of this Committee are Messrs. Coombs, Hansen and
Seidman (Chairman), each of whom has been determined by the Board to be
independent and financially literate within the meaning of the Governance
Standards. The Board has also determined that Mr. Coombs, who is a certified
public accountant, qualifies as an audit committee financial expert within the
meaning of Securities and Exchange Commission regulations. The Audit Committee
held five meetings during the last fiscal year.
Under its charter, adopted by the Board in July 2005, the Compensation and
Human Resources Committee is responsible for determining salaries and bonuses
for the executives of the Company and its subsidiaries, establishing overall
compensation and benefit levels and fixing bonus pools for other employees, and
making recommendations to the Board concerning other matters relating to
employees and regarding director compensation. The members of this Committee are
Messrs. Cloues, Karabots (Chairman) and Russo, and it held five meetings during
the last fiscal year.
For fiscal 2006, each non-employee director of the Company was paid a fee
of $20,000 in addition to fees paid to such director as a member of one or more
Board Committees. Additionally, under the 2002 Non-Employee Directors' Stock
Plan, each non-employee director receives a grant from the Company of 1,250
shares of its Common Stock on each March 15 and September 15 as partial payment
for services for the preceding six months. Regarding the fiscal 2006 grants, the
last sales prices for the Common Stock on the New York Stock Exchange on
September 15, 2005 and March 15, 2006 were $27.28 and $31.40.
Also, through the 2005 Annual Meeting of Shareholders, the Company had in
effect the Non-Employee Directors Option Plan, under which following each Annual
Meeting each non-employee director was granted an option covering 500 shares of
Common Stock of the Company. The price per share payable upon exercise of such
option was either (i) the mean between the highest and lowest reported sale
price of the Common Stock on the date of grant on the New York Stock Exchange,
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or (ii) the price of the last sale of Common Stock on that date as quoted on the
New York Stock Exchange, whichever was higher. For the options granted following
the 2005 Annual Meeting, the exercise price is $24.88 per share. Options granted
under the Plan are first exercisable as to all or any portion of the shares
covered thereby one year after the date of grant and expire five years after the
date of grant. The Board terminated the Plan effective following the 2005
grants.
AMENDMENT TO CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of the Company provides for the By-Laws to
fix the size of the Board of Directors, subject to a maximum of twelve
directors. The size of the Board is presently fixed at seven directors. Although
the Board has the authority to amend the By-Laws to increase the number of
directors, the Certificate of Incorporation at present permits only the
shareholders to fill vacancies created by such Board action.
The Board of Directors believes that this limit on its authority interferes
with its ability to efficiently manage the business and affairs of the Company.
Although the Board has no present intention to seek additional directors, it
believes that the Company's business and the enhanced corporate governance
responsibilities of the Board, as well as the possibility of future
acquisitions, may create a future need or desire to expand the Board. The Board
believes that the current requirement that only the shareholders may elect the
additional directors with the attendant extension of the period for the election
process could unnecessarily delay the implementation of desired increases in
Board membership and might hamper the ability of the Board to convince suitable
candidates to join the Board.
The Board therefore is proposing an amendment to the Certificate of
Incorporation, the text of which is included as Appendix A to this Proxy
Statement, allowing the Board to fill vacancies resulting from an increase in
its size. The authority proposed to be granted to the Board will not alter the
existing authority of the shareholders as well to fill such vacancies.
If the shareholders approve the proposed amendment, it will become
effective upon the filing of a Certificate of Amendment to the Certificate of
Incorporation with the Oklahoma Secretary of State which is intended will be
done promptly after the Annual Meeting.
The Board of Directors unanimously recommends a vote "for" the proposed
amendment to the Certificate of Incorporation.
APPROVAL OF ADOPTION OF THE AMREP CORPORATION
2006 EQUITY COMPENSATION PLAN
On July 20, 2006, the Board adopted the AMREP Corporation 2006 Equity
Compensation Plan (the "Plan"), subject to shareholder approval. The Board has
directed that the proposal to approve its adoption of the Plan be submitted to
the Company's shareholders at the Annual Meeting. Shareholder approval is being
sought (i) in order for the shares covered by the Plan to meet the listing
requirements of the New York Stock Exchange, (ii) so that compensation
attributable to certain grants under the Plan may qualify for an exemption from
the $1 million deduction limit under section 162(m) of the Internal Revenue Code
of 1986 (the "Code") (see discussion of "Federal Income Tax Consequences"
below), and (iii) in order for any incentive stock options granted thereunder to
meet the requirements of the Code.
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The Board believes that the Plan will further the Company's compensation
strategy. The Company's ability to attract, retain and motivate top quality
employees and non-employee directors is material to the Company's success. The
Board believes that the interests of the Company and its shareholders will be
advanced if the Company can offer its employees and non-employee directors the
opportunity to acquire or increase their ownership interests in the Company by
receiving grants under the Plan. The Company's only existing equity compensation
plan is the 2002 Non-Employee Directors' Stock Plan. This plan for the Company's
non-employee directors is described under "The Board of Directors and its
Committees" above and "Equity Compensation Plan Information" below and is not
affected by the adoption of the Plan. However, only 12,500 shares of Common
Stock remain available for grant under the Directors' Plan, 7,500 of which are
expected to be issued on September 15, 2006.
The material terms of the Plan are summarized below. A copy of the full
text of the Plan is attached to this Proxy Statement as Appendix B. This summary
of the Plan is not intended to be a complete description of the Plan and is
qualified in its entirety by the actual text of the Plan to which reference is
made.
Material Features of the Plan
General. The Plan provides that grants may be made in any of the following
forms: (i) incentive stock options, (ii) nonqualified stock options (incentive
stock options and nonqualified stock options are collectively referred to as
"options"), (iii) stock awards, (iv) stock units, (v) stock appreciation rights
("SARs"), (vi) dividend equivalents and (vii) other stock-based awards.
The Plan authorizes up to 400,000 shares of Common Stock for issuance,
subject to adjustment in certain circumstances as described below. If and to the
extent options and SARs granted under the Plan terminate, expire or are
cancelled, forfeited, exchanged or surrendered without being exercised or if any
stock awards, stock units or other stock-based awards are forfeited or
terminated, the shares subject to such grants will become available again for
purposes of the Plan.
The Plan provides that the maximum aggregate number of shares of Common
Stock with respect to which grants may be made to any individual during any
calendar year is 20,000 shares, subject to adjustment as described below. All
grants under the Plan will be expressed in shares of Common Stock.
If approved by the shareholders, the Plan will become effective on
September 20, 2006 or, if later, the date of such approval.
Administration. The Plan will be administered and interpreted by the Board
of Directors or by a committee (the "Committee") unanimously appointed by the
Board from among its members, provided that (i) the Board shall act as the
Committee in the absence of the unanimous appointment of the Committee by the
Board and (ii) grants under the Plan to non-employee directors shall be awarded
and administered only by the Board. The Committee has the authority to (i)
determine the individuals to whom grants will be made under the Plan, (ii)
determine the type, size, terms and conditions of the grants, (iii) determine
when grants will be made and the duration of any applicable exercise or
restriction period, including the criteria for exercisability and the
acceleration of exercisability, (iv) amend the terms and conditions of any
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previously issued grant, subject to the limitations described below, and (v)
deal with any other matters arising under the Plan.
Eligibility for Participation. All employees of the Company and its
subsidiaries and all non-employee directors of the Company are eligible to
receive grants under the Plan. As of July 14, 2006, the date of the Plan's
adoption by the Board, approximately 1,300 employees and six non-employee
directors were eligible to receive grants under the Plan. The Committee is
authorized to select the persons to receive grants from among those eligible and
to determine the number of shares of Common Stock that are subject to each
grant.
Types of Awards.
Stock Options. The Committee may grant options intended to qualify as
---------------
"incentive stock options" within the meaning of section 422 of the Code ("ISOs")
or "nonqualified stock options" that are not intended to so qualify ("NQSOs") or
any combination of ISOs and NQSOs. Anyone eligible to participate in the Plan
may receive a grant of NQSOs. Only employees of the Company and its subsidiaries
may receive a grant of ISOs.
The Committee will fix the exercise price per share of options on the date
of grant. The exercise price of options granted under the Plan may be equal to
or greater than the fair market value of the underlying shares of Common Stock
on the date of grant. However, if the grantee of an ISO is a person who holds
more than 10% of the total combined voting power of all classes of outstanding
stock of the Company, the exercise price per share of an ISO granted to such
person must be at least 110% of the fair market value of a share of Common Stock
on the date of grant. If the aggregate fair market value of shares of Common
Stock, determined on the date of grant, with respect to which ISOs become
exercisable for the first time by a grantee during any calendar year exceeds
$100,000, such ISOs, to the extent of such excess over $100,000, will be treated
as NQSOs.
The Committee will determine the term of each option, but such term may not
exceed ten years from the date of grant; however, if the grantee of an ISO is a
person who holds more than 10% of the combined voting power of all classes of
outstanding stock of the Company, the term of the ISO may not exceed five years
from the date of grant. The Committee will determine the terms and conditions of
options, including when they become exercisable. The Committee may accelerate
the exercisability of any options.
A grantee may exercise an option by delivering notice of exercise to the
Company. The grantee will pay the exercise price and any withholding taxes for
the option: (i) in cash, (ii) unless the Committee determines otherwise, by
delivering shares of Common Stock already owned by the grantee and having a fair
market value on the date of exercise equal to the exercise price or to that
portion thereof not paid in cash, (iii) by payment through a broker in
accordance with the procedures permitted by Regulation T of the Federal Reserve
Board, or (iv) by such other method as the Committee may approve.
The Committee will determine under what circumstances a grantee may
exercise an option after termination of employment or service, but in no event
may this be later than the expiration of the option term. Generally, if a
grantee ceases to be employed by, or provide service to, the Company or any
subsidiary for any reason other than disability, death or termination for cause,
the grantee's options will terminate 90 days following the date on which the
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grantee ceases to be employed by, or provide service to, the Company or any
subsidiary. If a grantee's employment or service ceases due to a disability or
death, the grantee's options will terminate 180 days following the date on which
the grantee ceases to be employed by, or provide service to, the Company or any
subsidiary. In each case described above, the Committee may specify a different
option termination date, but in any event no later than the expiration of the
option term. If a grantee ceases to be employed by, or provide service to, the
Company or any subsidiary on account of termination for cause, the grantee's
options will terminate immediately.
Stock Awards. The Committee may grant stock awards to anyone eligible to
-------------
participate in the Plan. The Committee may require that grantees pay
consideration for the stock awards and may impose restrictions on the stock
awards. If restrictions are imposed on stock awards, the Committee will
determine whether they will lapse over a period of time or according to such
other criteria as the Committee determines. The Committee will determine the
number of shares of Common Stock subject to the grant of stock awards and the
other terms and conditions of the grant. The Committee will determine to what
extent and under what conditions grantees will have the right to vote shares of
Common Stock and to receive dividends paid on such shares during the restriction
period. The Committee may determine that a grantee's entitlement to dividends
with respect to stock awards will be subject to the achievement of performance
goals or other conditions.
Stock Units. The Committee may grant stock units to anyone eligible to
-------------
participate in the Plan. Each stock unit provides the grantee with the right to
receive an amount based on the value of a share of Common Stock at a future
date. The Committee will determine the number of stock units to be granted,
whether stock units will become payable based on achievement of performance
goals or other conditions, and the other terms and conditions applicable to
stock units. Stock units may be paid at the end of a specified period or
deferred to a date authorized by the Committee. If a stock unit becomes
distributable, it will be paid to the grantee in cash, in shares of Common Stock
or in a combination of cash and shares of Common Stock, as determined by the
Committee.
SARs. The Committee may grant SARs to anyone eligible to participate in the
-----
Plan. SARs may be granted in connection with, or independently of, any option
granted under the Plan. Upon exercise of an SAR, the grantee will receive an
amount equal to the excess of the fair market value of the Common Stock on the
date of exercise over the base amount of the SAR. Payment will be made in shares
of Common Stock, in cash or in a combination of shares and cash, as determined
by the Committee. The base amount of each SAR will be determined by the
Committee and will be equal to the per share exercise price of the related
option or, if there is no related option, an amount that is at least equal to
the value of a share of Common Stock on the date of grant of the SAR. The
Committee will determine the terms and conditions of SARs, including when they
become exercisable. The Committee may accelerate the exercisability of any SARs.
SARs may be exercised during the period specified by the Committee, but only
while the grantee is employed by or providing service to the Company and its
subsidiaries or within a specified period of time after termination of such
employment or service, as described above with respect to stock options.
Other Stock Based Awards. The Committee may grant other stock-based awards,
-------------------------
which are grants other than options, stock awards, stock units or SARs. The
Committee may grant other stock-based awards to anyone eligible to participate
in the Plan. These grants will be based on or measured by shares of Common
Stock, and will be payable in cash, in shares of Common Stock or in a
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combination of cash and shares of Common Stock, as determined by the Committee.
The terms and conditions for other stock-based awards will be determined by the
Committee.
Dividend Equivalents. The Committee may grant dividend equivalents in
----------------------
connection with stock units or other stock-based awards. Dividend equivalents
are payable in cash or shares of Common Stock and may be paid currently or
accrued as contingent obligations. The terms and conditions of dividend
equivalents will be determined by the Committee.
Qualified Performance-Based Compensation. The Plan permits the Committee to
impose objective performance goals that must be met with respect to grants of
stock awards, stock units, other stock-based awards or dividend equivalents
granted to employees under the Plan, in order for the grants to be considered
qualified performance-based compensation for purposes of section 162(m) of the
Code (see "Federal Income Tax Consequences" below). Prior to, or soon after the
beginning of, the performance period, the Committee will establish in writing
the performance goals that must be met, the applicable performance period, the
amounts to be paid if the performance goals are met and any other conditions.
The performance goals, to the extent designed to meet the requirements of
section 162(m) of the Code, will be based on one or more of the following
measures: stock price, earnings per share, net earnings, operating earnings,
earnings before income taxes, EBITDA (earnings before income tax expense,
interest expense, and depreciation and amortization expense), return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share or strategic business criteria consisting of one or more objectives
based on meeting specified revenue goals, market penetration goals, geographic
business expansion goals, cost targets or goals relating to acquisitions or
divestitures.
If dividend equivalents are granted as qualified performance-based
compensation under section 162(m) of the Code, the grantee may not accrue more
than $50,000 of such dividend equivalents during any calendar year.
Deferrals. The Committee may permit or require grantees to defer receipt of
the payment of cash or the delivery of shares of Common Stock that would
otherwise be due to the grantee in connection with any stock units or other
stock-based awards under the Plan. The Committee will establish the rules and
procedures, consistent with section 409A of the Code, applicable to any such
deferrals and may provide for interest or other earnings to be paid on such
deferrals.
Adjustment Provisions. If there is any change in the number or kind of
shares of the Common Stock by reason of a stock dividend of greater than 10%,
recapitalization, stock split, combination or exchange of shares, merger,
reorganization, consolidation, reclassification, change in par value, spin-off,
split-off, or split-up, the limit on the number of shares of Common Stock any
individual may receive pursuant to grants in any year, the number of shares
covered by outstanding grants, the kind of shares to be issued under the Plan
and the price per share of such grants shall be appropriately adjusted by the
Committee to reflect any increase or decrease in the number or kind of issued
shares of Common Stock in order to preclude, to the extent practicable, the
enlargement or dilution of the rights and benefits under such grants. Any
fractional shares resulting from such adjustment will be eliminated. Upon any
such event, the Committee also has the discretion to appropriately adjust the
number of shares available for grants so long as the action taken would not
disqualify options intended to be ISOs.
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Change of Control. In the event of a change of control of the Company, as
defined in the Plan, the Committee may, but need not, in its sole discretion,
take any or all of the following actions: (i) accelerate the exercisability of
all outstanding options and SARs in whole or in part; (ii) determine that the
restrictions and conditions on all outstanding stock awards shall lapse in whole
or in part; (iii) determine that all stock units, dividend equivalents and other
stock-based awards are fully vested and shall be paid at no less than their
target values, if any, or in such amounts as the Committee may determine in the
case of awards without target values; (iv) require that grantees surrender their
options and SARs in exchange for payment by the Company, in cash or shares of
Common Stock as determined by the Committee, in an amount equal to the amount by
which the then fair market value of the shares subject to the grantee's
unexercised options and SARs exceeds the exercise price of the options or the
base amount of the SARs, as applicable; (v) after giving grantees the
opportunity to exercise their options and SARs, terminate any or all unexercised
options and SARs at such time as the Committee determines appropriate; or (vi)
determine that outstanding options and SARS that are not exercised will be
assumed by, or replaced with comparable options or rights by, the surviving
corporation.
Transferability of Grants. Only the grantee may exercise rights under a
grant during the grantee's lifetime. A grantee may not transfer those rights
except by will or the laws of descent and distribution; provided, however, that
a grantee may transfer a grant other than an ISO pursuant to a domestic
relations order. The Committee may also provide, in a grant agreement, that a
grantee may transfer NQSOs to his or her family members, or one or more trusts
or other entities for the benefit of or owned by such family members, consistent
with applicable securities laws, according to such terms as the Committee may
determine.
Grantees Outside the United States. If any individual who receives a grant
under the Plan is subject to taxation in a country other than the United States,
the Committee may make the grant on such terms and conditions as the Committee
determines appropriate to comply with the laws of the applicable country.
No Repricing of Options. Neither the Board nor the Committee can amend the
Plan or options previously granted under the Plan to permit a repricing of
options, without prior shareholder approval. Adjustments to the exercise price
or number of shares of Common Stock subject to an option to reflect the effects
of a stock split or other corporate transaction will not constitute a repricing.
Amendment and Termination of the Plan. The Board may amend or terminate the
Plan at any time, subject to shareholder approval if such approval is required
under any applicable laws or stock exchange requirements. The Plan will
terminate on September 19, 2016, unless the Plan is terminated earlier by the
Board or is extended by the Board with shareholder consent.
Grants Under the Plan. No grants have been made under the Plan. Grants
under the Plan are discretionary, so it is not currently possible to predict the
number of shares of Common Stock that will be granted or who will receive grants
under the Plan after the Annual Meeting.
The closing price of the Company's Common Stock on the New York Stock
Exchange on July 31, 2006, was $37.37 per share.
-14-
Federal Income Tax Consequences
The federal income tax consequences of grants under the Plan will depend on
the type of grant. The following description provides only a general description
of the application of federal income tax laws to grants under the Plan. This
discussion is intended for the information of shareholders considering how to
vote at the Annual Meeting and not as tax guidance to grantees, as the
consequences may vary with the types of grants made, the identity of the
grantees and the method of payment or settlement. The summary does not address
the effects of other federal taxes (including possible "golden parachute" excise
taxes) or taxes imposed under state, local or foreign tax laws.
From the grantees' standpoint, as a general rule, ordinary income will be
recognized at the time of delivery of shares of Common Stock or payment of cash
under the Plan. Future appreciation on shares of Common Stock held beyond the
ordinary income recognition event will be taxable as capital gain when the
shares of Common Stock are sold. The tax rate applicable to the capital gain
will depend upon how long the grantee holds the shares. The Company, as a
general rule, will be entitled to a tax deduction that corresponds in time and
amount to the ordinary income recognized by the grantee, and the Company will
not be entitled to any tax deduction with respect to capital gain income
recognized by the grantee.
Exceptions to these general rules arise under the following circumstances:
(i) If shares of Common Stock, when delivered, are subject to a substantial
risk of forfeiture by reason of any employment or performance-related condition,
ordinary income taxation and the Company's tax deduction will be delayed until
the risk of forfeiture lapses, unless the grantee makes a special election to
accelerate taxation under section 83(b) of the Code.
(ii) If an employee exercises a stock option that qualifies as an ISO, no
ordinary income will be recognized, and the Company will not be entitled to any
tax deduction, if shares of Common Stock acquired upon exercise of the stock
option are held until the later of (A) one year from the date of exercise and
(B) two years from the date of grant. However, if the employee disposes of the
shares acquired upon exercise of an ISO before satisfying both holding period
requirements, the employee will recognize ordinary income to the extent of the
difference between the fair market value of the shares on the date of exercise
(or the amount realized on the disposition, if less) and the exercise price, and
the Company will be entitled to a tax deduction in that amount. The gain, if
any, in excess of the amount recognized as ordinary income will be long-term or
short-term capital gain, depending upon the length of time the employee held the
shares before the disposition.
(iii) Although the exercise by an employee of a stock option that qualifies
as an ISO is not a taxable event for regular income tax purposes, the difference
between the exercise price and the fair market value of the Common Stock at the
time of exercise is treated as an item of alternative minimum taxable income. In
general, items of alternative minimum taxable income in excess of the exemption
amount (currently $62,500 for joint filers and $42,500 for single filers) may be
taxed at the rate of 26% (up to $175,000) or 28% (in excess of $175,000).
-15-
(iv) A grant may be subject to a 20% tax, in addition to ordinary income
tax, at the time the grant becomes vested, plus interest, if the grant
constitutes deferred compensation under section 409A of the Code and the
requirements of section 409A of the Code are not satisfied.
Section 162(m) of the Code generally disallows a publicly-held
corporation's tax deduction for compensation paid to its chief executive officer
or any of its four other most highly compensated officers in excess of $1
million in any year. Qualified performance-based compensation is excluded from
the $1 million deductibility limit, and therefore remains fully deductible by
the corporation that pays it. Options and SARs will generally meet the
requirements for qualified performance-based compensation. Stock awards, stock
units, dividend equivalents and other stock-based awards granted under the Plan
will be designated as qualified performance-based compensation if the Committee
conditions such grants on the achievement of specific performance goals in
accordance with the requirements of section 162(m) of the Code.
The Company has the right to require that grantees pay to the Company an
amount necessary for the Company to satisfy its federal, state and local tax
withholding obligations with respect to grants. The Company may withhold from
other amounts payable to a grantee an amount necessary to satisfy these
obligations. The Committee may permit a grantee to satisfy the Company's
withholding obligation with respect to a grant paid in Common Stock by having
shares withheld, at the time the grant becomes taxable, provided that the number
of shares withheld does not exceed the individual's minimum applicable
withholding tax rate for federal, state and local tax liabilities.
The Board unanimously recommends a vote "for" approval of the adoption of
the 2006 Equity Compensation Plan.
-16-
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth certain information
concerning the compensation of the Company's executive officers.*
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------
Other Annual
Compensation($)
Name and Principal Position Year Salary($) Bonus($) (a)(b)
--------------------------- ---- --------- -------- ------------
James Wall 2006 283,868 - (c) 12,000
Senior Vice President; 2005 281,831 50,000 (d) 10,732
Chairman of the Board, 2004 277,572 35,000 4,552
President and CEO of the
Company's AMREP Southwest
Inc. subsidiary
Michael P. Duloc 2006 224,525 - (c) 7,828
Chief Operating Officer 2005 220,619 22,500 (d) 7,428
of the Company's fulfillment 2004 217,042 12,500 4,298
and distribution services
businesses
Peter M. Pizza 2006 177,970 - (c) 7,518
Vice President, Chief 2005 174,720 10,000 (d) 8,249
Financial Officer and 2004 171,692 10,000 1,639
Treasurer
Joseph S. Moran 2006 167,211(e) - (c) -
Vice President, General 2005 - - -
Counsel and Secretary 2004 - - -
_____________________________________
(a) Includes amounts contributed by the Company to the Company's Savings and
Salary Deferral Plan.
(b) Other compensation in the form of personal benefits to the named persons
has been omitted because it does not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus as to each.
(c) No determination has yet been made with respect to bonuses for fiscal 2006.
(d) The determination to award bonuses for fiscal 2005 was made after the 2005
Annual Meeting and, therefore, not disclosed in the Proxy Statement for
that meeting.
(e) Mr. Moran first joined the Company and became an executive officer on June
6, 2005.
Options
No stock options were granted to or exercised by any of the officers named
in the Summary Compensation Table during the fiscal year ended April 30, 2006.
No stock options were held by any of such officers at April 30, 2006.
_____________________________________
* Since January 1996, the Company has not had a CEO.
-17-
Compensation and Human Resources Committee Report on Executive Compensation
The current members of the Company's Compensation and Human Resources
Committee are Messrs. Cloues, Karabots and Russo.
Compensation Policy for Executive Officers
------------------------------------------
The Compensation and Human Resources Committee's compensation policy for
executive officers is to pay competitively, while balancing pay versus
performance and otherwise to be fair and equitable in the administration of
compensation. In determining the salary to be paid to a particular individual,
the Compensation and Human Resources Committee applies these and other criteria,
while also using its best judgment of compensation applicable to other
executives holding comparable positions both within the Company and at other
companies.
With respect to salaries, bonuses and other compensation and benefits, the
decisions and recommendations of the Compensation and Human Resources Committee
are subjective and are not based on any list of specific criteria. We believe
that the compensation received by each of the executive officers for fiscal 2006
was reasonable. The Company has not had a Chief Executive Officer since January
1996, when the employment of the then CEO was terminated due to disability, and
senior management now operates under the supervision of the Executive Committee
of the Board and its Chairman, who is also the Chairman of the Board.
On September 20, 2005, the Compensation and Human Resources Committee
approved the payment of bonuses to the executive officers based on the
Committee's evaluation of their performance in fiscal 2005. The Committee has
not yet acted on bonuses for executive officers in respect of fiscal 2006.
There have been no stock options granted to executive officers since fiscal
1995.
Payments during fiscal 2006 to the Company's executives as discussed above
were made with regard to the provisions of Section 162(m) of the Internal
Revenue Code. Section 162(m) limits the deduction that may be claimed by a
"public company" for compensation paid to certain individuals to $1 million,
except to the extent that any excess compensation is "performance-based
compensation". It is the Compensation and Human Resources Committee's intention
that compensation will not be awarded that exceeds the deductibility limits of
Section 162(m).
Bases for Chief Executive Officer's Compensation
------------------------------------------------
Since January 1996, the Company has not had a CEO.
Nicholas G. Karabots, Chairman
Edward B. Cloues II
Albert V. Russo
July 14, 2006
Compensation Committee Interlocks and Insider Participation
On August 4, 1993, pursuant to an agreement with Nicholas G. Karabots and
two corporations he then owned, the Company, in exchange for 575,593 shares of
its Common Stock, acquired various rights to distribute magazines for its
distribution business. The distribution rights covered various magazines
-18-
published by unaffiliated publishers, as well as magazines published by Mr.
Karabots' companies. Mr. Karabots is a director, Vice-Chairman of the Board and
of the Executive Committee, Chairman of the Compensation and Human Resources
Committee and the father-in-law of Michael P. Duloc, one of the Company's
executive officers.
The conduct of the Company's magazine distribution business involves the
purchase of magazines from publishing companies, including those owned or
controlled by Mr. Karabots, and their resale to wholesalers. During the fiscal
year ended April 30, 2006, the purchases of magazines from Mr. Karabots'
companies amounted to approximately $45.2 million. The Company reports as
revenues only the spread between the prices paid to publishers and the prices
received for copies sold to wholesaler customers. The $45.2 million paid to Mr.
Karabots' companies represents 27.7% of the approximately $163 million which the
Company paid to all publishers in fiscal 2006. Consistent with industry
practice, advance payments for magazine purchases are made to publishers,
including Mr. Karabots' companies, based upon estimates of the amounts that will
be due to them from the sales of their publications to the buying public. If the
actual sales are less than estimated, overadvances will result, which the
publishers are obligated to repay promptly, without interest. The total
overadvance to Mr. Karabots' companies at June 30, 2006 was approximately
$90,000 and its highest amount between May 1, 2005 and June 30, 2006 was
approximately $115,000.
The distribution contracts were scheduled to expire on December 31, 2005.
On March 17, 2006, effective as of January 1, 2006, in accordance with the
approval of the Independent Committee described below, the Company entered into
an agreement extending the distribution contracts for 30 months to June 30,
2008, on their existing terms except for an increase in the price paid to the
publishers for the magazines and the provision by the Company to the publishers
of certain additional promotional assistance.
The Company also provides fulfillment services for publishing companies
owned or controlled by Mr. Karabots. The fulfillment services contracts were to
have been effective through August 1, 2006, and year to year thereafter, unless
terminated at the election of either party. However, in conjunction with the
extension of the distribution contracts, the fulfillment services contracts were
also extended to June 30, 2008, substantially on their existing terms. For
fiscal 2006, the Company's revenues from these fulfillment services contracts
were $332,100.
A committee of the Board of Directors of the Company (the "Independent
Committee") comprised of independent directors whom the Board also found to be
independent of Mr. Karabots, has been appointed with authority to consider and,
if deemed appropriate, to approve new contracts and material modifications to
existing contracts between the Company and companies owned or controlled by Mr.
Karabots. In accordance with such authority, the Independent Committee has
approved the extensions of the distribution contracts and fulfillment services
contracts with Mr. Karabots' companies. In granting such approval, the
Independent Committee concluded that the extension terms were fair and
reasonable and no less favorable to the Company than would be obtained in a
comparable arm's length transaction with an unaffiliated publisher having the
same volume of business as Mr. Karabots' companies.
Performance Graph
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return of the Standard & Poor's
500 Index ("S&P 500 Index") and with an index comprised of the stock of 27
-19-
companies with market capitalizations similar to that of the Company ("Similar
Cap Issuers"), for the five years ended April 30, 2006 (assuming the investment
of $100 in the stock of the Company, the S&P 500 Index and the Similar Cap
Issuers on April 30, 2001 and the reinvestment of all dividends). The Company
cannot identify an index of issuers engaged in operations similar to those in
which it is currently engaged and therefore has determined to use the Similar
Cap Issuers for purposes of comparison.
2001 2002 2003 2004 2005 2006
---- ---- ---- ---- ---- ----
AMREP CORP 100 205.13 241.03 452.79 649.02 1443.91
S&P 500 INDEX 100 87.37 75.75 93.08 98.98 114.23
SIMILAR CAP ISSUERS 100 143.54 158.80 258.86 274.79 414.67
The Similar Cap Issuers are: Abigail Adams National Bancorp, Inc., Allied
Healthcare Products, Inc., American Communities Properties Trust, Ark
Restaurants Corp., Bolt Technology Corporation, Cambior Inc., Champion
Industries, Inc., Clean Harbors, Inc., Devcon International Corp., First Mariner
Bancorp, Focus Enhancements, Inc., Fortune Industries, Inc., Giga-tronics
Incorporated, Goldleaf Financial Solutions, Inc., HearUSA, Inc., Hi-Tech
Pharmacal Co., Inc., Horizon Bancorp (Indiana), Ipix Corporation, Mannatech,
Incorporated, MFB Corp., Midsouth Bancorp, Inc., New Brunswick Scientific Co.,
Inc., Perficient, Inc., Schiff Nutrition International, Inc., Smith Micro
Software, Inc., T-3 Energy Services, Inc. and Vitran Corporation Inc.
As a result of changes in market capitalizations from year to year, none of
the companies comprising the Similar Cap Issuer index in the Company's 2005
Proxy Statement met the criteria for inclusion in the Similar Cap Issuer index
in this Proxy Statement. The 2005 Similar Cap companies were: Bankrate, Inc.,
Cavalier Homes, Inc., D&K Healthcare Resources, Inc., Deckers Outdoor
Corporation, DSG International Limited, First Federal Bankshares, Inc., First
National Lincoln Corporation (Maine), Glowpoint, Inc., Golden Enterprises, Inc.,
Horizon Health Corporation, Hyperdynamics Corporation, I.D. Systems, Inc., Key
-20-
Technology, Inc., Koss Corporation, Lipid Sciences, Inc., Mer Telemanagement
Solutions Ltd., Mercury Air Group, Inc., Merit Medical Systems, Inc., NewMil
Bancorp, Inc., Northway Financial, Inc., Oil-Dri Corporation of America,
Perceptron, Inc., Security Capital Corporation (Delaware), SIFCO Industries,
Inc., Sport Chalet, Inc., TeamStaff, Inc. and Zindart Limited.
Equity Compensation Plan Information
The following table sets forth information as of April 30, 2006 concerning
Common Stock of the Company which is issuable under its compensation plans.
(C)
(A) (B) Number of securities
Number of securities Weighted average remaining available for
to be issued upon exercise price of future issuance under
exercise of outstanding equity compensation plans
outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (A))
------------- ------------------- ---------- ------------------------
Equity compensation plans approved by
shareholders 7,000 (a) $18.56 -
Equity compensation plans not
approved by shareholders - - 12,500 (b)
----- ------
Total 7,000 12,500
===== ======
____________________________
(a) Consists of shares issuable upon exercise of outstanding options issued
under the Non-Employee Directors Option Plan. This Plan was terminated by
the Board in fiscal 2006 and no further grants may be made.
(b) Consists of shares available for issuance under the 2002 Non-Employee
Directors' Stock Plan.
On December 5, 2002, the Board of Directors adopted the AMREP Corporation
2002 Non-Employee Directors' Stock Plan and reserved 65,000 shares of Common
Stock of the Company for issuance thereunder. Under this Plan, each non-employee
director receives a grant from the Company of 1,250 shares on each March 15 and
September 15 as partial payment for services for the preceding six months.
Retirement Benefits
The Company's executive officers who were employees prior to March 1, 2004
participate in a Retirement Plan (the "Plan"), which was amended effective
January 1, 1998, and subsequently frozen effective March 1, 2004, so that in the
determination of the benefit payable, a participant's compensation from and
after March 1, 2004 is not taken into account. Prior to the 1998 amendment, the
Plan provided a monthly benefit payable at age 65 to employees with five or more
years of service in an amount equal to 1.125% of the employee's highest
consecutive 60-month average monthly earnings up to a specified amount related
to the social security wage base, plus 1.5% of such earnings in excess of such
specified amount, multiplied by years of service not to exceed 35. From and
after January 1, 1998 through February 29, 2004, each participant's benefit was
the amount of the monthly benefit accrued for that participant as of December
31, 1997 under the terms of the Plan prior to the 1998 amendment, plus an
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additional benefit determined by establishing a cash balance account for the
participant to which was allocated annually 2% of the participant's compensation
plus an annual interest credit of 5% of the amount in such account. The cash
balance account may be converted to a life annuity or may be taken in a lump
sum. After February 29, 2004, a participant's benefit under the Plan is the sum
of (i) the actuarial equivalent of the participant's cash balance account as of
February 29, 2004, plus interest on the cash balance account at the rate of 5%
per year, and (ii) the participant's monthly pension benefit under the Plan as
at December 31, 1997.
Mr. Wall has passed the normal retirement age of 65 under the Plan. His
annual retirement benefit under the Plan had he elected to receive the life
annuity pension at normal retirement age would have been $54,290. Mr. Pizza has
nine years of credited service and Mr. Duloc has twelve years of credited
service. Assuming that (i) they continue to be employed until age 65, and (ii)
they elect the life annuity form of pension, their annual retirement benefits
are estimated to be: Mr. Pizza - $5,623 and Mr. Duloc - $11,090. Mr. Moran was
first employed by the Company after February 29, 2004 and does not participate
in the Plan.
Certain Transactions
See "Compensation Committee Interlocks and Insider Participation" for
information concerning transactions involving Nicholas G. Karabots.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of its
Common Stock to file initial reports of ownership and reports of changes of
ownership of the Common Stock with the Securities and Exchange Commission and
the New York Stock Exchange. The related regulations require copies of the
reports to be provided to the Company.
Based upon a review of the copies of the reports received by the Company
and certain written representations from the directors and executive officers,
the Company believes that for the fiscal year ended April 30, 2006, all required
Section 16(a) reports were filed on time.
AUDIT-RELATED MATTERS
The consolidated financial statements of the Company and its subsidiaries
included in the Annual Report to Shareholders for the fiscal year ended April
30, 2006 have been audited by McGladrey & Pullen, LLP, an independent registered
public accounting firm. No representative of McGladrey & Pullen, LLP is expected
to attend the Annual Meeting. The retention of an independent registered public
accounting firm for fiscal 2007 has not yet been approved by the Audit
Committee.
Audit Committee Report
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management, which has primary responsibility for the
financial statements. McGladrey & Pullen, LLP, as the Company's independent
registered public accountants, are responsible for expressing an opinion on the
conformity of the Company's audited financial statements with U.S. generally
accepted accounting principles. The Committee has discussed with McGladrey &
Pullen, LLP the matters that are required to be discussed by Statement on
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Auditing Standards No. 61 (Communication With Audit Committees). McGladrey &
Pullen, LLP has provided to the Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Committee has discussed with
McGladrey & Pullen, LLP that firm's independence. Based on these considerations,
the Audit Committee has recommended to the Board of Directors that the
consolidated financial statements audited by McGladrey & Pullen, LLP be included
in the Company's annual report on Form 10-K for fiscal 2006.
The foregoing report is provided by the following directors who constitute the
Audit Committee:
Samuel N. Seidman, Chairman
Lonnie A. Coombs
Elmer F. Hansen, Jr.
July 14, 2006
Audit Fees
The following table sets forth certain information concerning the fees of
McGladrey & Pullen, LLP and its affiliate, RSM McGladrey Inc., for the Company's
last two fiscal years. The reported fees, except the Audit Fees, are amounts
billed to the Company in the indicated fiscal years. The Audit Fees are for
services for those fiscal years.
Fiscal Year Ended April 30,
---------------------------
2006 2005
---- ----
Audit Fees (1).......................... $129,501 $122,838
Audit-Related Fees (2).................. 36,826 16,679
Tax Fees (3)............................ 47,117 41,656
All Other Fees.......................... - -
___________________
(1) Includes fees for the audit of the Company's annual financial statements
and for review of the unaudited financial statements included in the
Company's quarterly reports to the Securities and Exchange Commission on
Form 10-Q.
(2) Includes fees for consultation related to preparation for Sarbanes-Oxley
Section 404 compliance and for benefit plan audits and, in fiscal 2006,
also for advice on the accounting treatment of certain transactions.
(3) Includes fees for tax compliance, tax advice and tax planning services.
Such services principally involved reviews of the Company's federal income
tax returns and advice on the tax treatment of certain transactions.
Pre-Approval Policies and Procedures
The Audit Committee pre-approves all audit services to be provided by the
independent registered public accountants and, separately, all permitted
non-audit services to be performed by the independent registered public
accountants.
OTHER MATTERS
The Board of Directors knows of no matters that will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matters properly come before the Annual
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Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
SOLICITATION OF PROXIES
The Company will bear the cost of this solicitation of proxies. In addition
to solicitation of proxies by mail, the Company may reimburse brokers and other
nominees for the expense of forwarding proxy materials to the beneficial owners
of stock held in their names. Directors, officers and employees of the Company
may solicit proxies on behalf of the Board of Directors but will not receive any
additional compensation therefor.
SHAREHOLDER PROPOSALS
From time to time, shareholders present proposals which may be proper
subjects for inclusion in the Proxy Statement and for consideration at an annual
meeting. Shareholders who intend to present proposals at the 2007 Annual Meeting
and who wish to have such proposals included in the Company's Proxy Statement
for the 2007 Annual Meeting must be certain that such proposals are received by
the Company's Secretary at the Company's executive offices, 212 Carnegie Center,
Suite 302, Princeton, New Jersey 08450, not later than April 16, 2007. Such
proposals must meet the requirements set forth in the rules and regulations of
the Securities and Exchange Commission in order to be eligible for inclusion in
the Proxy Statement. For any proposal that is not submitted for inclusion in
next year's Proxy Statement but is, instead, sought to be presented directly at
the 2007 Annual Meeting, Securities and Exchange Commission rules permit
management to vote proxies in its discretion if the Company does not receive
notice of the proposal prior to the close of business on July 1, 2007.
By Order of the Board of Directors
Joseph S. Moran, Secretary
Dated: August 14, 2006
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APPENDIX A
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
Paragraph (b) of Article SEVENTH of the Certificate of Incorporation shall
be amended in its entirety to read as follows:
(b) Newly created directorships resulting from any increase in the
number of directors and vacancies on the Board of Directors occurring
otherwise than by removal may be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors, or by a sole remaining director, or by
the shareholders. A vacancy caused by removal of a director shall be filled
by the shareholders. Any director elected in accordance with the provisions
of this Paragraph (b) shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been
elected and qualified. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes by the Board of
Directors so as to maintain the number of directors in each class as nearly
equal as possible. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
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APPENDIX B
AMREP CORPORATION
2006 EQUITY COMPENSATION PLAN
-----------------------------
The purpose of the AMREP Corporation 2006 Equity Compensation Plan (the
"Plan") is to provide (i) employees of AMREP Corporation. (the "Company") and
its subsidiaries and (ii) non-employee members of the Board of Directors of the
Company with the opportunity to receive grants of incentive stock options,
nonqualified stock options, stock appreciation rights, stock awards, stock units
and other stock-based awards. The Company believes that the Plan will encourage
the participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
Section 1. Definitions
The following terms shall have the meanings set forth below for purposes of
the Plan:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean, except to the extent specified otherwise by the
Committee, a finding by the Committee that the Grantee (i) has breached his or
her employment or service contract with the Employer, (ii) has engaged in
disloyalty to the Employer, including, without limitation, fraud, embezzlement,
theft, commission of a felony or proven dishonesty, (iii) has disclosed trade
secrets or confidential information of the Employer to persons not entitled to
receive such information, (iv) has breached any written non-competition,
non-solicitation or confidentiality agreement between the Grantee and the
Employer or (v) has engaged in such other behavior detrimental to the interests
of the Employer as the Committee determines.
(c) "Change of Control" shall be deemed to have occurred upon:
(i) A liquidation or dissolution of the Company or a sale (excluding
transfers to subsidiaries) of all or substantially all of the Company's
assets;
(ii) As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split or sale
or transfer of assets, any person or group (as such terms are used in and
under Section 13(d) of the Exchange Act) who is not at the date of adoption
of this Plan by the Board, the beneficial owner (as defined in Rule 13-d
under the Exchange Act), directly or indirectly, of more than 15% of the
outstanding Company Stock becomes the beneficial owner (as similarly
defined), directly or indirectly, of securities of the Company representing
25% or more of the outstanding common stock of the Company or the combined
voting power of the Company's then outstanding securities; or
(iii) During any period of two consecutive years, individuals who, at
the beginning of such period, constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of at least
two-thirds of the directors who were not directors at the beginning of such
period was approved by a vote of at least two-thirds of the directors then
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still in office who were either directors at the beginning of the period or
who, in connection with their election or nomination, received the
foregoing two-thirds approval.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the committee described in Section 2 designated
by the Board to administer the Plan.
(f) "Company" shall mean AMREP Corporation, an Oklahoma corporation and
shall include its successors.
(g) "Company Stock" shall mean common stock of the Company.
(h) "Disability" or "Disabled" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code, within the meaning of the
Employer's long-term disability plan applicable to the Grantee, or as otherwise
determined by the Committee.
(i) "Dividend Equivalent" shall mean an amount determined by multiplying
the number of shares of Company Stock subject to a Grant by the per-share cash
dividend paid by the Company on its outstanding Company Stock, or the per-share
fair market value (as determined by the Committee) of any dividend paid on its
outstanding Company Stock in consideration other than cash.
(j) "Employee" shall mean an employee of the Company or a subsidiary of the
Company.
(k) "Employed by, or providing service to, the Employer" shall mean
employment or service as an Employee or member of the Board (so that, for
purposes of exercising Options and SARs and satisfying conditions with respect
to Stock Awards and Performance Units, a Grantee who has served as both an
Employee and a director shall not be considered to have terminated employment or
service until the Grantee ceases to be both an Employee and member of the
Board).
(l) "Employer" shall mean the Company and each of its subsidiaries.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Exercise Price" shall mean the purchase price of Company Stock subject
to an Option.
(o) "Fair Market Value" shall mean:
(i) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or
Nasdaq, the last reported sale price thereof on the relevant date or (if
there were no trades on that date) the latest preceding date upon which a
sale was reported, or (y) if the Company Stock is not principally traded on
any such exchange or on Nasdaq, the mean between the last reported "bid"
and "asked" prices on a share of Company Stock on the relevant date, as
B-2
reported by the OTC Bulletin Board or, if shares are not reported on the
OTC Bulletin Board, on pinksheets.com.
(ii) If the Company Stock is not publicly traded or, if publicly
traded, is not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
(p) "Grant" shall mean a grant of Options, SARs, Stock Awards, Stock Units
or Other Stock-Based Awards under the Plan.
(q) "Grant Instrument" shall mean the agreement that sets forth the terms
of a Grant, including any amendments.
(r) "Grantee" shall mean an Employee or Non-Employee Director who receives
a Grant under the Plan.
(s) "Incentive Stock Option" shall mean an option to purchase Company Stock
that is intended to meet the requirements of section 422 of the Code.
(t) "Non-Employee Director" shall mean a member of the Board who is not an
Employee.
(u) "Nonqualified Stock Option" shall mean an option to purchase Company
Stock that is not intended to meet the requirements of section 422 of the Code.
(v) "Option" shall mean an Incentive Stock Option or Nonqualified Stock
Option granted under the Plan.
(w) "Other Stock-Based Award" shall mean any Grant based on, measured by or
payable in Company Stock, as described in Section 10.
(x) "SAR" shall mean a stock appreciation right with respect to a share of
Company Stock.
(y) "Stock Award" shall mean an award of Company Stock, with or without
restrictions.
(z) "Stock Unit" shall mean a unit that represents a hypothetical share of
Company Stock.
Section 2. Administration
(a) Committee. The Plan shall be administered and interpreted by the Board
---------
or by a Committee unanimously appointed by the Board from among its members,
provided that (i) the Board shall act as the Committee in the absence of the
unanimous appointment of the Committee by the Board and (ii) grants under the
Plan to Non-Employee Directors shall be awarded and administered only by the
Board. The Committee, when other than the full Board, shall consist of two or
more persons who are "outside directors" as defined under section 162(m) of the
Code, and related Treasury regulations, and "non-employee directors" as defined
under Rule 16b-3 under the Exchange Act. The Committee may delegate authority to
B-3
one or more subcommittees, as it deems appropriate. To the extent that the Board
or a subcommittee administers the Plan, references in the Plan to the
"Committee" shall be deemed to refer to the Board or such subcommittee.
(b) Committee Authority. The Committee shall have the sole authority to (i)
-------------------
determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, subject to the provisions of Section
18 below, and (v) deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
-------------------------
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
Section 3. Grants
Awards under the Plan may consist of grants of Options as described in
Section 6, Stock Awards as described in Section 7, Stock Units as described in
Section 8, SARs as described in Section 9 and Other Stock-Based Awards as
described in Section 10. All Grants shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with this
Plan as the Committee deems appropriate and as are specified in writing by the
Committee to the individual in the Grant Instrument. All Grants shall be made
conditional upon the Grantee's acknowledgement, in writing or by acceptance of
the Grant, that all decisions and determinations of the Committee shall be final
and binding on the Grantee, his or her beneficiaries and any other person having
or claiming an interest under such Grant. Grants under a particular Section of
the Plan need not be uniform as among the Grantees.
Section 4. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, th
------------------e
aggregate number of shares of Company Stock that may be issued or transferred
under the Plan is 400,000 shares. Shares issued or transferred under the Plan
may be authorized but unissued shares of Company Stock or reacquired shares of
Company Stock, including shares purchased by the Company on the open market for
purposes of the Plan. If and to the extent Options or SARs granted under the
Plan terminate, expire or are canceled, forfeited, exchanged or surrendered
without having been exercised or if any Stock Awards, Stock Units or Other
Stock-Based Awards are forfeited or terminated, the shares subject to such
Grants shall again be available for purposes of the Plan.
B-4
(b) Individual Limits. All Grants under the Plan shall be expressed in
------------------
shares of Stock. The maximum aggregate number of shares of Company Stock that
shall be subject to Grants made under the Plan to any individual during any
calendar year shall be 20,000 shares, subject to adjustment as described below.
(c) Adjustments. If there is any change in the number or kind of shares of
-----------
the Company Stock outstanding by reason of (i) a stock dividend of greater than
ten percent (10%), recapitalization, stock split, or combination or exchange of
shares, (ii) a merger, reorganization, or consolidation, (iii) a
reclassification or change in par value, or (iv) a spin-off, split-off, or
split-up, the maximum number of shares of Company Stock that any individual
participating in the Plan may be granted in any year, the number of shares
covered by outstanding Grants, the kind of shares issued or transferred under
the Plan and the price per share of such Grants shall be appropriately adjusted
by the Committee to reflect any increase or decrease in the number of, or change
in the kind of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. The Committee may also make or provide for such
adjustment in the number of shares specified in Section 4(a) as the Committee,
in its sole discretion, may determine to be appropriate to reflect any
transaction or event described in this Section 4(c); provided, however, that any
such adjustment will be made if and only to the extent that it would not cause
any Option intended to qualify as an Incentive Stock Option not so qualify. Any
adjustments determined by the Committee shall be final, binding and conclusive.
Section 5. Eligibility for Participation
(a) Eligible Persons. All Employees (including, for all purposes of the
-----------------
Plan, an Employee who is a member of the Board) and Non-Employee Directors shall
be eligible to participate in the Plan.
(b) Selection of Grantees. The Committee shall select the Employees and
---------------------
Non-Employee Directors to receive Grants and shall determine the number of
shares of Company Stock subject to a particular Grant in such manner as the
Committee determines.
Section 6. Options
The Committee may grant Options to an Employee or Non-Employee Director
upon such terms as the Committee deems appropriate. The following provisions are
applicable to Options:
(a) Number of Shares. The Committee shall determine the number of shares of
----------------
Company Stock that will be subject to each Grant of Options to Employees and
Non-Employee Directors.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options or Nonqualified
Stock Options or any combination of the two, all in accordance with the
terms and conditions set forth herein. Incentive Stock Options may be
granted only to employees of the Company or its parent or subsidiary
corporations, as defined in section 424 of the Code. Nonqualified Stock
Options may be granted to Employees and Non-Employee Directors.
B-5
(ii) The Exercise Price of Company Stock subject to an Option shall be
determined by the Committee and may be equal to or greater than the Fair
Market Value of a share of Company Stock on the date the Option is granted;
provided, however, that an Incentive Stock Option may not be granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company, or
any parent or subsidiary corporation of the Company, as defined in section
424 of the Code, unless the Exercise Price per share is not less than 110%
of the Fair Market Value of a share of Company Stock on the date of grant.
(c) Option Term. The Committee shall determine the term of each Option. The
-----------
term of any Option shall not exceed ten years from the date of grant. However,
an Incentive Stock Option that is granted to an Employee who, at the time of
grant, owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, or any parent or subsidiary corporation of
the Company, as defined in section 424 of the Code, may not have a term that
exceeds five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
---------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing service to, the Employer as an
Employee or member of the Board. Except as otherwise provided by the
Committee, any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Employer shall terminate as of such date.
(ii) In the event that a Grantee ceases to be employed by, or provide
service to, the Employer for any reason other than Disability, death or
termination for Cause, any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within 90 days after the date on
which the Grantee ceases to be employed by, or provide service to, the
Employer (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the
Employer, any Option held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Employer. In
addition, notwithstanding any other provisions of this Section 6, if the
Committee determines that the Grantee has engaged in conduct that
constitutes Cause at any time while the Grantee is employed by, or
providing service to, the Employer or after the Grantee's termination of
employment or service, any Option held by the Grantee shall immediately
terminate and the Grantee shall automatically forfeit all shares underlying
any exercised portion of an Option for which the Company has not yet
delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a
forfeiture.
B-6
(iv) In the event the Grantee ceases to be employed by, or provide
service to, the Employer because the Grantee is Disabled, any Option which
is otherwise exercisable by the Grantee shall terminate unless exercised
within 180 days after the date on which the Grantee ceases to be employed
by, or provide service to, the Employer (or within such other period of
time as may be specified by the Committee), but in any event no later than
the date of expiration of the Option term.
(v) If the Grantee dies while employed by, or providing service to,
the Employer or within 90 days after the date on which the Grantee ceases
to be employed or provide service on account of a termination specified in
Section 6(e)(ii) above (or within such other period of time as may be
specified by the Committee), any Option that is otherwise exercisable by
the Grantee shall terminate unless exercised within 180 days after the date
on which the Grantee ceases to be employed by, or provide service to, the
Employer (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term.
(f) Exercise of Options. A Grantee may exercise an Option that has become
-------------------
exercisable, in whole or in part, by delivering a notice of exercise to the
Company. The Grantee shall pay the Exercise Price for an Option as specified by
the Committee (w) in cash, (x) unless the Committee determines otherwise, by
delivering shares of Company Stock owned by the Grantee and having a Fair Market
Value on the date of exercise at least equal to the Exercise Price or by
attestation (on a form prescribed by the Committee) to ownership of shares of
Company Stock having a Fair Market Value on the date of exercise at least equal
to the Exercise Price, (y) by payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board, or (z) by
such other method as the Committee may approve. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period
of time necessary to avoid adverse accounting consequences to the Company with
respect to the Option. Payment for the shares to be issued or transferred
pursuant to the Option, and any required withholding taxes, must be received by
the Company by the time specified by the Committee depending on the type of
payment being made, but in all cases prior to the issuance or transfer of such
shares.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
----------------------------------
provide that, if the aggregate Fair Market Value of the Company Stock on the
date of the grant with respect to which Incentive Stock Options are exercisable
for the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary corporation (within
the meaning of section 424(f) of the Code) of the Company.
Section 7. Stock Awards
The Committee may issue or transfer shares of Company Stock to an Employee
or Non-Employee Director under a Stock Award, upon such terms as the Committee
deems appropriate. The following provisions are applicable to Stock Awards:
(a) General Requirements. Shares of Company Stock issued or transferred
---------------------
pursuant to Stock Awards, subject to the requirements of applicable law, may be
issued or transferred for consideration or for no consideration, and, in either
B-7
case, subject to restrictions or no restrictions, as determined by the
Committee. The Committee may, but shall not be required to, establish conditions
under which restrictions on Stock Awards shall lapse over a period of time or
according to such other criteria as the Committee deems appropriate, including,
without limitation, restrictions based upon the achievement of specific
performance goals. The period of time during which the Stock Awards will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Shares. The Committee shall determine the number of shares of
----------------
Company Stock to be issued or transferred pursuant to a Stock Award and the
restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
---------------------------------------
employed by, or provide service to, the Employer during a period designated in
the Grant Instrument as the Restriction Period, or if other specified conditions
are not met, the Stock Award shall terminate as to all shares covered by the
Grant as to which the restrictions have not lapsed, and those shares of Company
Stock must be immediately returned to the Company. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
----------------------------------------------------------
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except under Section 15(a)
below. Unless otherwise determined by the Committee, the Company will retain
possession of certificates for shares of Stock Awards until all restrictions on
such shares have lapsed. Each certificate for a Stock Award, unless held by the
Company, shall contain a legend giving appropriate notice of the restrictions in
the Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when all
restrictions on such shares have lapsed. The Committee may determine that the
Company will not issue certificates for Stock Awards until all restrictions on
such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee determines
--------------------------------------
otherwise, during the Restriction Period, the Grantee shall have the right to
vote shares of Stock Awards and to receive any dividends or other distributions
paid on such shares, subject to any restrictions deemed appropriate by the
Committee, including, without limitation, the achievement of specific
performance goals.
(f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall
---------------------
lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions, if any, imposed by the Committee. The Committee
may determine, as to any or all Stock Awards, that the restrictions shall lapse
without regard to any Restriction Period.
Section 8. Stock Units
The Committee may grant Stock Units, each of which shall represent one
hypothetical share of Company Stock, to an Employee or Non-Employee Director,
upon such terms and conditions as the Committee deems appropriate. The following
provisions are applicable to Stock Units:
B-8
(a) Crediting of Units. Each Stock Unit shall represent the right of the
------------------
Grantee to receive a share of Company Stock or an amount of cash based on the
value of a share of Company Stock, if and when specified conditions are met. All
Stock Units shall be credited to bookkeeping accounts established on the
Company's records for purposes of the Plan.
(b) Terms of Stock Units. The Committee may grant Stock Units that are
---------------------
payable if specified performance goals or other conditions are met, or under
other circumstances. Stock Units may be paid at the end of a specified
performance period or other period, or payment may be deferred to a date
authorized by the Committee. The Committee shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock Units.
(c) Requirement of Employment or Service. If the Grantee ceases to be
---------------------------------------
employed by, or provide service to, the Employer prior to the vesting of Stock
Units, or if other conditions established by the Committee are not met, the
Grantee's Stock Units shall be forfeited. The Committee may, however, provide
for complete or partial exceptions to this requirement as it deems appropriate.
(d) Payment With Respect to Stock Units. Payments with respect to Stock
-------------------------------------
Units shall be made in cash, Company Stock or any combination of the foregoing,
as the Committee shall determine.
Section 9. Stock Appreciation Rights
The Committee may grant SARs to an Employee or Non-Employee Director
separately or in tandem with any Option. The following provisions are applicable
to SARs:
(a) General Requirements. The Committee may grant SARs to an Employee or
---------------------
Non-Employee Director separately or in tandem with any Option (for all or a
portion of the applicable Option). Tandem SARs may be granted either at the time
the Option is granted or at any time thereafter while the Option remains
outstanding; provided, however, that, in the case of an Incentive Stock Option,
SARs may be granted only at the time of the Grant of the Incentive Stock Option.
The Committee shall establish the base amount of the SAR at the time the SAR is
granted. The base amount of each SAR shall be equal to the per share Exercise
Price of the related Option or, if there is no related Option, an amount equal
to or greater than the Fair Market Value of a share of Company Stock as of the
date of Grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs granted to
-----------
a Grantee that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Grantee may purchase upon the
exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Company Stock covered by such exercise shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the period specified
--------------
by the Committee in the Grant Instrument and shall be subject to such vesting
and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by, or providing service to, the Employer or during the applicable
period after termination of employment or service as described in Section 6(e)
B-9
above. A tandem SAR shall be exercisable only during the period when the Option
to which it is related is also exercisable.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall receive
-------------
in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised. The stock appreciation for an SAR
is the amount by which the Fair Market Value of the underlying Company Stock on
the date of exercise of the SAR exceeds the base amount of the SAR as described
in subsection (a).
(e) Form of Payment. The appreciation in an SAR shall be paid in shares of
---------------
Company Stock, cash or any combination of the foregoing, as the Committee shall
determine. For purposes of calculating the number of shares of Company Stock to
be received, shares of Company Stock shall be valued at their Fair Market Value
on the date of exercise of the SAR.
Section 10. Other Stock-Based Awards
The Committee may grant Other Stock-Based Awards, which are awards (other
than those described in Sections 6, 7, 8 and 9 of the Plan) that are based on or
measured by Company Stock, to any Employee or Non-Employee Director, on such
terms and conditions as the Committee shall determine. Other Stock-Based Awards
may be awarded subject to the achievement of performance goals or other
conditions and may be payable in cash, Company Stock or any combination of the
foregoing, as the Committee shall determine.
Section 11. Dividend Equivalents
The Committee may grant Dividend Equivalents in connection with Stock Units
or Other Stock-Based Awards. Dividend Equivalents may be paid currently or
accrued as contingent cash obligations and may be payable in cash or shares of
Company Stock, and upon such terms as the Committee may establish, including,
without limitation, the achievement of specific performance goals.
Section 12. Qualified Performance-Based Compensation
The Committee may determine that Stock Awards, Stock Units, Other
Stock-Based Awards and Dividend Equivalents granted to an Employee shall be
considered "qualified performance-based compensation" under section 162(m) of
the Code. The following provisions shall apply to Grants of Stock Awards, Stock
Units, Other Stock-Based Awards and Dividend Equivalents that are to be
considered "qualified performance-based compensation" under section 162(m) of
the Code:
(a) Performance Goals.
-----------------
(i) When Stock Awards, Stock Units, Other Stock-Based Awards or
Dividend Equivalents that are to be considered "qualified performance-based
compensation" are granted, the Committee shall establish in writing (A) the
objective performance goals that must be met, (B) the performance period
during which the performance will be measured, (C) the threshold, target
and maximum amounts that may be paid if the performance goals are met, and
(D) any other conditions that the Committee deems appropriate and
consistent with the Plan and Section 162(m) of the Code.
B-10
(ii) The business criteria may relate to the Grantee's business unit
or the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively
determinable performance goals based on one or more of the following
criteria: stock price, earnings per share, net earnings, operating
earnings, earnings before income taxes, EBITDA (earnings before income tax
expense, interest expense, and depreciation and amortization expense),
return on assets, shareholder return, return on equity, growth in assets,
unit volume, sales or market share, or strategic business criteria
consisting of one or more objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion goals, cost
targets or goals relating to acquisitions or divestitures.
(b) Establishment of Goals. The Committee shall establish the performance
-----------------------
goals in writing either before the beginning of the performance period or during
a period ending no later than the earlier of (i) 90 days after the beginning of
the performance period or (ii) the date on which 25% of the performance period
has been completed, or by such other date as may be required or permitted under
applicable regulations under section 162(m) of the Code. The performance goals
shall satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the achievement of the goals be substantially
uncertain at the time they are established and that the goals be established in
such a way that a third party with knowledge of the relevant facts could
determine whether and to what extent the performance goals have been met. The
Committee shall not have discretion to increase the amount of compensation that
is payable upon achievement of the designated performance goals.
(c) Announcement of Grants. The Committee shall certify and announce the
-----------------------
results for each performance period to all Grantees after the announcement of
the Company's financial results for the performance period. If and to the extent
that the Committee does not certify that the performance goals have been met,
the grants of Stock Awards, Stock Units, Other Stock-Based Awards and Dividend
Equivalents for the performance period shall be forfeited or shall not be made,
as applicable. If Dividend Equivalents are granted as "qualified
performance-based compensation" under section 162(m) of the Code, a Grantee may
not accrue more than $50,000 of such Dividend Equivalents during any calendar
year.
Section 13. Deferrals
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of shares that would otherwise be due to such
Grantee in connection with any Stock Units or Other Stock-Based Awards. If any
such deferral election is permitted or required, the Committee shall establish
rules and procedures for such deferrals and may provide for interest or other
earnings to be paid on such deferrals. The rules and procedures for any such
deferrals shall be consistent with applicable requirements of section 409A of
the Code.
Section 14. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
---------------------
applicable federal (including FICA), state and local tax withholding
requirements. The Employer may require that the Grantee or other person
receiving or exercising Grants pay to the Employer the amount of any federal,
state or local taxes that the Employer is required to withhold with respect to
such Grants, or the Employer may deduct from other salary or wages paid by the
Employer the amount of any withholding taxes due with respect to such Grants.
B-11
(b) Election to Withhold Shares. If the Committee so permits, a Grantee may
---------------------------
elect to satisfy the Employer's tax withholding obligation with respect to
Grants paid in Company Stock by having shares valued at their Fair Market Value
withheld up to an amount that does not exceed the tax withholding obligation
determined at the Grantee's minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and may be subject to the prior
approval of the Committee.
Section 15. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
------------------------------
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except (i) by will or by the laws of
descent and distribution or (ii) with respect to Grants other than Incentive
Stock Options, pursuant to a domestic relations order. When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee may exercise such rights. Any such successor must furnish proof
satisfactory to the Company of the successor's right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
--------------------------------------
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members, or one or more trusts or other
entities for the benefit of or owned by family members, consistent with the
applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of an Option and the transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
transfer.
Section 16. Consequences of a Change of Control
In the event of a Change of Control the Committee may, but need not, in its
sole discretion, take any or all of the following actions: (i) accelerate the
exercisability of the outstanding Options and SARs in whole or in part; (ii)
determine that the restrictions and conditions on outstanding Stock Awards shall
lapse in whole or in part; (iii) determine that all Stock Units, Other
Stock-Based Awards and Dividend Equivalents are fully vested and shall be paid
at no less than their target values, if any, or in such amounts as the Committee
may determine in the case of such Awards without target values; (iv) require
that Grantees surrender their outstanding Options and SARs as of a date
specified by the Committee in exchange for one or more payments by the Company,
in cash or Company Stock as determined by the Committee, in an amount equal to
the amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's unexercised Options and SARs exceeds the Exercise Price
of the Options or the base amount of the SARs, as applicable; (v) after giving
Grantees an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised Options and SARs at such time as the Committee
deems appropriate; or (vi) determine that outstanding Options and SARs that are
not exercised shall be assumed by, or replaced with comparable options or rights
by, the surviving corporation (or a parent or subsidiary of the surviving
corporation).
B-12
Section 17. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant on the Grantee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of the shares of Company Stock
as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan may be subject to such stop-transfer orders and other restrictions as
the Committee deems appropriate to comply with applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
Section 18. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
---------
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required in order to comply with the Code or other
applicable law, or to comply with applicable stock exchange requirements.
(b) No Repricing Without Shareholder Approval. Notwithstanding anything in
-----------------------------------------
the Plan to the contrary, the Committee may not reprice Options, nor may the
Board amend the Plan to permit repricing of Options, unless the shareholders of
the Company provide prior approval for such repricing. An adjustment to an
Option pursuant to Section 4(c) above shall not constitute a repricing of the
Option.
(c) Shareholder Re-Approval Requirement. If Stock Awards, Stock Units,
-------------------------------------
Other Stock-Based Awards or Dividend Equivalents are granted as "qualified
performance-based compensation" under Section 12 above, the Plan must be
reapproved by the shareholders no later than the first shareholders meeting that
occurs in the fifth year following the year in which the shareholders previously
approved the provisions of Section 12, if required by section 162(m) of the Code
or the regulations thereunder.
(d) Termination of Plan. The Plan shall terminate on the day immediately
-------------------
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders.
(e) Termination and Amendment of Outstanding Grants. A termination or
--------------------------------------------------
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 19(f) below. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 19(f) below or may be amended by agreement
of the Company and the Grantee consistent with the Plan.
(f) Effective Date of the Plan. The Plan shall be effective as of the date
---------------------------
on which the shareholders approve the Plan.
B-13
Section 19. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise. Nothing
--------------------------------------------------------------
contained in the Plan shall be construed to (i) limit the right of the Committee
to make Grants under the Plan in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business or assets of any
corporation, firm or association, including Grants to employees thereof who
become Employees, or (ii) limit the right of the Company to grant stock options
or make other awards outside of the Plan. The Committee may make a Grant to an
employee of another corporation who becomes an Employee by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company, in substitution for a stock option or stock
awards grant made by such corporation. Notwithstanding anything in the Plan to
the contrary, the Committee may establish such terms and conditions of the new
Grants as it deems appropriate, including setting the Exercise Price of Options
or the base price of SARs at a price necessary to retain for the Grantee the
same economic value as the prior options or rights.
(b) Governing Document. The Plan shall be the controlling document. No
-------------------
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
(c) Funding of the Plan. The Plan shall be unfunded. The Company shall not
-------------------
be required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Grants under the Plan.
(d) Rights of Grantees. Nothing in the Plan shall entitle any Employee,
-------------------
Non-Employee Director or other person to any claim or right to be granted a
Grant under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Employer or any other employment rights.
(e) No Fractional Shares. No fractional shares of Company Stock shall be
---------------------
issued or delivered pursuant to the Plan or any Grant. Except as otherwise
provided under the Plan, the Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
(f) Compliance with Law. The Plan, the exercise of Options and SARs and the
-------------------
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and regulations, and to approvals
by any governmental or regulatory agency as may be required. With respect to
persons subject to section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In
addition, it is the intent of the Company that Incentive Stock Options comply
with the applicable provisions of section 422 of the Code, that Grants of
"qualified performance-based compensation" comply with the applicable provisions
of section 162(m) of the Code and that, to the extent applicable, Grants comply
with the requirements of section 409A of the Code. To the extent that any legal
requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of
the Code as set forth in the Plan ceases to be required under section 16 of the
B-14
Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision
shall cease to apply. Any provision that would cause the Plan or any Grant to
fail to satisfy section 409A of the Code shall have no force or effect until
amended to comply with section 409A of the Code (which amendment may be
retroactive to the extent permitted by section 409A of the Code and may be made
by the Company without the consent of Grantees). The Committee may revoke any
Grant if it is contrary to law or modify a Grant to bring it into compliance
with any valid and mandatory government regulation.
(g) Employees Subject to Taxation Outside the United States. With respect
--------------------------------------------------------
to Grantees who are believed by the Committee to be subject to taxation in
countries other than the United States, the Committee may make Grants on such
terms and conditions, consistent with the Plan, as the Committee deems
appropriate to comply with the laws of the applicable countries, and the
Committee may create such procedures, addenda and subplans and make such
modifications as may be necessary or advisable to comply with such laws.
(h) Governing Law. The validity, construction, interpretation and effect of
-------------
the Plan and Grant Instruments issued under the Plan shall be governed and
construed by and determined in accordance with the laws of New Jersey, without
giving effect to the conflict of laws provisions thereof.
B-15
PROXY AMREP CORPORATION PROXY
SOLICITED BY BOARD OF DIRECTORS FOR
2006 ANNUAL MEETING OF SHAREHOLDERS
The Conference Center at Normandy Farm
Route 202 and Morris Road, Blue Bell, Pennsylvania
September 20, 2006, 9:00 A.M. Local Time
The undersigned hereby appoints Lonnie A. Coombs and Peter M. Pizza, and
each of them acting alone, with full power of substitution, proxies to vote the
Common Stock of the undersigned at the 2006 Annual Meeting of Shareholders of
AMREP Corporation, and any continuation or adjournment thereof, for the election
of directors, approval of an amendment to the Certificate of Incorporation and
approval of the adoption of the 2006 Equity Compensation Plan as set forth in
the Notice of 2006 Annual Meeting of Shareholders and Proxy Statement of the
Board of Directors, and upon all other matters which come before said meeting or
any continuation or adjournment thereof.
Receipt of the Notice of 2006 Annual Meeting of Shareholders and
accompanying Proxy Statement of the Board of Directors is acknowledged.
Unless otherwise specified, this proxy will be voted FOR the election of
directors, FOR approval of the amendment to the Certificate of Incorporation and
FOR approval of the adoption of the 2006 Equity Compensation Plan as set forth
in the Proxy Statement.
(Continued and to be dated and signed on reverse side.)
PLEASE MARK, DATE SIGN
AND MAIL YOUR PROXY [X]
PROMPTLY IN THE ENVELOPE Votes MUST be indicated
PROVIDED. (x) in Black or Blue ink.
A vote FOR each ITEM is recommended by the Board of Directors.
FOR AGAINST ABSTAIN
1. ELECTION OF TWO (2) DIRECTORS. 2. APPROVAL OF AMENDMENT
TO THE CERTIFICATE OF [ ] [ ] [ ]
INCORPORATION
FOR all [ ] WITHHOLD AUTHORITY [ ] * EXCEPTIONS [ ]
nominees to vote for all
listed below nominees listed
below
Nominees: Edward B. Cloues II, James Wall 3. APPROVAL OF ADOPTION OF
THE 2006 EQUITY [ ] [ ] [ ]
COMPENSATION PLAN
(INSTRUCTION: To withhold authority to vote for
any individual nominee, mark the "Exceptions" box
and write that nominee's name in the space
provided below.)
*Exceptions ____________________________________________
To change your address, please mark this box. [ ]
If stock is held in the name of more than one person, all holders should sign.
Sign exactly as name or names appear at left. Persons signing in a fiduciary
capacity should include their title as such.
______________________________ _____________________________
Date Share owner sign here Co-Owner sign here