As filed with the Securities and Exchange Commission on April 7, 1998
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
SL GREEN REALTY CORP.
70 WEST 36TH STREET
NEW YORK, NEW YORK 10018
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computedpursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.):
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration state-ment number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SL GREEN REALTY CORP.
70 West 36th Street
New York, New York 10018
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 28, 1998
------------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of SL Green Realty Corp. (the "Company") will be held on
Thursday, May 28, 1998 at 10:00 a.m. at 110 East 42nd Street, New York, New
York, for the following purposes:
1. To elect one Class I director of the Company to serve until the 2001
Annual Meeting of Stockholders and until his successor is duly elected and
qualified;
2. To ratify the selection of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1998;
3. To approve the Company's Amended 1997 Stock Option and Incentive
Plan; and
4. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on April 3, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, $.01 par value per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
BY ORDER OF THE BOARD OF DIRECTORS
BENJAMIN P. FELDMAN
SECRETARY
New York, New York
April 7, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
SL GREEN REALTY CORP.
70 West 36th Street
New York, New York 10018
------------------------
PROXY STATEMENT
------------------------
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
to be held on May 28, 1998
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SL Green Realty Corp. (the "Company") for
use at the 1998 Annual Meeting of Stockholders of the Company to be held on
Thursday, May 28, 1998, and at any adjournments or postponements thereof (the
"Annual Meeting"). At the Annual Meeting, stockholders will be asked to vote
upon (1) the election of one Class I director of the Company, (2) to ratify the
selection of Ernst & Young LLP as the independent auditors of the Company for
the fiscal year ending December 31, 1998, (3) to approve the Company's Amended
1997 Stock Option and Incentive Plan, and (4) to act upon any other matters
properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about April 8, 1998. The Board
of Directors has fixed the close of business on April 3, 1998 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only stockholders of record of the Company's
common stock, par value $.01 per share (the "Common Stock"), at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were 12,292,311 shares of Common
Stock outstanding and entitled to vote at the Annual Meeting. Holders of Common
Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. The vote of a plurality of all of the votes cast at a meeting at which
a quorum is present is necessary for the election of the Class I director. The
affirmative vote of the holders of a majority of the shares of Common Stock cast
at the Annual Meeting at which a quorum is present is required for the
ratification of the Company's auditors, the approval of the Company's Amended
1997 Stock Option and Incentive Plan and the approval of any other matters
properly presented at the Annual Meeting for stockholder approval. Under
Maryland law, abstentions do not constitute a vote "for" or "against" a matter
and will be disregarded in determining "votes cast." Broker "non-votes", or
proxies from brokers or nominees indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote such
shares on a particular matter with respect to which the broker or nominee does
not have discretionary voting power, will be treated in the same manner as
abstentions.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE ONE
NOMINEE FOR CLASS I DIRECTOR OF THE COMPANY NAMED IN THIS PROXY STATEMENT, FOR
RATIFICATION OF THE BOARD OF DIRECTORS' SELECTION OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998 AND
FOR THE APPROVAL OF THE COMPANY'S AMENDED 1997 STOCK OPTION AND INCENTIVE PLAN.
IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THE PROXY
STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE
PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS.
2
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above, by filing a duly executed proxy
bearing a later date, or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1997 Annual Report, including financial statements for the
fiscal year ended December 31, 1997, has been mailed to stockholders prior to
the mailing of this Proxy Statement. The Annual Report, however, is not part of
the proxy solicitation material.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company consists of five members and is
divided into three classes, with the directors in each class serving for a term
of three years and until their successors are duly elected and qualified. The
term of one class expires at each annual meeting of stockholders.
At the Annual Meeting, one director will be elected to serve until the 2001
Annual Meeting and until his successor is duly elected and qualified. The Board
of Directors has nominated Mr. Edwin Thomas Burton, III, to serve as the Class I
director (the "Nominee"). The Nominee is currently serving as a Class I director
of the Company and as Chairman of the Audit Committee of the Board of Directors.
The Board of Directors anticipates that the Nominee will serve, if elected, as a
director. However, if such person nominated by the Board of Directors is unable
to accept election, the proxies will be voted for the election of such other
person or persons as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE.
INFORMATION REGARDING THE NOMINEE AND DIRECTORS
The following table and biographical descriptions set forth certain
information with respect to the Nominee for election as a Class I director at
the Annual Meeting, the continuing directors whose terms expire at the annual
meetings of stockholders in 1999 and 2000 and the executive officers who are not
directors, based upon information furnished to the Company by each director and
executive officer.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
DIRECTOR OWNERSHIP OF OF CLASS
NAME AGE SINCE COMMON STOCK (1) (2)
- ---------------------------------------------------------------- --- ----------- ------------------ -----------
CLASS I NOMINEE FOR ELECTION AT 1998
ANNUAL MEETING (TERM TO EXPIRE IN 2001)
Edwin Thomas Burton, III........................................ 55 1997 -- N/A
CLASS II CONTINUING DIRECTORS (TERM EXPIRES IN 1999)
Benjamin P. Feldman............................................. 45 1997 117,832(3) 0.9%
John S. Levy.................................................... 61 1997 -- N/A
CLASS III CONTINUING DIRECTORS (TERM EXPIRES IN 2000)
John H. Alschuler, Jr........................................... 49 1997 -- N/A
Stephen L. Green................................................ 59 1997 2,140,784(4) 16.3%
- ------------------------
(1) All information has been determined as of April 3, 1998. For purposes of
this table a person is deemed to have "beneficial ownership" of the number
of shares of Common Stock that such person has the right to acquire pursuant
to the exercise of stock options exercisable within sixty days or the
redemption of units (the "Units") of limited partnership interests in SL
Green Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership") (assuming the Company elects to
3
issue Common Stock rather than pay cash upon such redemption). See
"Executive Compensation" for a discussion of the vesting of stock options
granted to directors and officers. Pursuant to the terms of the First
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, dated as of August 20, 1997, after August 20, 1999 the
Operating Partnership is obligated to redeem Units for cash, or, at the
option of the Company, shares of Common Stock.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person, any share of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option exercisable
within 60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percent ownership of any other
person.
(3) All such shares are held by Mr. Feldman through a family limited liability
company of which he is the managing member.
(4) Includes 2,140,784 Units.
CLASS I NOMINEE FOR ELECTION AT 1998 ANNUAL MEETING --TERM TO EXPIRE IN 2001
EDWIN THOMAS BURTON, III has served as a director of the Company since 1997
and serves as Chairman of the Audit Committee, and is a member of the
Compensation Committee. He has been Chairman of the Board of Trustees and a
member of the Investment Advisory Committee of the Virginia Retirement System
("VRS") for state and local employees of the Commonwealth of Virginia ($30
billion in assets). Mr. Burton served as the Chairman of the VRS Special
Committee on the sale of RF&P Corporation, a $570 million real estate company.
He is currently a visiting professor of commerce and economics at the University
of Virginia. From 1994 until 1995, Mr. Burton served as Senior Vice President,
Managing Director and member of the Board of Directors of Interstate Johnson
Lane, Incorporated, an investment banking firm where he was responsible for the
Corporate Finance and Public Finance Divisions. From 1987 to 1994, Mr. Burton
served as President of Rothschild Financial Services, Incorporated (a subsidiary
of Rothschild, Inc. of North America), an investment banking company
headquartered in New York City that is involved in proprietary trading,
securities lending and other investment activities. From 1985 until 1987, Mr.
Burton was a partner of First Capital Strategists, a partnership that managed
security lending and investment activities for large endowment portfolios. Mr.
Burton also served as a consultant to the American Stock Exchange from 1985
until 1986 and a senior vice president with Smith Barney (or its corporate
predecessor) from 1976 until 1984. Mr. Burton currently serves on the Board of
Directors of Capstar, a publicly traded hotel company and SNL Securities, a
private securities data company. He has held various teaching positions at York
College, Rice University and Cornell University and has written and lectured
extensively in the field of economics. Mr. Burton also serves as a member of the
Children's Medical Center Committee of the University of Virginia Hospital
Advisory Board. Mr. Burton received a B.A. and an M.A. in economics from Rice
University and a Ph.D in economics from Northwestern University.
CLASS II CONTINUING DIRECTORS--TERM TO EXPIRE IN 1999
BENJAMIN P. FELDMAN has served as Executive Vice President and General
Counsel of the Company and as a Director and member of the Executive Committee
of the Company since 1997. He served as General Counsel of SL Green Properties,
Inc. ("SL Green") from 1987 until 1997. Mr. Feldman handles the legal aspects of
all leasing, financing and acquisition decisions. Prior to joining the Company,
Mr. Feldman was vice-president and general counsel for Bruce Berger Realty. Mr.
Feldman received a B.A. degree from Columbia University and a J.D. degree from
Columbia University School of Law.
JOHN S. LEVY has served as a director of the Company since 1997 and serves
on the Audit Committee and Compensation Committee. He is a private investor. Mr.
Levy was associated with Lehman Brothers Inc. (or its corporate predecessors)
from 1983 until 1995. During this period, Mr. Levy served as Managing Director
and Chief Administrative Officer of the Financial Services Division, Senior
Executive Vice
4
President and Co-Director of the International Division overseeing the
International Branch System, and Managing Partner of the Equity Securities
Division, where he managed the International, Institutional, Retail and Research
Departments. Prior to that period, Mr. Levy was associated with A.G. Becker
Incorporated (or its corporate predecessors) from 1960 until 1983. During this
period, Mr. Levy served as Managing Director of the Execution Services Division,
Vice President-Manager of Institutional and Retail Sales, Manager of the
Institutional Sales Division, Manager of the New York Retail Office and a
Registered Representative. Mr. Levy received a B.A. degree from Dartmouth
College.
CLASS III CONTINUING DIRECTORS--TERM TO EXPIRE IN 2000
JOHN H. ALSCHULER, JR. has served as a director of the Company since 1997
and serves on the Audit Committee, Executive Committee and Compensation
Committee. He has served as President and Partner-in Charge of the New York
office of Hamilton, Rabinowitz & Alschuler, Inc. ("HRA"), a nationally
recognized real estate and management consulting firm, since 1996 and 1983,
respectively. Mr. Alschuler has also been an Adjunct Assistant Professor in the
Graduate Program in Real Estate at Columbia University since 1987. As President
of HRA, Mr. Alschuler is currently advising the Government of Kuwait on the
redevelopment of the main commercial district of Kuwait City. Mr. Alschuler is
also advising the Governor of Massachusetts and the Board of the MBTA on the
restructuring and privatization of the nation's second largest mass transit
system. Mr. Alschuler also serves as the real estate advisor to the Guggenheim
family and their foundation. Mr. Alschuler has advised a wide range of
development clients, including Olympia & York, Maguire Thomas Partners, Queens
West Development Corporation and the Empire State Development Corporation. Mr.
Alschuler has also advised many public organizations and elected officials,
including the Mayor of New York City and the Governor of New York. Mr. Alschuler
received a B.A. degree from Wesleyan University and Ed.D. degree from the
University of Massachusetts at Amherst.
STEPHEN L. GREEN has served as the Chairman and member of the Executive
Committee of the Board of Directors, Chief Executive Officer and President of
the Company since 1997. Mr. Green founded S.L. Green Real Estate in 1980. Since
then he has been involved in the acquisition of over 30 Manhattan office
buildings containing in excess of four million square feet and the management of
50 Manhattan office buildings containing in excess of 10 million square feet.
His clients have included Aldrich Eastman & Waltch, Bank of New York, CalPERS,
Dai-Ichi Kangyo Bank, and CS First Boston. Mr. Green is a Governor of the Real
Estate Board of New York and an at-large member of the Executive Committee of
the Board of Governors of the Real Estate Board of New York. Additionally, Mr.
Green is a Co-Chairman of the Real Estate Tax Fairness Coalition. Mr. Green
received a B.A. degree from Hartwick College and a J.D. degree from Boston
College Law School. Mr. Green is the husband of Nancy A. Peck, an Executive Vice
President of the Company.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
DAVID J. NETTINA has served as Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company since 1997. Prior to joining
the Company, Mr. Nettina worked for The Pyramid Companies ("Pyramid"), based in
Syracuse, NY, in various positions from March 1986 to June 1997. From 1990 to
1997, Mr. Nettina was a partner and Chief Financial Officer of Pyramid. From
1989 to 1990, Mr. Nettina was a development partner at the Boston, MA office of
Pyramid. Mr. Nettina was the Director of Corporate Finance of the Pyramid
Development Group from 1987 to 1989. From 1986 to 1987, Mr. Nettina was Chief
Operating Officer of the Pyramid Management Group. Mr. Nettina served as
President of Citibank (Maine), N.A. from 1983 to 1986. From 1980 to 1983, Mr.
Nettina was Assistant Vice President of Citibank (NYS), N.A. in Rochester, NY.
Mr. Nettina was in the U.S. Army from 1976 until he completed service as a
Captain in 1980. Mr. Nettina received a B.S. degree in 1974 and an MBA in 1976
from Canisius College. Mr. Nettina is 44 years old.
5
NANCY ANN PECK has served as Executive Vice President-Development and
Operations of the Company since 1997. From 1983 until 1997, Ms. Peck supervised
redevelopment of the SL Green projects and oversaw the management and
construction of all properties owned and managed by SL Green. Prior to joining
SL Green, Ms. Peck served as project coordinator for projects valued in excess
of $500 million, one of which was the renovation and conversion of the two
million square foot American Furniture Mart in Chicago into a multi-use complex.
Ms. Peck has worked for McKeon Construction Corp., Paul Properties and Shelter
Rock Holdings Corp. She recently was appointed to the Board of Directors of the
Real Estate Board of New York, Management Division. Ms. Peck received a B.A.
degree from the University of California at Berkeley and an MBA in finance from
New York University Business School. She is the wife of Stephen L. Green,
Chairman of the Board of Directors and President of the Company. Ms. Peck is 53
years old.
STEVEN H. KLEIN has served as Executive Vice President-Acquisitions of the
Company since 1997. Mr. Klein oversaw the Asset Management division of SL Green
from 1991 until 1997 and led acquisition, sale and investment analysis
decisions. Mr. Klein played a major role in the redevelopment of SL Green's
managed portfolio. Prior to joining SL Green, Mr. Klein worked at Gallin Realty
Company in marketing and leasing. Mr. Klein received a B.A. degree from the
University of Michigan. Mr. Klein is 37 years old.
GERARD NOCERA has served as Executive Vice President-Leasing of the Company
since 1997. From 1991 to 1997, Mr. Nocera was responsible for the development
and implementation of marketing and leasing programs at SL Green owned and
managed properties. Prior to joining SL Green, Mr. Nocera worked for The Cohen
Brothers as a landlord representative. Mr. Nocera is a member of the Real Estate
Board of New York. Mr. Nocera received a B.A. degree from Duquesne University.
Mr. Nocera is 40 years old.
LOUIS A. OLSEN has served as Senior Vice President-Finance of the Company
since 1997. From 1988 until 1997, Mr. Olsen oversaw all financial and accounting
functions at SL Green. Before joining SL Green, Mr. Olsen was vice president and
comptroller of the management division of Edward S. Gordon Company where he was
responsible for the financial accounting of an 8 million square foot commercial
office portfolio managed by Edward S. Gordon. Mr. Olsen also served for four
years as vice president of Chase Manhattan Bank where he was responsible for
financial reporting for the $200 million Real Estate Owned Portfolio. Mr. Olsen
also worked as a manager in the real estate department at Peat, Marwick &
Mitchell. Mr. Olsen received a B.S. degree in accounting from Bloomfield College
and an M.B.A. degree in accounting and taxation from Fairleigh Dickenson
University. Mr. Olsen is a licensed New York State Certified Public Accountant.
Mr. Olsen is 53 years old.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company is managed by a five member Board of Directors, a majority of
whom are independent of the Company's management. The Board of Directors held
three meetings during fiscal year 1997 subsequent to the IPO. Each of the
directors attended 100% of the total number of meetings of the Board of
Directors and of the committees of the Company of which he was a member during
1997.
AUDIT COMMITTEE. The Audit Committee, which consists of John H. Alschuler,
Jr., Edwin Thomas Burton, III and John S. Levy, makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagements, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. The Audit Committee held two meetings during fiscal year
1997.
EXECUTIVE COMMITTEE. Subject to the supervision and oversight of the Board
of Directors, the Executive Committee, which consists of Stephen L. Green,
Benjamin P. Feldman and John H. Alschuler, Jr., has the authority to approve the
acquisition, financing and disposition of investments by the Company and to
authorize the execution of certain contracts and agreements, including those
relating to the
6
borrowing of money by the Company and to exercise generally all other powers of
the Board of Directors, except for those which require action by all Directors
or the Independent Directors under the Articles of Incorporation or Bylaws of
the Company or under applicable law. The Executive Committee held no meetings
during fiscal year 1997.
COMPENSATION COMMITTEE. The Compensation Committee, which consists of John
H. Alschuler, Jr., Edwin Thomas Burton, III and John S. Levy makes
recommendations and exercises all powers of the Board of Directors in connection
with compensation matters, including incentive compensation and benefit plans.
The Compensation Committee also has authority to grant awards under the
Company's 1997 Stock Option and Incentive Plan, as amended by the Board of
Directors (the "Amended 1997 Stock Option and Incentive Plan"). The Compensation
Committee held no meetings during fiscal year 1997.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the functions of such a committee.
DIRECTOR COMPENSATION
Each of the non-employee directors of the Company receives an annual
director's fee of $12,000. Each non-employee director also receives $1,000 for
each meeting of the Board of Directors attended and $500 for each committee
meeting attended, provided such committee meeting does not occur on a day on
which a Board of Directors meeting is held. Each non-employee director, upon
initial election to the Board of Directors, received options under the 1997
Stock Option and Incentive Plan to purchase 6,000 shares of Common Stock at the
market price of the Common Stock on the date of grant, which will vest one year
from the date of grant.
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, upon the recommendation of the Audit
Committee, has selected the accounting firm of Ernst & Young LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
1998, subject to ratification of this appointment by the stockholders of the
Company. Ernst & Young LLP has served as the Company's independent auditors
since the Company's formation in June 1997 and is considered by management of
the Company to be well qualified. The Company has been advised by that firm that
neither it nor any member thereof has any financial interest, direct or
indirect, in the Company or any of its subsidiaries in any capacity. A
representative of Ernst & Young LLP will be present at the Annual Meeting, will
be given the opportunity to make a statement if he or she so desires and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF THE INDEPENDENT AUDITORS.
7
EXECUTIVE COMPENSATION
The Company was organized as a Maryland corporation in June 1997. The
following table sets forth information regarding the base compensation awarded
to the Company's Chief Executive Officer and each of the Company's other five
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers") whose base salary, on an annualized basis exceeded
$100,000 during the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------------------------------
LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUSES($) OPTIONS(1) ($)
- ---------------------------------------------------------- --------- ---------- --------------- ----------- -------------
Stephen L. Green, Chairman of the Board, President and
Chief Executive Officer 1997 $ 250,000 -- -- --
David J. Nettina, Executive Vice President and Chief
Operating Officer 1997 $ 200,000 -- 75,000 --
Steven H. Klein, Executive Vice President-Acquisitions 1997 $ 175,000 -- 50,000 --
Gerard Nocera, Executive Vice President-Leasing 1997 $ 175,000 -- 50,000 --
Nancy A. Peck, Executive Vice President-Development and
Operations 1997 $ 150,000 -- 50,000 --
Benjamin P. Feldman, Executive Vice President and General
Counsel 1997 $ 150,000 -- 50,000 --
- ------------------------
(1) As of December 31, 1997, options to purchase a total of 610,000 shares of
Common Stock have been granted to directors and employees of the Company,
including options to purchase 275,000 shares of Common Stock granted to the
Named Executive Officers.
The following table sets forth the options granted with respect to the
fiscal year ended December 31, 1997 to the Company's Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1997
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS EXERCISE SHARE PRICE
SECURITIES GRANTED TO PRICE PER APPRECIATION
UNDERLYING EMPLOYEES SHARE OF FOR OPTION TERM(2)
OPTIONS IN FISCAL COMMON EXPIRATION ------------------------
NAME GRANTED(1) YEAR STOCK(3) DATE 5%(4) 10%(5)
- ---------------------------------------------- ----------- --------------- ----------- ----------- ---------- ------------
Stephen L. Green.............................. -- -- -- -- -- --
David J. Nettina.............................. 75,000 11.4% $ 21.00 8/14/07 $ 990,509 $ 2,510,144
Nancy A. Peck................................. 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Benjamin P. Feldman........................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Steven H. Klein............................... 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
Gerard Nocera................................. 50,000 7.6% $ 21.00 8/14/07 $ 660,339 $ 1,673,430
- ------------------------
(1) All options are granted at the fair market value of the common stock at the
date of grant. These options will vest in three equal annual installments
(rounded to the nearest whole share) over three years.
8
(2) In accordance with the rules of the Commission, these amounts are the
hypothetical gains or "option spreads" that would exist for the respective
options based on assumed rates of annual compound share price appreciation
of 5% and 10% from the date the options were granted over the full option
term. No gain to the optionee is possible without an increase in the price
of the Common Stock, which would benefit all stockholders.
(3) The exercise price for the initial grant of options on August 14, 1997 was
based on the IPO price of $21.00 per share of Common Stock.
(4) An annual compound share price appreciation of 5% from the IPO price of
$21.00 per share of Common Stock yields a price of $34.21 per share of
Common Stock.
(5) An annual compound share price appreciation of 10% from the IPO price of
$21.00 per share of Common Stock yields a price of $54.47 per share of
Common Stock.
No options were exercised in 1997. The following table sets forth the value
of options held at the end of 1997 by the Company's Named Executive Officers.
AGGREGATED FISCAL YEAR-END 1997 OPTION VALUES
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------- ----------------------- -----------------------
Stephen L. Green............................................... -- --
David J. Nettina............................................... 0/75,000 0/$ 370,313
Nancy A. Peck.................................................. 0/50,000 0/$ 246,875
Benjamin P. Feldman............................................ 0/50,000 0/$ 246,875
Steven H. Klein................................................ 0/50,000 0/$ 246,875
Gerard Nocera.................................................. 0/50,000 0/$ 246,875
- ------------------------
(1) The value of unexercised in-the-money options at fiscal year-end based on
the fair market value for Common Stock, $25 15/16 share, as of December 31,
1997.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Stephen L. Green, Nancy A. Peck, Steven H. Klein, Benjamin P. Feldman,
Gerard Nocera and Louis A. Olsen have each entered into employment and
noncompetition agreements with the Company.
Each agreement will expire on the third anniversary of the closing of the
IPO (I.E., August 20, 2000), except the agreement with Louis A. Olsen will
expire on the first anniversary of the IPO (I.E., August 20, 1998), unless in
each case otherwise extended, and provides for certain severance payments in the
event of the employee's death, disability, termination "without cause" or
resignation with "good reason" (as such terms are defined in the agreements).
Such employment and noncompetition agreements, subject to certain exceptions,
prohibit each such employee from engaging, directly or indirectly, during the
term of his or her employment, in any business which engages or attempts to
engage in, directly or indirectly, the acquisition, development, construction,
operation, management or leasing of any office real estate property within the
New York City metropolitan area ("Competitive Activities"). The employment and
noncompetition agreement of Stephen L. Green also, subject to certain
exceptions, prohibits Mr. Green from engaging, directly or indirectly, during
the Noncompetition Period in any Competitive Activities. The Noncompetition
Period is the period beginning on the date of the termination of employment and
ending on the later of (i) three years from the closing of the IPO and (ii) one
year from the termination of his employment with the Company.
9
David J. Nettina entered into a similar employment and noncompetition
agreement with the Company (including the prohibition of Competitive Activities
during the Noncompetition Period). Mr. Nettina's agreement also provides for a
minimum yearly bonus of $100,000, the award of options to purchase at least
50,000 shares of Common Stock upon completion of the IPO (exercisable at $21.00,
the initial public offering price), the award of $200,000 worth of shares of
Common Stock on each of the first, second and third anniversaries of his
employment and customary relocation expenses.
In addition, pursuant to the terms of Mr. Nettina's employment agreement,
Mr. Nettina received a loan from the Company on August 14, 1997 to purchase
shares of Common Stock issued under the 1997 Stock Option and Incentive Plan (a
"Stock Loan"). The principal amount of the Stock Loan is $300,000. The Stock
Loan has a term of three years, accrues interest at the Federal mid-term
"Applicable Federal Rate" ("AFR"), as in effect from time to time, and is
secured by the Common Stock purchased and is otherwise be non-recourse.
One-thirty-sixth of the Stock Loan (together with accrued interest on the Stock
Loan) will be forgiven each month during the term of the Stock Loan provided
that Mr. Nettina is then employed by the Company. In the event of a
change-in-control of the Company, Mr. Nettina's death or permanent disability or
termination of his employment by the Company without cause, the outstanding
principal amount of the Stock Loan will be forgiven in full. In the event Mr.
Nettina leaves the employ of the Company or is terminated with cause, the
outstanding amount of the Stock Loan will be immediately due and payable. The
outstanding amount shall be equal to the amount then due and owing, pro rated
for the number of months elapsed for the year in which termination occurs.
Steven H. Klein received a similar Stock Loan from the Company on August 14,
1997 in the principal amount of $500,000, with a term of five years one sixtieth
of which will be forgiven each month during the term of the Stock Loan upon the
same terms and conditions of Mr. Nettina's Stock Loan.
REPORT ON EXECUTIVE COMPENSATION
The following is a report by the Company's Compensation Committee regarding
the Company's executive compensation objectives, executive compensation program
and the compensation of the Company's chief executive officer.
EXECUTIVE COMPENSATION OBJECTIVES. The objective of the Company's executive
compensation program is to attract, retain and motivate talented executives that
will maximize stockholder value. In order to achieve this objective, in addition
to annual base salaries, the executive compensation program utilizes a
combination of long-term incentives through equity-based compensation and annual
incentives through cash bonuses. The program is intended to align the interests
of executives with those of the Company's stockholders by linking a portion of
executive compensation directly to increases in stockholder value. The Company
seeks to provide total compensation to its executive officers which is
competitive with total compensation paid by REITs similar to the Company.
PROCEEDINGS OF THE COMPENSATION COMMITTEE. The Compensation Committee
determines compensation for the Company's executive officers and is comprised of
three nonemployee directors, John H. Alschuler, Jr., Edwin Thomas Burton, III
and John S. Levy. Final compensation determinations for each fiscal year
generally will be made after the end of the fiscal year and after audited
financial statements for such year become available. At that time, base salaries
for the following fiscal year will be set, cash bonuses, if any, will be
determined for the past year's performance, and option grants, if any, will
generally be made. With respect to each executive officer who acted in such
capacity at the time of the IPO, base compensation and stock option grants made
in 1997 were determined prior to the IPO and prior to the formation of the
Compensation Committee. Accordingly, the Compensation Committee took no action
with respect to such determinations.
The Compensation Committee exercises independent discretion in respect of
executive compensation matters. With respect to the compensation of the Named
Executive Officers other than Mr. Stephen L. Green, the Compensation Committee
reviews the recommendations of Mr. Stephen L. Green.
10
The following is a discussion of each element of the Company's executive
compensation:
ANNUAL BASE SALARY. Base salaries for each of the Named Executive Officers
are the subject of the employment and noncompetition agreement between the
Company and each such executive as indicated above. For 1997, base salaries for
each Named Executive Officer were determined prior to the IPO and prior to the
formation of the Compensation Committee. Accordingly, the Compensation Committee
took no action with respect to such determinations.
ANNUAL INCENTIVES. Annual incentives are provided in the form of cash
bonuses to be paid if certain performance objectives are achieved. The
Compensation Committee may in the future award cash bonuses based primarily upon
the Company's level of Funds from Operations. Cash bonuses will also be subject
to adjustment based upon the Compensation Committee's evaluation of an
executive's personal performance. Mr. Nettina's employment and noncompetition
agreement provides for a minimum annual cash bonus (commencing on the first
anniversary of the date of the agreement) of $100,000.
In respect of the year ended December 31, 1997, none of the Company's
executive officers received cash bonuses. The determination not to award cash
bonuses to these officers was made in light of the fact that the Company
recently completed its IPO and had only four months of operations in 1997. It is
anticipated that the Company's performance during this period may be considered
by the Compensation Committee in determining incentive compensation for 1998.
LONG-TERM INCENTIVES. Long-term incentives are provided through the grant
of stock options. The grant of stock options are intended to align the
executive's long-term objectives with those of the Company's stockholders. The
Amended 1997 Stock Option and Incentive Plan is administered by the Compensation
Committee, which has the discretion to determine those individuals to whom
options will be granted, the number of shares subject to options and other terms
and conditions of the options.
In connection with the IPO, David J. Nettina was granted 75,000 nonqualified
stock options to purchase shares of Common Stock, and Nancy A. Peck, Benjamin P.
Feldman, Steven H. Klein and Gerard Nocera were each granted 50,000 nonqualified
stock options to purchase shares of Common Stock, all at an exercise price of
$21.00 per share (the IPO price of the Common Stock). Such stock option grants
were determined prior to the formation of the Compensation Committee.
Accordingly, the Compensation Committee took no action with respect to such
determinations.
1997 CHIEF EXECUTIVE OFFICER COMPENSATION. As indicated above, Stephen L.
Green's salary was determined prior to the IPO and prior to the formation of the
Compensation Committee. Accordingly, the Compensation Committee took no action
with respect to such determination. As indicated above, the Committee determined
to forgo awards of cash bonuses to executive officers during the Company's first
fiscal year of operations.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986, as amended, limits the deductibility on the Company's tax
return of compensation over $1 million to any of the named executive officers of
the Company unless, in general, the compensation is paid pursuant to a plan
which is performance-related, non-discretionary and has been approved by the
Company's stockholders. The Compensation Committee's policy with respect to
Section 162(m) is to make every reasonable effort to ensure that compensation is
deductible to the extent permitted while simultaneously providing Company
executives with appropriate compensation for their performance. The Company did
not pay any compensation during 1997 that would be subject to the limitations
set forth in Section 162(m).
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
John H. Alschuler, Jr.
Edwin Thomas Burton, III
John S. Levy
11
STOCK PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Common Stock from the IPO price to the NYSE closing
price per share on December 31, 1997 with the cumulative total return on the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") and the BBG
REIT Office Properties Index (the "BBG REIT Index"). Total return values were
calculated based on cumulative total return assuming (i) the investment of $100
in the Common Stock IPO on August 15, 1997 and in the S&P 500 and the BBG REIT
Office Properties Index on August 31, 1997 and (ii) reinvestment of dividends.
[PERFORMANCE GRAPH]
SOURCE: BLOOMBERG
The actual returns shown on the graph above are as follows:
VALUE OF
INITIAL INVESTMENT INITIAL
AT INVESTMENT AT
15/31-AUG-97(1) 31-DEC-97
------------------ -------------
SL Green Realty................................. $ 100.00 $ 125.96
S&P 500......................................... $ 100.00 $ 108.42
BBG REIT Index.................................. $ 100.00 $ 118.35
- ------------------------
(1) Assumes an initial investment of $100 on August 15, 1997 (the IPO purchase
date) with respect to shares of the Company's Common Stock and on August 31,
1997 with respect to the S&P 500 and the BBG REIT Index.
12
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock for
(i) each stockholder of the Company holding more than a 5% beneficial interest
in the Company, (ii) each executive officer of the Company who is not a director
of the Company and (iii) the directors and executive officers of the Company as
a group as of December 31, 1997. Stock ownership of the Directors of the Company
appears under the heading "Information Regarding the Nominee and Directors" in
this Proxy Statement.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-------------------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT OF TOTAL
- ------------------------------------------------------------------------------- ---------- -------------------
David J. Nettina(2)............................................................ 14,285 0.10%
Nancy A. Peck(2)............................................................... 197,720 1.50%
Steven H. Klein(2)............................................................. 102,897(9) 0.80%
Gerard Nocera(2)............................................................... 79,088 0.60%
Cohen & Steers Capital Management, Inc.(3)..................................... 1,702,000 13.85%
Capital Growth Management Limited Partnership(4)............................... 1,320,000 10.74%
The Equitable Companies Incorporated(5)........................................ 1,302,900 10.60%
Neuberger & Berman LLC(6)...................................................... 681,100 5.54%
EII Realty Securities Inc.(7).................................................. 639,300 5.20%
FMR Corp.(8)................................................................... 622,400 5.06%
All directors and executive officers as a group (10 persons)................... 2,732,494 20.80%
- ------------------------
(1) The number of Common Shares beneficially owned is reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities.
(2) The business address for this stockholder is 70 West 36th Street, New York,
New York 10018.
(3) The business address for this stockholder is 757 Third Avenue, New York, New
York 10017. Pursuant to a Schedule 13G filed with the SEC, as of December
31, 1997, this stockholder may have direct or indirect voting and/or
investment discretion over these shares of Common Stock which are held for
the benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.
(4) The business address for this stockholder is One International Plaza,
Boston, MA 02110. Pursuant to a Schedule 13G filed with the SEC, as of
December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.
(5) The business address for this stockholder is 1290 Avenue of the Americas,
New York, NY 10104. Pursuant to a Schedule 13G filed with the SEC, as of
December 31, 1997, this stockholder may have direct or indirect voting
and/or investment discretion over these shares of Common Stock which are
held for the benefit of its clients by its separate accounts, externally
managed accounts, registered investment companies, subsidiaries and/or other
affiliates. This stockholder is reporting the combined holdings of the
entities for the purpose of administrative convenience.
(6) The business address for this stockholder is 605 Third Avenue, New York, NY
10158. Pursuant to a Schedule 13G filed with the SEC, as of December 31,
1997, this stockholder may have direct or indirect voting and/or investment
discretion over these shares of Common Stock which are held for the benefit
of its clients by its separate accounts, externally managed accounts,
registered investment
13
companies, subsidiaries and/or other affiliates. This stockholder is
reporting the combined holdings of the entities for the purpose of
administrative convenience.
(7) The business address for this stockholder is 667 Madison Avenue, New York,
NY 10021. Pursuant to a Schedule 13G filed with the SEC, as of December 31,
1997, this stockholder may have direct or indirect voting and/or investment
discretion over these shares of Common Stock which are held for the benefit
of its clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates. This
stockholder is reporting the combined holdings of the entities for the
purpose of administrative convenience.
(8) The business address for this stockholder is 82 Devonshire Street, Boston,
MA 02109. Pursuant to a Schedule 13G filed with the SEC, as of December 31,
1997, this stockholder may have direct or indirect voting and/or investment
discretion over these shares of Common Stock which are held for the benefit
of its clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates. This
stockholder is reporting the combined holdings of the entities for the
purpose of administrative convenience.
(9) Includes 15,000 shares of Common Stock held by Mr. Klein through a family
trust.
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders"), to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Officers, directors and 10% Holders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, all Section 16(a) filing requirements
applicable to its executive officers, directors and 10% Holders were satisfied.
PROPOSAL 3: APPROVAL OF THE
AMENDED 1997 STOCK OPTION AND INCENTIVE PLAN
In December 1997 and in March 1998 the Board of Directors amended the 1997
Stock Option and Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED
1997 STOCK OPTION AND INCENTIVE PLAN.
The Company's 1997 Stock Option and Incentive Plan ("1997 Stock Option and
Incentive Plan") was adopted at the time of the IPO in order to provide a means
for the Company to implement its long-term incentive program for executive
officers and directors, as well as to provide incentives for other officers and
employees. The Company's objective in providing these incentives is to attract,
retain and motivate talented persons that will maximize stockholder value. In
this regard, the Company has sought to provide incentives for a broad range of
persons employed by the Company in granting awards under the 1997 Stock Option
and Incentive Plan.
In order to ensure that the Company can continue the broad-based application
of its long-term incentive program, the Board of Directors has amended the 1997
Stock Option and Incentive Plan. The Amended 1997 Stock Option and Incentive
Plan includes "consultants" as among the persons eligible to receive awards
under the plan and provides for the grant of awards in respect of up to an
aggregate of 1,700,000 shares of Common Stock. (The 1997 Stock Option and
Incentive Plan provided for the grant of awards in respect of up to an aggregate
of 1,100,000 shares of Common Stock.) The Amended 1997 Stock Option and
Incentive Plan is otherwise the same as the 1997 Stock Option and Incentive
Plan.
The following is a description of the Amended 1997 Stock Option and
Incentive Plan:
The Amended 1997 Stock Option and Incentive Plan authorizes (i) the grant of
stock options that qualify as incentive stock options under Section 422 of the
Code ("ISOs"), (ii) the grant of stock options
14
that do not so qualify ("NQSOs"), (iii) the grant of stock options in lieu of
cash Directors' fees and employee bonuses, and (iv) grants of shares of Common
Stock, in lieu of cash compensation. The exercise price of stock options is
determined by the Compensation Committee, but may not be less than 100% of the
fair market value of the shares of Common Stock on the date of grant in the case
of ISOs; provided that, in the case of grants of NQSOs granted in lieu of cash
Directors' fees and employee bonuses, the exercise price may not be less than
50% of the fair market value of the shares of Common Stock on the date of grant.
The Company has reserved 1,700,000 shares of Common Stock for issuance under the
Amended 1997 Stock Option and Incentive Plan. As of April 3, 1998, options for
821,000 shares of Common Stock had been granted pursuant to the Amended 1997
Stock Option and Incentive Plan, including options to purchase 375,000 shares of
Common Stock granted to the Named Executive Officers. In that regard, as of
April 3, 1998, David J. Nettina had been granted options to purchase 175,000
shares of Common Stock (100,000 of which were awarded in February 1998), and
Nancy A. Peck, Steven H. Klein, Benjamin P. Feldman and Gerard Nocera had each
been granted options to purchase 50,000 shares of Common Stock. See "Executive
Compensation." In addition, each non-employee Director (including Mr. Burton,
nominee for election as a Director at the Annual Meeting) was granted options to
purchase 6,000 shares of Common Stock upon completion of the IPO. See "Proposal
I -- Election of Directors -- Director Compensation." On April 3, 1998, the last
reported sale price of the Common Stock on the New York Stock Exchange was
$26 7/16.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE AMENDED 1997 STOCK OPTION AND
INCENTIVE PLAN. The following is a brief summary of the principal Federal
income tax consequences of awards under the Amended 1997 Stock Option and
Incentive Plan. The summary is based upon current Federal income tax laws and
interpretations thereof, all of which are subject to change at any time,
possibly with retroactive effect. The summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign tax
consequences.
A participant is not subject to Federal income tax either at the time of
grant or at the time of exercise of an ISO. However, upon exercise, the
difference between the fair market value of the Common Stock and the exercise
price is an item of tax preference subject to the possible application of the
alternative minimum tax. If a participant does not dispose of Common Stock
acquired through the exercise of an ISO in a "disqualifying disposition" (I.E.,
no disposition occurs within two years from the date of grant of the share
option nor within one year of the transfer of the Common Stock to the
participant), then the participant will be taxed only upon the gain, if any,
from the sale of such Common Stock, and such gain will be taxable as gain from
the sale of a capital asset.
The Company will not receive any tax deduction on the exercise of an ISO or,
if the above holding period requirements are met, on the sale of the underlying
Common Stock. If there is a disqualifying disposition (I.E., one of the holding
period requirements is not met), the participant will be treated as receiving
compensation subject to ordinary income tax in the year of the disqualifying
disposition and the Company will be entitled to a deduction for compensation
expense in an amount equal to the amount included in income by the participant.
The participant generally will be required to include in income an amount equal
to the difference between the fair market value of the Common Stock at the time
of exercise and the exercise price. Any appreciation in value after the time of
exercise will be taxed as capital gain and will not result in any deduction by
the Company.
If NQSOs are granted to a participant, there are no Federal income tax
consequences at the time of grant. Upon exercise of the option, the participant
must report as ordinary income an amount equal to the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise. The Company will receive a tax deduction in like amount. Any
appreciation in value after the time of exercise will be taxed as capital gain
and will not result in any deduction by the Company.
15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION TRANSACTIONS
In connection with the formation of the Company in June 1997, certain
continuing investors (which included Stephen L. Green, members of his immediate
family and unaffiliated partners) received an aggregate of 2,383,284 Units for
their direct and indirect interests in certain properties and in the commercial
real estate businesses acquired by the Company. In addition, in connection with
the formation of the Company, the Operating Partnership used $20 million to
repay a portion of a $46 million loan made by Lehman Brothers Holdings, Inc. to
Green Realty LLC and invested in Treasury securities pledged as collateral
therefor which, upon repayment of the LBHI Loan, was released to Stephen L.
Green.
CLEANING SERVICES
First Quality Maintenance, L.P. ("First Quality") provides cleaning and
related services with respect to certain of the properties owned by the Company.
First Quality is owned by Gary Green, a son of Stephen L. Green. First Quality
also provides additional services directly to tenants on a separately negotiated
basis. The aggregate amount of fees to First Quality for services provided
(excluding services provided directly to tenants) was approximately $296,000 in
1996 and $320,000 in 1997. In addition, the cleaning entity has the
non-exclusive opportunity to provide cleaning and related services to individual
tenants at the Company's properties on a basis separately negotiated with any
tenant seeking such additional services. The cleaning entity will provide such
services to individual tenants pursuant to agreements on customary terms
(including at market rates). First Quality leases 3,740 square feet of space at
70 West 36th Street pursuant to a lease that expires on December 31, 2005 and
provides for annual rental payments of approximately $68,660.
SECURITY SERVICES
Classic Security LLC ("Classic Security") provides security services with
respect to certain of properties owned by the Company. Classic Security is owned
by Gary Green, a son of Stephen L. Green. The aggregate amount of fees for such
services was approximately $24,000 in 1996 and $143,000 in 1997.
RELATED PARTY TRANSACTIONS
During 1996, HRA, a real estate and management consulting firm of which John
H. Alschuler, Jr., a director of the Company, is the President provided
consulting services for S.L. Green Leasing, Inc. ("S.L. Green Leasing"). HRA
negotiated certain New York City benefit programs for Information Builders,
Inc., a tenant that was represented by S.L. Green Leasing, in connection with
its relocation from 1250 Broadway to 2 Penn Plaza. For such services, HRA was
paid a total of $128,962.99 by S.L. Green Leasing.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
In addition, the Company intends to utilize the proxy solicitation services of
The Financial Relations Board and Beacon Hill Partners at an aggregate estimated
cost of $7,500 plus out-of-pocket expenses.
16
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 annual meeting of
stockholders must be received by the Secretary of the Company no later than
December 9, 1998 in order to be considered for inclusion in the Company's proxy
statement relating to the 1999 meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended ("Rule 14a-8").
For a proposal of a stockholder to be presented to the Company's 1999 annual
meeting of stockholders, other than a stockholder proposal included in the
Company's proxy statement pursuant to Rule 14a-8, it must be received at the
principal executive offices of the Company after November 29, 1998 and on or
before March 14, 1999, unless the 1999 annual meeting of stockholders is
scheduled to take place before May 21, 1999. The Company's Bylaws provide that
any stockholder wishing to nominate a director or have a stockholder proposal
other than a stockholder proposal included in the Company's proxy statement
pursuant to Rule 14a-8, considered at an annual meeting must provide written
notice of such nomination or proposal and appropriate supporting documentation,
as set forth in the Bylaws, to the Company at its principal executive offices
not less than 75 days nor more than 180 days prior to the anniversary of the
immediately preceding annual meeting of stockholders (the "Anniversary Date");
provided, however, that in the event that the annual meeting is scheduled to be
held more than seven calendar days prior, or more than 60 days subsequent, to
the Anniversary Date, such nominations or proposals must be delivered to the
Company not earlier than the 180th day prior to such meeting and not later than
the later of the 75th day prior to such annual meeting or the twentieth day
following the earlier of the day on which public announcement of the meeting is
first made or notice of the meeting is mailed to stockholders. Any such proposal
should be mailed to: SL Green Realty Corp., 70 West 36th Street, New York, New
York 10018, Attn: Benjamin P. Feldman, Secretary.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement that will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
BY ORDER OF THE BOARD OF DIRECTORS
BENJAMIN P. FELDMAN
SECRETARY
New York, New York
April 7, 1998
17
SL GREEN REALTY CORP.
70 WEST 36TH STREET
NEW YORK, NEW YORK 10018
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 28, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Stephen L. Green and
Benjamin P. Feldman and either of them, as Proxies of the undersigned, with full
power of substitution, to vote all shares of Common Stock of SL Green Realty
Corp. (the "Company") held of record by the undersigned as of the close of
business on April 3, 1998, on behalf of the undersigned at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 110 East 42nd Street, New
York, New York, 10:00 a.m., local time, on Thursday, May 28, 1998, and at any
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE NOMINEE OF THE BOARD OF DIRECTORS LISTED IN PROPOSAL 1 AND
FOR PROPOSAL 2 AND PROPOSAL 3. IN THEIR DISCRETION, THE PROXIES ARE EACH
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. A STOCKHOLDER
WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS NEED
ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
/X/ Please mark your votes as in this example.
1. To elect one Class I Director of the Company to serve until the 2001 Annual Meeting of Stockholders and until his
successor is duly elected and qualified.
Nominee: Edwin Thomas Burton, III
/ / FOR / / WITHHOLD
2. To ratify the selection of Ernst & Young LLP as the independent auditors of the Company for the fiscal year ending
December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the Company's Amended 1997 Stock Option and Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. To consider and act upon any other matters that may properly be brought before the Annual Meeting and at any adjournments
or postponements thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A COPY OF THE ACCOMPANYING
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS, THE PROXY STATEMENT WITH RESPECT
THERETO AND THE COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS AND HEREBY
REVOKE(S) ANY PROXY OR PROXIES HERETOFORE GIVEN. THIS PROXY MAY BE REVOKED AT
ANY TIME BEFORE IT IS EXERCISED.
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Signature: Date: Signature: Date:
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IF HELD JOINTLY
Signature
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Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
