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 Rule 14a-11(c) or Rule 14a-12
Wellsford Real Properties, Inc.
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(Name of Registrant as Specified In Its Charter)
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WELLSFORD REAL PROPERTIES, INC.
535 Madison Avenue, 26th Floor
New York, NY 10022
April 21, 2003
Dear Stockholder:
You are cordially invited to attend the 2003 Annual Meeting of stockholders
which will be held on June 9, 2003, at 9:30 a.m. at the offices of Bryan Cave
LLP, 1290 Avenue of the Americas, 31st floor, New York, NY 10104.
Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
stockholders and Proxy Statement which follow. Also included is a Proxy Card and
postage paid return envelope.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, WE HOPE THAT YOU WILL COMPLETE AND RETURN YOUR PROXY
CARD IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
Sincerely,
/s/ Jeffrey H. Lynford
--------------------------
Jeffrey H. Lynford
Chairman of the Board,
President and Chief Executive Officer
WELLSFORD REAL PROPERTIES, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 9, 2003
---------------------
The Annual Meeting of stockholders of Wellsford Real Properties, Inc., a
Maryland Corporation (the "Company"), will be held at the offices of Bryan Cave
LLP, 1290 Avenue of the Americas, 31st floor, New York, NY 10104 on June 9, 2003
at 9:30 a.m. local time, for the following purposes:
1. To elect two directors to terms expiring at the 2006 annual meeting of
stockholders.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public auditors for the fiscal year ending December 31, 2003.
3. To transact such other business as may properly come before the meeting
or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed April 17, 2003 as the record date for
determining the stockholders entitled to receive notice of and to vote at the
meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James J. Burns
---------------------
James J. Burns
Secretary
April 21, 2003
New York, New York
WELLSFORD REAL PROPERTIES, INC.
535 Madison Avenue, 26th Floor
New York, NY 10022
--------------------
PROXY STATEMENT
--------------------
June 9, 2003
Annual Meeting of Stockholders
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Wellsford Real Properties, Inc., a
Maryland corporation (the "Company"), of proxies from the holders (the
"Stockholders") of the Company's issued and outstanding shares of common stock,
par value $.02 per share (the "Common Shares") and issued and outstanding shares
of class A-1 common stock, par value $.02 per share (the "Class A-1 Common
Shares"), to be exercised at the Annual Meeting of Stockholders to be held on
June 9, 2003, at the offices of Bryan Cave LLP, 1290 Avenue of the Americas,
31st floor, New York, NY 10104, at 9:30 a.m. local time, and at any
adjournment(s) or postponement(s) of such meeting (the "Annual Meeting"), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.
This Proxy Statement and enclosed Proxy Card are being mailed to the
Stockholders on or about April 25, 2003.
At the Annual Meeting, the Stockholders will be asked to consider and vote
upon the following proposals (the "Proposals"):
1. The election of two directors to terms expiring at the 2006 annual
meeting of Stockholders.
2. The ratification of the appointment of Ernst & Young LLP as the
Company's independent public auditors for the fiscal year ending December 31,
2003.
3. Such other business as may properly come before the Annual Meeting.
Only the holders of record of the Common Shares and Class A-1 Common Shares
at the close of business on April 17, 2003 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. Each Common Share and Class A-1
Common Share is entitled to one vote on all matters. As of the Record Date, an
aggregate of 6,283,827 Common Shares and 169,903 Class A-1 Common Shares were
outstanding.
A majority of all the votes entitled to be cast at the Annual Meeting shall
constitute a quorum for the transaction of business at the Annual Meeting. A
plurality of all the votes cast at the Annual Meeting is sufficient to elect a
director (Proposal 1). The affirmative vote of Stockholders owning a majority of
the shares voting is required to ratify the appointment of Ernst & Young LLP as
the Company's independent public auditors (Proposal 2). Abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote on Proposals 1 and 2 (collectively, the "Proposals").
Each of the directors and executive officers of the Company has informed
the Company that he will vote all of his respective Common Shares in favor of
all of the Proposals.
The Common Shares and Class A-1 Common Shares represented by all properly
executed proxies will be voted at the Annual Meeting as indicated or, if no
instruction is given, in favor of all of the Proposals. As to any other business
which may properly come before the Annual Meeting, all properly executed Proxy
Cards will be voted by the persons named therein. The Company does not presently
know of any other business which may come
1
before the Annual Meeting. Any person giving a proxy has the right to revoke it
at any time before it is exercised (a) by filing with the Secretary of the
Company a duly signed revocation or a Proxy Card bearing a later date or (b) by
electing to vote in person at the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The directors are divided into three classes, consisting of (i) three
members whose terms expire at the Annual Meeting, (ii) two members whose terms
expire at the 2004 annual meeting of Stockholders and (iii) three members whose
terms expire at the 2005 annual meeting of Stockholders. At the Annual Meeting,
two directors will be elected to hold office until the 2006 annual meeting of
Stockholders and until their successors are elected and qualify. Meyer "Sandy"
Frucher, who is presently a director of the Company, is a nominee for election
as a director for such term. Martin Bernstein and Richard S. Frary are not going
to stand for re-election as directors. Bonnie R. Cohen has been nominated for
election as director to fill one of the vacancies. The terms of Edward Lowenthal
and Rodney F. Du Bois expire in 2004, however, Mr. Du Bois is retiring from his
position as director effective at the Annual Meeting. It is the intention of the
Board of Directors to fill at least one of the remaining vacated directorships
in accordance with the By-laws of the Company. The terms of Douglas Crocker II,
Mark S. Germain and Jeffrey H. Lynford expire in 2005.
For information regarding the beneficial ownership of Common Shares and
Class A-1 Common Shares by the current directors of the Company, see "Security
Ownership of Certain Beneficial Owners and Management."
EXCEPT WHERE OTHERWISE INSTRUCTED, PROXIES SOLICITED BY THIS PROXY
STATEMENT WILL BE VOTED FOR THE ELECTION OF EACH OF THE BOARD'S NOMINEES LISTED
BELOW. Each such nominee has consented to be named in this Proxy Statement and
to continue to serve as a director if elected.
NOMINEES FOR ELECTION AS DIRECTORS
The following individuals have been nominated by the Board for election as
directors at the Annual Meeting based upon the review and recommendation of the
Nominating Committee:
Bonnie R. Cohen, age 60, has been a principal of B R Cohen and Associates,
--------------- a consulting firm, since January 2002. From 1998 to 2002,
Ms. Cohen served as Under Secretary for Management of the U.S. Department of
State where she was responsible for the day-to-day operations of the State
Department including all embassies, personnel, finance, budget, information
systems and consultant affairs. Prior to assuming the position at the State
Department, Ms. Cohen was Assistant Secretary for Policy, Management and Budget
at the U.S. Department of the Interior. Ms. Cohen is also a director of Cohen
and Steers Investment Company, a manager of six real estate mutual funds, the
Washington Film Festival, CARE, Friends of Art and Preservation in Embassies.
Ms. Cohen received a Masters in Business Administration from Harvard Business
School.
Meyer "Sandy" Frucher, age 56, has been a director of the Company since
--------------------- June 2000. Mr. Frucher has served as Chairman and
Chief Executive Officer of the Philadelphia Stock Exchange since June 1998 after
serving on its Board of Governors since September 1997. From 1988 to 1997, Mr.
Frucher was Executive Vice President-Development of Olympia & York Companies
(U.S.A.) and coordinated and oversaw all of Olympia & York's development
projects in the United States. From 1988 to 1999 Mr. Frucher was Trustee and
then Chairman of the New York City School Construction Authority. From 1984 to
1988 he was President and Chief Executive Officer of Battery Park City
Authority.
--------------------
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE FOR
---
DIRECTOR.
--------------------
2
OTHER DIRECTORS
Information concerning the other directors whose terms of office continue
after the Annual Meeting is set forth below:
Douglas Crocker II, age 62, has been a director of the Company since May
------------------ 1997. Mr. Crocker has been Vice-Chairman and a trustee
of Equity Residential Property Trust ("EQR"), a real estate investment trust
("REIT") that owns and operates residential properties and is the general
partner of ERP Operating Limited Partnership, since January 1, 2003. From March
1993 until December 31, 2002, Mr. Crocker was the Chief Executive Officer and a
trustee of EQR. He is a director of Ventas, Inc., a real estate company focusing
on the ownership and acquisition of health care properties and was a director of
Horizon Group Incorporated, an owner, developer and operator of outlet retail
properties from July 1996 to June 1998. Mr. Crocker has been President and Chief
Executive Officer of First Capital Financial Corporation, a sponsor of public
limited real estate partnerships ("First Capital"), since December 1992 and a
director of First Capital since January 1993. He was an executive vice president
of Equity Financial and Management Company, a subsidiary of Equity Group
Investments, Inc., an owner, manager and financier of real estate and
corporations ("EGI"), providing strategic direction and services for EGI's real
estate and corporate activities from November 1992 until March 1997.
Mark S. Germain, age 52, has been a director of the Company since May 1997.
--------------- Mr. Germain served as a trustee of Wellsford Residential
Property Trust (the "Trust") from November 1992 until consummation of its merger
with EQR in May 1997 (the "Merger"). For the past five years he has been
employed by Olmsted Group L.L.C., which is a consultant to biotechnology and
other high technology companies. Mr. Germain also serves as a board member of
several privately-held biotechnology companies. He is also a member of the New
York bar.
Edward Lowenthal, age 58, has been a director of the Company since its
---------------- formation in January 1997. Mr. Lowenthal served as the
President and Chief Executive Officer from the Company's formation until his
retirement on March 31, 2002, from which time he has been serving as a
consultant to the Company. Mr. Lowenthal served as the President and Chief
Executive Officer and as a trustee of the Trust from its formation in July 1992
until consummation of the Merger. Mr. Lowenthal is Managing Member of Ackerman
Management LLC, a real estate advisory and investment firm. Mr. Lowenthal
currently serves as a director of Reis, Inc. ("Reis"), Omega Healthcare, Inc., a
healthcare REIT and as a trustee of the Manhattan School of Music. Mr. Lowenthal
also serves as a trustee of EQR. He will not stand for re-election as a trustee
of EQR when his term expires in May 2003.
Jeffrey H. Lynford, age 55, has been the Chairman of the Board and a
------------------ director of the Company since its formation in January
1997. Mr. Lynford was also elected to the offices of President and Chief
Executive Officer effective April 1, 2002. Mr. Lynford also served as Chief
Financial Officer ("CFO") of the Company from June 2000 until December 2000 and
was the Company's Secretary from January 1997 to March 2002. Mr. Lynford served
as the Chairman of the Board and Secretary of the Trust from its formation in
July 1992 until consummation of the Merger. Mr. Lynford was the CFO of the Trust
from July 1992 until December 1994. Mr. Lynford currently serves as a trustee of
Polytechnic University, Caramoor Center for Music and the Arts and is a trustee
emeritus of the National Trust for Historic Preservation. Mr. Lynford also
serves as a trustee of EQR. He will not stand for re-election as a trustee of
EQR when his term expires in May 2003.
BOARD OF DIRECTORS' MEETINGS
The Board held four meetings during 2002. Every director attended at least
75% of the Board meetings held in 2002. Management also confers frequently with
the members of the Board on an informal basis to discuss Company affairs.
BOARD COMMITTEES
The Board has established an Executive Committee, a Compensation Committee,
an Audit Committee and a Nominating Committee.
3
Executive Committee. During 2002, the Executive Committee consisted of
------------------- Messrs. Lynford, Lowenthal and Crocker. The Executive
Committee has the authority to acquire, dispose of and finance investments for
the Company and execute contracts and agreements, including those related to the
borrowing of money by the Company, and generally to exercise all other powers of
the directors except for those which require action by all directors or the
independent directors under the charter or bylaws of the Company or under
applicable law. The Executive Committee did not have any formal meetings during
2002, however, the members meet from time to time on an informal basis.
Compensation Committee. During 2002, the Compensation Committee consisted
---------------------- of Messrs. Bernstein, Crocker, Frary, Frucher and
Germain, none of whom are employees of the Company. The Compensation Committee
reviews the Company's compensation and employee benefit plans, programs and
policies, approves employment agreements and monitors the performance and
compensation of the Executive Officers and other employees. The Compensation
Committee held one formal meeting during 2002 and met from time to time on an
informal basis as well during 2002. On March 10, 2003, the Board of Directors
approved the Compensation Committee charter.
Audit Committee. The Audit Committee acts pursuant to the Audit Committee
--------------- Charter. The Audit Committee Charter was adopted by the
Board on April 20, 2000, as amended on March 10, 2003 and attached hereto as
Appendix A. During 2002, the Audit Committee consisted of Messrs. Bernstein,
Frary, Frucher and Germain, all of whom are considered independent by The
American Stock Exchange standards, and engaged the independent public auditors,
reviewed with the independent public auditors the plans for and results of the
audit engagement, approved the professional (including non-audit) services
provided by the independent public auditors, reviewed the independence of the
independent public auditors, considered the range of audit and non-audit fees,
discussed the adequacy of the Company's internal accounting controls with
management and the independent public auditors, reviewed related party
transactions and reviewed the Company's quarterly financial statements and
disclosures in the Form 10-Qs and year-end financial statements and disclosures
in the Form 10-K prior to each being filed with the Securities and Exchange
Commission. The Audit Committee held five meetings during 2002.
Nominating Committee. The Nominating Committee generally consists of those
-------------------- members of the Board whose terms as directors of the
Company will not expire at the Annual Meeting and all of whom are not employees
of the Company. Accordingly, the Nominating Committee for the 2003 Annual
Meeting consisted of Messrs. Bernstein, Frucher and Germain, none of whom are
nominated for re-election as a director at the 2003 Annual Meeting except for
Mr. Frucher, who recused himself from the meeting with respect to his nomination
for re-election as a director at the 2003 Annual Meeting. The Nominating
Committee reviews and makes recommendations to the Board as to the nominees for
election as directors of the Company including recommendations concerning the
qualifications and desirability of any Stockholder nominees. The Nominating
Committee held one meeting during 2003. On January 31, 2003, the Board of
Directors approved the Nominating Committee Charter.
Governance. The Board as a whole believes it is important for the Company
---------- not only to comply with all current regulatory and legislative
requirements, but also to adopt and abide by high standards in its governance
structure and activities. The Board ensures compliance with the recently enacted
Sarbanes-Oxley Act of 2002 as well as the various proposals announced by The
American Stock Exchange. Consistent with these proposals, the Board has adopted
a Code of Conduct and Corporate Governance Charter, both of which are publicly
available at the Company's website (www.wellsford.com). On March 10, 2003, the
Board of Directors approved the Governance Committee Charter and intends to
appoint members to this committee at the May 2003 Board of Directors meeting.
COMPENSATION OF DIRECTORS
The Company pays each of its non-employee directors of the Company (i) an
annual fee of $16,000, payable quarterly in Common Shares, and (ii) a fee of
$2,250 payable in cash for each Board meeting at which such director is present
in person or by telephone. Each non-employee director also receives options to
purchase 2,500 Common Shares annually. Members of the Audit Committee also
currently receive annual compensation of $5,000 payable in cash, except for Mr.
Germain, who receives annual compensation of $10,000 payable in cash, for his
role as chairman of the Audit Committee. Directors who are full time employees
of the Company and Mr. Lowenthal are
4
not paid any directors' fees. In addition, the Company reimburses the directors
for travel expenses incurred in connection with their activities on behalf of
the Company.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Audit Committee has appointed the firm of Ernst & Young LLP, the
Company's independent public accountants for the fiscal year ended December 31,
2003, to audit the financial statements of the Company for the fiscal year
ending December 31, 2003. A proposal to ratify this appointment is being
presented to the Stockholders at the Annual Meeting. A representative of Ernst
& Young LLP is expected to be present at the meeting and available to
respond to appropriate questions and, although that firm has indicated that no
statement will be made, an opportunity for a statement will be provided.
During the fiscal year ended December 31, 2002, Ernst & Young LLP provided
various audit and non-audit services to the Company. Set forth below are the
aggregate fees billed for these services:
a) Audit Fees: Aggregate fees billed for professional services rendered
for the audit of the Company's annual financial statements for the
year ended December 31, 2002 and for the reviews of the financial
statements included in the Company's quarterly reports on Form 10-Q
were $177,000.
b) Audit Related Fees: No fees were billed for other audit related
services to the Company for the year ended December 31, 2002.
c) Financial Information Systems Design and Implementation Fees: The
Company did not (and does not expect to) engage Ernst & Young LLP
for professional services rendered for information technology services
relating to financial information systems design and implementation
for the year ended December 31, 2002.
d) All Other Fees: The aggregate fees billed by Ernst & Young LLP for
services rendered to the Company (other than the services described
above under "Audit Fees," "Audit Related Fees" and "Financial
Information Systems Design and Implementation Fees"), consisting
principally of tax return preparation, other tax compliance and tax
consulting services was $114,000 for the year ended December 31, 2002.
The Audit Committee has determined that the provision of services covered
in (d) above are compatible with maintaining the independence of Ernst &
Young LLP.
--------------------
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSED RATIFICATION OF
---
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC AUDITORS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003.
--------------------
5
EXECUTIVE OFFICERS
Each Executive Officer of the Company holds office at the pleasure of the
Board. The Executive Officers of the Company are as set forth below:
Jeffrey H. Lynford, Chairman of the Board, President and Chief Executive
------------------ Officer. Biographical information regarding Mr. Lynford
is set forth above under "Other Directors."
James J. Burns, age 63, has been CFO of the Company since December 2000 and
-------------- a Senior Vice President of the Company since October 1999.
He was appointed Secretary of the Company in April 2002. Mr. Burns served as
Chief Accounting Officer of the Company from October 1999 until December 2000.
Mr. Burns was previously a Senior Audit Partner with Ernst & Young's E&Y Kenneth
Leventhal Real Estate Group where he was employed for 25 years, including 23
years as a partner. Mr. Burns is a director of One Liberty Properties, Inc., and
of Cedar Income Fund, Ltd., both of which are REITs. Mr. Burns is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants.
William H. Darrow II, age 55, has been a Managing Director of the Company
-------------------- since August 1997 and a Vice President since January
2003. From 1993 to 1997, Mr. Darrow was a founder and partner of Mansfield
Partners, Inc., a real estate investment, management and consulting firm. From
1989 until 1993, Mr. Darrow was Senior Vice President and Manager of the US Real
Estate Group of Banque Indosuez, a French merchant bank. From 1987 until 1989,
he was President of CRI Institutional Real Estate. From 1984 to 1987, Mr. Darrow
was a managing director in the corporate finance group of Prudential-Bache
Securities. From 1983 to 1984, he was President of Dade Savings and Loan
Association. Prior to joining Dade Savings, Mr. Darrow was a Senior Vice
President with Chemical Bank, which he joined in 1969.
David M. Strong, age 45, has been Vice President - Development of the
--------------- Company since its formation in January 1997. Mr. Strong
served as a Vice President of the Trust from July 1995 until consummation of the
Merger in May 1997. From July 1994 until July 1995 he was Acquisitions and
Development Associate of the Trust. From 1991 to 1994, Mr. Strong was President
and owner of LPI Management, Inc., a commercial real estate company providing
management and consulting services. From 1984 to 1991, he was a senior executive
with the London Pacific Investment Group, a real estate development, investment
and management firm active in Southern California and Western Canada. From 1979
through 1984, Mr. Strong worked for Arthur Young and Company (currently known as
Ernst & Young), a public accounting firm where he attained the level of manager.
Mr. Strong is a member of the Canadian Institute of Chartered Accountants.
Mark P. Cantaluppi, age 32, has been Vice President, Chief Accounting
------------------ Officer and Director of Investor Relations since
December 2000. He joined the Company in November 1999 as a Vice President,
Controller and Director of Investor Relations. From January 1998 to November
1999 he was the Assistant Controller of Vornado Realty Trust, a diversified REIT
which primarily owns and operates office buildings, retail centers and cold
storage facilities. Mr. Cantaluppi worked for Ernst & Young, a public accounting
firm, from 1993 to 1998 where he attained the level of manager. Mr. Cantaluppi
is a Certified Public Accountant and a member of the American Institute of
Certified Public Accountants.
6
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
of the Chief Executive Officer and each of the other Executive Officers of the
Company whose cash compensation from the Company exceeded $100,000 for the year
ended December 31, 2002.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
-------------------------------------------- ----------------------------------------
Long-Term Compensation Payouts
--------------------------- --------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year (A) (B) (C) (D) (E) (D)(F) (G)
----------------------- ---- --------- ----- ------------ ------------ ------------ -------- ------------
Jeffrey H. Lynford
Chairman of the
Board, Chief Executive
Officer and
President............. 2002 $318,799 $325,000 $36,199(H) $ -- 22,585 $ -- $21,968
2001 $309,514 $325,000 -- $1,356,000 71,087 $581,508 $21,968
2000 $300,499 $325,000 -- $ -- -- $ -- $21,968
Edward Lowenthal
Former President
and Chief Executive
Officer(I)........... 2002 $ 79,700 $ 81,250 -- $ -- -- $ -- $23,015
2001 $309,514 $325,000 -- $ -- -- $ -- $23,015
2000 $300,499 $325,000 -- $ -- -- $ -- $23,015
James J. Burns
Senior Vice President -
Chief Financial
Officer and
Secretary............. 2002 $216,300 $175,000 -- $ -- -- $ -- $ 2,500
2001 $210,000 $175,000 -- $ -- -- $ -- $ 2,500
2000 $200,000 $150,000 -- $ 250,000 -- $ -- $ 2,500
William H. Darrow II
Vice President -
Managing Director...... 2002 $206,000 $175,000 -- $ -- -- $ 50,000 $ 2,500
2001 $200,000 $175,000 -- $ -- -- $ -- $ 2,500
2000 $175,000 $175,000 -- $ 200,000 -- $ -- $ 2,500
David M. Strong
Vice President -
Development .......... 2002 $185,658 $150,000 -- $ -- -- $ -- $ 2,500
2001 $180,250 $100,000 -- $ -- -- $ -- $ 2,500
2000 $175,000 $100,000 -- $ 50,000 -- $ -- $ 2,500
Mark P. Cantaluppi
Vice President-
Chief Accounting ....
Officer ............. 2002 $160,000 $110,000 -- $ -- -- $ -- $ 2,500
2001 $150,000 $100,000 -- $ -- -- $ -- $ 2,500
2000 $125,000 $ 62,500 -- $ 133,000 -- $ -- $ 2,500
------------------------
(A) Amounts shown are actual payments by the Company.
(B) Bonus amount includes each Executive Officer's minimum bonus pursuant to
their employment agreement, plus any discretionary incentive bonus as
described herein.
(C) No named Executive Officer received perquisites or other personal benefits
aggregating more than the lesser of 10% of his total annual salary and bonus
or $50,000.
7
(Footnotes continued from previous page)
(D) The following restricted share grants to Executive Officers during 2000 and
2001 were contributed to the Company's deferred compensation plan and,
therefore, the respective Executive Officers do not have voting power with
respect to such Common Shares until such Common Shares vest and are
distributed from the deferred compensation accounts.
o Mr. Strong received a grant of 3,148 restricted Common Shares in
December 1999 (the "1999 Restricted Share Grant"). One third of the
Strong 1999 Restricted Share Grant vests on each anniversary date of
the grant over a three-year period. Based upon the closing market
price on the date immediately preceding the date of grant of $15.88
per Common Share, the 1999 Restricted Share Grant had an aggregate
market value of $50,000. The aggregate market value of this grant,
based on the closing price of the Company's Common Shares on
Decemeber 31, 2002 ($15.76 per share), was $49,612.
o Messrs. Burns, Cantaluppi, Darrow and Strong received grants of
15,936, 8,478, 12,749 and 3,187 restricted Common Shares,
respectively, in December 2000 (the "2000 Restricted Share Grants").
One third of the 2000 Restricted Share Grants vest on each
anniversary date of the grant over a three-year period. Based upon
the market price on the date immediately preceding the date of grant
of $15.6875 per Common Share, the 2000 Restricted Share Grants had
an aggregate market value of $633,000. The aggregate market value of
such grants, based on the closing price of the Company's Common
Shares on December 31, 2002 ($15.76 per share) was $635,916.
o Mr. Lynford received a grant of 71,087 restricted Common Shares on
December 31, 2001 pursuant to the terms of his amended employment
agreement dated December 7, 2001 (the "Lynford Restricted Share
Grant"). One third of the Lynford Restricted Share Grant vested on
December 31, 2001, the next third vested on July 1, 2002 and the
final third vested on January 1, 2003. Based upon the closing market
price on the date immediately preceding the date of grant of $19.075
per Common Share, the Lynford Restricted Share Grant had an
aggregate market value of $1,356,000. The aggregate market value of
this grant, based on the closing price of the Company's Common
Shares on December 31, 2002 ($15.76 per share) was $1,120,331.
(E) See "Management Incentive Plans" regarding certain other options issued by
the Company. Pursuant to Mr. Lynford's amended employment agreement, options
to purchase 290,000 Common Shares were cancelled in 2001.
(F) "LTIP Payouts" refers to long-term incentive plan payouts. In the case of
Mr. Lynford, such amount represents the release of cash from prior years
compensation deferrals transferred from the Trust at the Company's
inception. In the case of Mr. Darrow, such amounts represent the release of
certain vested shares from the 2000 Restricted Share Grants.
(G) The amounts set forth include annual premiums of $20,515 and $19,468 made
by the Company related to split dollar life insurance plans for the benefit
of Messrs. Lowenthal and Lynford, respectively, in 2002, 2001 and 2000. The
amounts set forth also include contributions to the Company's defined
contribution savings plan pursuant to Section 401 of the Internal Revenue
Code of 1986, as amended. Contributions of $2,500 were made by the Company
on behalf of Messrs. Lynford,Lowenthal, Burns, Darrow, Strong and
Cantaluppi for 2002, 2001 and 2000.
(H) The other annual compensation of $36,199 relates to an additional payment
for Mr. Lynford to make premium payments under a split dollar life
insurance program as provided for in Mr. Lynford's employment contract for
fiscal year 2003 premiums.
(I) Pursuant to Mr. Lowenthal's employment separation agreement ("Separation
Agreement") (a) the Company paid his existing salary and a minimum bonus of
$325,000 for the year ended December 31, 2001 and his pro rata salary and
bonus for the three months ended March 31, 2002 (termination as President);
(b) the Company made a severance payment to him on March 31, 2002 of
$1,650,000, (c) the Company repurchased one-half of his stock options during
February 2002 (284,551 stock options) at $2.3827 per option, or an aggregate
of $678,000 and (d) the Company agreed to repurchase, at Mr. Lowenthal's
option, his remaining 284,551 stock options on or after January 2, 2003, for
the same amount as the initial stock option repurchase. Such amount was paid
by March 31, 2003. For the consulting services performed by Mr. Lowenthal
after his retirement pursuant to the Separation Agreement, he will receive
payments at the rate of $100,000 per annum, plus a continuation of health
and other benefits through December 31, 2004. The severance payment, stock
option buyout amounts and payments for the consulting services are not
reflected in the above table.
(J) Mr. Darrow received a loan of $75,000 upon joining the Company in August
1997. Payments of his annual bonus amount in 2002, 2001 and 2000 were
reduced by $12,500, $12,500 and $25,000, respectively as principal payments
on the loan. Upon payment of the 2002 bonus in January 2003, the $12,500
loan balance was repaid in full.
8
The following table sets forth certain information concerning the
value of unexercised options as of December 31, 2002 held by the Executive
Officers named in the Summary Compensation Table above.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of in-the-Money
Options/SARs at Options/SARs at
Shares Fiscal Year End(A) Fiscal Year End(B)
Acquired on Valie ------------------------------ ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------- --------- --------- -------------- ------------- ------------- -------------
Jeffrey H. Lynford.. 22,585 $ 126,614 256,517 -- $ -- $ --
Edward Lowenthal.... -- $ -- -- -- $ -- $ --
James J. Burns...... -- $ -- 15,000 10,000 $ -- $ --
William H. Darrow II -- $ -- 5,000 -- $ -- $ --
David M. Strong..... -- $ -- 71,562 4,000 $ 11,357 $ --
Mark P. Cantaluppi.. -- $ -- 3,000 2,000 $ -- $ --
------------------------
(A) The right to receive reload options was given in connection with certain
options. The reload options enable the Executive Officer to purchase a
number of Common Shares equal to the number of Common Shares delivered by
him to exercise the underlying option. The effective date of the grant of
the reload options ("Effective Date") will be the date the underlying
option is exercised by delivering Common Shares to the Company. The reload
options have the same expiration date as the underlying options and will
have an exercise price equal to the fair market value of the Common Shares
on the Effective Date.
(B) The fair market value on December 31, 2002 of the Common Shares underlying
the options was $15.76 per Common Share.
EMPLOYMENT AGREEMENTS
The Amended and Restated Employment Agreement entered into between the
Company and Mr. Lynford (the "Restated Agreement") provides, among other things,
for the maintenance of his current base salary of $318,000 per year and an
annual minimum bonus of $325,000 throughout the term of the Restated Agreement
which expires on December 31, 2004. In addition, Mr. Lynford will be entitled to
receive a severance payment of $1,929,000 in the event (a) he terminates his
employment by reason of a change in control of the Company (as defined in the
Restated Agreement), (b) the Company terminates his employment other than for
proper cause (as defined in the Restated Agreement) or (c) his employment is
terminated by reason of his death or disability. The provisions in the prior
employment agreement providing for the reimbursement to Mr. Lynford of excise
and certain income taxes with respect to the severance payments have been
eliminated. The Company issued an aggregate of $1,356,000 restricted
Common Shares (which equates to 71,087 shares at $19.075 per share) on December
31, 2001, one third of which vested on each of December 31, 2001, June 30, 2002
and January 1, 2003. Mr. Lynford also agreed to the cancellation of 290,000 of
the 569,102 options to acquire the Company's Common Shares then held by him. The
290,000 options had a Black-Scholes valuation of approximately $1,400,000 at the
date of cancellation.
The Company had entered into an employment agreement with Mr. Lowenthal,
pursuant to which he served as the Company's President and Chief Executive
Officer through March 31, 2002, at which time he retired. In connection with his
retirement, Mr. Lowenthal and the Company entered into a Separation Agreement
pursuant to which, among other benefits, (a) the Company paid his existing
salary and a minimum bonus of $325,000 for the year ended December 31, 2001 and
his pro rata salary and bonus for the three months ended March 31, 2002; (b) the
Company made a severance payment to him on March 31, 2002 of $1,650,000, (c) the
Company repurchased one-half of his stock options during February 2002 (284,551
stock options) at $2.3827 per option, or an aggregate of $678,000 and (d) the
Company agreed to repurchase, at Mr. Lowenthal's option, his remaining 284,551
stock options on or after January 2, 2003, for the same amount as the initial
stock option repurchase. By March 31, 2003, Mr. Lowenthal's remaining option
payment was made. The 569,102 options had an average remaining term of six years
and a Black-Scholes valuation of approximately $3,300,000 as calculated in
December 2001. For the consulting services to be performed by Mr. Lowenthal
after his retirement pursuant to the Separation Agreement, he
9
will receive payments at the rate of $100,000 per annum, plus a continuation of
health and other benefits through December 31, 2004. In connection with these
arrangements and other personnel changes, the Company recorded a non-recurring
charge of approximately $3,527,000 in the fourth quarter of 2001.
The Company has also entered into employment agreements with Messrs.
Cantaluppi and Darrow (which will expire on June 30, 2003) Mr. Burns (which
expires on December 31, 2003) and Mr. Strong (which will expire on December 31,
2004).
Pursuant to the employment agreements, each of the Executive Officers is
generally entitled to a minimum bonus and is also entitled to consideration for
incentive compensation to be approved by the Compensation Committee. Mr. Strong
is also entitled to a special bonus based upon the performance level above a
defined threshold, if any, from the Company's Denver, Colorado project, upon
sale of 90% or more of such project, or January 1, 2005, if not sold by that
date ("Special Bonus").
If Mr. Cantaluppi's employment is terminated following a "change in
control" of the Company (as defined in his agreement) and provided he has not
been offered "comparable employment" (as defined in his agreement) within 60
days after the event resulting in the change in control of the Company, Mr.
Cantaluppi shall be entitled to receive a lump sum payment equal to the sum of
(i) twice the amount of his annual salary for the calendar year in which the
event occurs and (ii) a pro rata portion of any minimum bonus payable to him
with respect to the calendar year in which the termination occurs, in lieu of
any salary, bonus or other compensation to which he would otherwise be entitled.
If Mr. Darrow's employment is terminated following a "change in control" of
the Company (as defined in his agreement) and provided he has not been offered
"comparable employment" (as defined in his agreement) within 60 days after the
event resulting in the change in control of the Company, Mr. Darrow shall be
entitled to receive a lump sum payment equal to the sum of twice the amount of
his annual salary for the calendar year in which the event occurs, in lieu of
any salary, bonus or other compensation to which he would otherwise be entitled.
If Mr. Burns' employment is terminated following a "change in control" of
the Company (as defined in his agreement) and provided he has not been offered
"comparable employment" (as defined in his agreement) within 60 days after the
event resulting in the change in control of the Company, Mr. Burns shall be
entitled to receive a lump sum payment equal to the sum of (i) twice the amount
of his annual salary for the calendar year in which the event occurs and (ii) a
pro rata portion of a bonus equal to 50% of his annual salary for the calendar
year in which the event occurs.
If Mr. Strong's employment agreement is terminated following a "change in
control" of the Company (as defined in the agreement) by (a) the Company, other
than for "Cause" (as defined in his agreement) or (b) Mr. Strong for "Good
Reason" then Mr. Strong shall be entitled to receive a lump sum payment equal to
the greater of (i) the amount of compensation that he would have been entitled
to had the agreement not been so terminated and (ii) twice his average annual
compensation of every type and form includible in gross income received during
the three year period preceding the calendar year in which employment is
terminated. If there is a change in control and Mr. Strong's employment is
terminated, he would also be entitled to receive the Special Bonus based upon
the performance level above a defined threshold as referred to above.
MANAGEMENT INCENTIVE PLANS
The Company has a 1997 Management Incentive Plan and a 1998 Management
Incentive Plan (collectively, the "Management Incentive Plans") and a Rollover
Stock Option Plan (the "Rollover Plan"; together with the Management Incentive
Plans, the "Plans") for the purpose of aligning the interests of the Company's
directors, Executive Officers and employees with those of the Stockholders and
to enable the Company to attract, compensate and retain directors, Executive
Officers and employees and provide them with appropriate incentives and rewards
for their performance. The existence of the Management Incentive Plans should
enable the Company to compete more effectively for the services of such
individuals. The Rollover Plan was established for the purpose of granting
options and corresponding rights to purchase Common Shares in replacement of
former Trust share options. Each Plan provides for administration by a committee
of two or more non-employee directors established for such purpose.
10
Awards to directors, Executive Officers and other employees under the Plans
may take the form of stock options, including corresponding stock appreciation
rights and reload options. Under the Management Incentive Plans, the Company may
also provide restricted stock awards and stock purchase awards.
The following table details information for each of the Company's
compensation plans at December 31, 2002:
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Number of Securities Weighted Average Compensation Plans
to be Issued upon Exercise Price of (Excluding Securities
Exercise of Options Outstanding Options Reflected in Column (a))
------------------- ------------------- -------------------------
(a) (b) (c)
Equity compensation plans approved by
Stockholders:
Rollover Stock Option Plan.................... 372,874 $ 20.46 277,654
1997 Management Incentive Plan................ 208,687 $ 21.37 633,965
1998 Management Incentive Plan................ 190,625 $ 17.96 471,074
------- ---------
772,186 $ 20.90 1,382,693
Equity compensation plans not approved
by Stockholders.............................. $ -- --
------- ---------
Total............................................ 772,186 $ 20.90 1,382,693
======= =========
Options to acquire 1,382,063 Common Shares have been granted under the
Management Incentive Plans to directors, Executive Officers and employees of the
Company. Options to purchase an aggregate of 28,000 shares were exercised
through December 31, 2002 (all during 2002). At December 31, 2002, an aggregate
of 399,312 options were outstanding for 19 individuals under the Management
Incentive Plans. In addition to options, 382,167 restricted Common Shares have
been granted under the Management Incentive Plans to 12 individuals, including
Executive Officers and employees of the Company, of which 311,624 of such
restricted Common Shares are reported as treasury stock at December 31, 2002 in
the Company's consolidated balance sheet as 31,025 shares have been released to
Executive Officers and employees and 39,518 have been forfeited and are
available for future grant.
Options to purchase 663,113 Common Shares were granted to eight individuals
under the Rollover Plan at the closing of the Merger, principally to certain
Executive Officers and directors of the Company at that time. Messrs. Lynford,
Lowenthal, Germain and Strong each received options under the Rollover Plan to
purchase 226,352, 226,352, 19,257 and 20,312 Common Shares, respectively, which
options represent replacement options for Trust share options. Options to
purchase 113,176 Common Shares issued pursuant to the Rollover Plan held by Mr.
Lowenthal were cancelled in connection with the Separation Agreement, at
December 31, 2002 and 2001, respectively, resulting in the cancellation of all
of Mr. Lowenthal's Rollover Plan options. At December 31, 2002, an aggregate
372,874 options were outstanding under the Rollover Plan as 12,585 were
exercised during 2002 and the remaining 277,654 were forfeited and/or cancelled
and are available for future grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Bernstein, Crocker, Frary,
Frucher and Germain, none of whom is, or has been, an officer or employee of the
Company. Mr. Lynford, the Company's Chairman of the Board, and Mr. Lowenthal,
the Company's former President and Chief Executive Officer, each serve on the
board of trustees of EQR. Messrs. Lowenthal and Lynford will not stand for
re-election as trustees of EQR when their terms expire in May 2003. Mr. Crocker
is the vice chairman and a trustee of EQR.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and adopts compensation plans, programs
and policies and monitors the performance and compensation of Executive
Officers.
The key elements of the Company's executive compensation package are base
salary, minimum bonus, incentive bonus and long-term incentives. The policies
with respect to each of these elements are discussed below.
Compensation Philosophy
The Compensation Committee seeks to enhance the profitability of the
Company, and thus Stockholder value, by aligning closely the financial interests
of the Company's Executive Officers with those of its Stockholders. The
Compensation Committee believes that the Company's compensation program should:
o Emphasize stock ownership and, thereby, tie long-term compensation to
increases in Stockholder value.
o Enhance the Company's ability to attract and retain qualified Executive
Officers.
o Stress teamwork and overall Company results.
Base Salary and Minimum Bonuses
Base salaries and minimum bonuses for Executive Officers are subject to
employment contracts and have been determined by evaluating the responsibilities
of the position held and the experience and qualifications of the individual,
with reference to the competitive marketplace for Executive Officers at certain
other similarly situated companies. The Company believes that the base salaries
and minimum bonuses for its Executive Officers are equal to or less than the
average minimum compensation for Executive Officers at such other similar
companies.
Annual Incentive Bonus
Pursuant to their employment agreements, in addition to base salaries and
minimum bonuses, each of the Executive Officers is entitled to be considered for
incentive compensation amounts to be determined by the Compensation Committee.
The incentive bonuses awarded reflect the financial and strategic successes
which the Company achieved in 2002, including leasing up the fourth phase
("Green River") and maintaining occupancy at the two other rental phases at the
Palomino Park project, obtaining permanent financing on the Green River phase,
maintaining a reasonable level of condominium sales activity at the Silver Mesa
phase, actively monitoring our investments in Wellsford/Whitehall and Second
Holding, implementing the requirements of the Sarbanes-Oxley Act which was
effective July 30, 2002 and related regulations issued since that date,
maximizing the tax benefits available to the Company, improving the overall
liquidity of the Company, as well as each respective Executive Officer's time
and efforts during the year.
Long-Term Incentive
Long-term incentives are designed to align the interests of the Executive
Officers with those of the Stockholders. In awarding grants of restricted Common
Shares to Executive Officers and granting them options to purchase Common
Shares, consideration is given to the long-term incentives previously granted to
them.
Share options will generally be granted with an exercise price equal to the
fair market value of the Common Shares and vest and become exercisable over a
period of years based upon continued employment. This is intended to create
Stockholder value over the long term since the full benefit of the compensation
package cannot be realized unless share price appreciation occurs over a number
of years.
12
Grants of restricted Common Shares also form a part of the Company's
long-term incentive package. Typically, some portion of such grants will vest
annually over a period of several years if the Executive Officer remains
employed by the Company. In making grants of restricted Common Shares, the
Compensation Committee will consider and give approximately equal weight to an
individual's scope of responsibilities, experience, past contributions to the
Company and anticipated contributions to the Company's long-term success.
The Compensation Committee believes that stock options, grants of
restricted stock, allocations of or portions of incentive-based compensation
from joint venture investments promotes loyalty to the Company and encourages
the recipients to coordinate their interests with those of the Stockholders. The
Compensation Committee may consider additional types of long-term incentives in
the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
Mr. Lynford's compensation as set forth in his 2001 Amended and Restated
Employment Agreement was fixed for three years. Specific consideration has been
given to his qualifications, responsibilities and experience in the real estate
industry, and the compensation package awarded to the most senior executive
officers of other comparable companies with similar market capitalization. At
that time, the Company believed that Mr. Lynford's compensation was equal to or
less than the average base salary for a comparable senior officer of such other
similar companies.
It is the responsibility of the Compensation Committee to address the
issues raised by the tax laws which make certain non-performance-based
compensation to executives of public companies in excess of $1,000,000
non-deductible to the Company. In this regard, the Committee must determine
whether any actions with respect to this limit should be taken by the Company.
At this time, it is not generally anticipated that any Executive Officer will
receive any such compensation in excess of this limit. Therefore, the
Compensation Committee has not taken any action to comply with the limit.
Conclusion
Through the programs described above, a very significant portion of the
Company's executive compensation is linked to individual and Company performance
and the creation of Stockholder value. However, periodic business cycle
fluctuations may result in an imbalance for a particular period.
The foregoing report has been furnished by the Compensation Committee.
December 16, 2002
Martin Bernstein Meyer S. Frucher
Douglas Crocker II Mark S. Germain
Richard S. Frary
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Shares and Class A-1 Common Shares (collectively, the
"Shares") by each person known by the Company to be the beneficial owner of more
than five percent of the Company's outstanding Shares, by each director of the
Company, by each Executive Officer of the Company and by all directors and
Executive Officers of the Company as a group as of December 31, 2002. Each
person named in the table has sole voting and investment power with respect to
all Shares shown as beneficially owned by such person, except as otherwise set
forth in the notes to the table.
Amount and Nature of
Name and Address of Beneficial Owner(1) Beneficial Ownership Percentage of Class(2)
------------------------------------------------------------- ---------------------- ----------------------
Jeffrey H. Lynford (3)........................................ 458,898 6.35%
Edward Lowenthal (4).......................................... 136,147 1.88%
Rodney F. Du Bois (5)......................................... 105,382 1.46%
32 Rip Road
Hanover, New Hampshire 03755
David M. Strong (6)........................................... 93,005 1.29%
Mark S. Germain (7)........................................... 75,164 1.04%
6 Olmsted Road
Scarsdale, New York 10583
James J. Burns (8)............................................ 40,936 *
Douglas Crocker II (9)........................................ 30,169 *
c/o Equity Residential Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606
Richard S. Frary (10)......................................... 26,759 *
c/o Tallwood Associates, Inc.
1350 Avenue of the Americas, Suite 1910
New York, New York 10019
William H. Darrow II (11)..................................... 15,812 *
Mark P. Cantaluppi (12)....................................... 13,478 *
Martin Bernstein (13)......................................... 13,129 *
c/o MFP Investors, LLC
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Meyer S. Frucher (14)......................................... 8,702 *
324 West 101 Street, #2
New York, New York 10025
All directors and Executive Officers as a group (12 persons)
(15)....................................................... 1,017,581 14.09%
Third Avenue Management LLC................................... 1,561,100 21.61%
622 Third Avenue
New York, New York 10017
Morgan Stanley Investment Management Inc...................... 996,658 13.80%
1221 Avenue of the Americas
New York, New York 10036
Kensington Investment Group, Inc.............................. 534,192 7.40%
4 Orinda Way, Suite 220D
Orinda, California 94563
Caroline Hunt Trust Estate.................................... 405,500 5.61%
500 Crescent Court, Suite 300
Dallas, Texas 75201
-----------------------------------------------------------------
* Less than 1.0%
(1) Unless otherwise indicated, the address of each person is c/o Wellsford Real
Properties, Inc., 535 Madison Avenue, 26th Floor, New York, New York 10022.
14
(Footnotes continued from previous page)
(2) Assumes the conversion or exercise of the following items at December 31,
2003: (i) 169,903 Class A-1 Common Shares issued to ERP Operating Limited
Partnership, an Illinois limited partnership, into 169,903 Common Shares and
(ii) options to acquire 772,186 Common Shares (739,336 of which are
exercisable on or before March 1, 2003).
(3) Includes 256,517 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Options to purchase
213,767 of these shares represent replacement options for Trust share
options. Also includes 162,787 Common Shares contributed to the Company's
deferred compensation plan with respect to which Mr. Lynford will not have
voting power until the Common Shares vest and are distributed from the
deferred compensation account. Also includes 17,956 Common Shares held by
the Lynford Family Charitable Trust; Mr. Lynford disclaims beneficial
ownership of such shares. Also includes 3,554 Common Shares held by Mr.
Lynford's Keogh account and 310 Common Shares held in his 401(K) account.
(4) Includes 92,700 Common Shares contributed to the Company's deferred
compensation plan with respect to which Mr. Lowenthal will not have voting
power until the Common Shares vest and are distributed from the deferred
compensation account. Also includes 145 Common Shares held by Mr.
Lowenthal's wife; Mr. Lowenthal disclaims beneficial ownership of such
shares. Also includes 1,000 Common Shares held by Mr. Lowenthal's Keogh
account and 3,302 Common Shares held in his 401(K) account.
(5) Includes 92,625 Common Shares issuable upon the exercise of options (87,625
of which are exercisable on or before March 1, 2003). Also includes 750
Common Shares held by Goshawk Capital Partners LLC, over which Mr. Du Bois
exercises voting and investment power.
(6) Includes 75,562 Common Shares issuable upon the exercise of options,(71,562
of which are exercisable on or before March 1, 2003). Options to purchase
20,312 of these shares represent replacement options for Trust share
options. Also includes 14,786 Common Shares contributed to the Company's
deferred compensation plan with respect to which Mr. Strong will not have
voting power until the Common Shares vest and are distributed from the
deferred compensation account.
(7) Includes 55,632 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Options to purchase 19,257
of these shares represent replacement options for Trust share options.
(8) Includes 25,000 Common Shares issuable upon the exercise of options (15,000
of which are exercisable on or before March 1, 2003). Also includes 15,936
Common Shares contributed to the Company's deferred compensation plan with
respect to which Mr. Burns will not have voting power until the Common
Shares vest and are distributed from the deferred compensation account.
(9) Includes 25,687 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Mr. Crocker is the Vice
Chairman and a trustee of EQR, the general partner of ERP Operating Limited
Partnership, which owns 169,903 Class A-1 Common Shares. Mr. Crocker
disclaims beneficial ownership of such shares. Additionally, the Company
placed 1,000,000 8.25% Convertible Trust Preferred Securities with an EQR
subsidiary in May 2000, which are convertible into 1,123,696 Common Shares
(see Certain Transactions). Mr. Crocker disclaims beneficial ownership of
such securities.
(10) Includes 12,500 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Also includes 2,500
Common Shares held by Mr. Frary's wife; Mr. Frary disclaims beneficial
ownership of such shares.
(11) Includes 5,000 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Also includes 9,562
Common Shares contributed to the Company's deferred compensation plan with
respect to which Mr. Darrow will not have any voting power until the Common
Shares vest and are distributed from the deferred compensation account.
Also includes 1,250 Common Shares held in Mr. Darrow's IRA account.
(12) Includes 5,000 Common Shares issuable upon the exercise of options (3,000
of which are exercisable on or before March 1, 2003). Also includes 8,478
Common Shares contributed to the Company's deferred compensation plan with
respect to which Mr. Cantaluppi will not have voting power until the Common
Shares vest and are distributed from the deferred compensation account.
(13) Includes 7,500 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Also includes 2,400
Common Shares held by Mr. Bernstein's wife; Mr. Bernstein disclaims
beneficial ownership of such shares.
(14) Includes 7,500 Common Shares issuable upon the exercise of options, all of
which are exercisable on or before March 1, 2003. Also includes 1,202
Common Shares held by a trust; Mr. Frucher disclaims beneficial ownership
of such shares.
(15) Includes the Common Shares referred to in footnotes (3) through (14) above.
15
CERTAIN TRANSACTIONS
In May 2000, the Company privately placed with a subsidiary of EQR
1,000,000 8.25% Convertible Trust Preferred Securities, representing beneficial
interests in the assets of WRP Convertible Trust I, a Delaware statutory
business trust which is a consolidated subsidiary of the Company, with an
aggregate liquidation amount of $25,000,000 (the "Convertible Trust Preferred
Securities"). The Convertible Trust Preferred Securities are convertible into
1,123,696 Common Shares at $22.248 per share and are redeemable in whole or in
part by the Company on or after May 30, 2002. EQR can require redemption on or
after May 30, 2012 unless the Company exercises one of its two five-year
extensions (subject to an interest adjustment to the then prevailing market
rates if higher than 8.25% per annum). The redemption rights are subject to
certain other terms and conditions contained in the related agreements.
Additionally, EQR owns 169,903 Class A-1 Common Shares which are
convertible into 169,903 Common Shares. EQR also had a 14.15% interest in the
Company's residential project in Denver, Colorado at December 31, 2002, 2001 and
2000. Furthermore, EQR provides credit enhancement related to certain tax-exempt
bonds issued by the project in Denver, for which the Company paid fees of
approximately $81,000, $81,000 and $92,000 during the years ended December 31,
2002, 2001 and 2000, respectively. Such credit enhancement had previously been
provided by the Trust prior to the Merger with EQR in May 1997 and is a
contractual requirement until May 2005. Messrs. Lynford and Lowenthal will
continue to be trustees of EQR until May 2003 and Mr. Crocker is the Vice
Chairman and a trustee of EQR; he was Chief Executive Officer of EQR from March
1993 to December 31, 2002.
The Company has an approximate 51.1% non-controlling interest in a joint
venture special purpose finance company, Second Holding Company, LLC, which was
organized to purchase investment and non-investment grade rated real estate debt
instruments and investment grade rated other asset-backed securities ("Second
Holding"). An affiliate of a significant Stockholder of the Company (the
Caroline Hunt Trust Estate ("Hunt Trust"), which owns 405,500 shares of common
stock of the Company) who, together with other entities, own an approximate 39%
interest in Second Holding.
The Company has direct and indirect investments in a real estate
information and database company, Reis, a leading provider of real estate market
information to institutional investors. At December 31, 2002 and 2001 the
Company's aggregate investment in Reis, which is accounted for under the cost
method, was approximately $6,792,000 and $6,583,000, respectively.
A portion of the Reis investment is held directly by the Company and the
remainder is held by Reis Capital Holdings, LLC ("Reis Capital"), a company
which was organized to hold this investment and in which the Company has an
approximate 51.1% non-controlling interest at December 31, 2002. The Hunt Trust,
who together with other entities, owns an approximate 39% interest in Reis
Capital.
16
A summary of the Company's direct and indirect investments in Reis follows:
Amounts
Company Invested by Total
Ownership Other Partners Investment
----------- -------------- ----------
INDIRECT OWNERSHIP BY THE COMPANY
Notes purchased through Reis Capital during 1999
converted to Series A Preferred shares in April 2000(A)... $ 2,555,000 $2,445,000 $5,000,000
Notes purchased through Reis Capital during 1999
converted to Series B Preferred shares in April 2000(B)... 766,000 734,000 1,500,000
Accrued interest on above notes converted to Series C
Preferred shares in April 2000(C)......................... 466,000 447,000 913,000
Series C Preferred shares purchased through Reis Capital
in April 2000(D).......................................... 766,000 734,000 1,500,000
---------- ---------- ----------
Total indirect ownership................................... 4,553,000 $4,360,000 $8,913,000
---------- ========== ==========
DIRECT OWNERSHIP BY THE COMPANY
Series C Preferred shares purchased directly in April 2000
(E)..................................................... 2,022,000
Series D Preferred shares purchased directly in June 2002(F) 210,000
Other.................................................... 7,000
----------
Total direct ownership................................... 2,239,000
----------
Total investment......................................... $ 6,792,000
===========
---------------------------------------------------------
Note: All preferred series have an 8% cumulative dividend; no dividends have
been declared or paid since issuance.
(A) Issued 50,000 shares at $100 per share; convertible into common shares
at $1.76 per share.
(B) Issued 15,000 shares at $100 per share; convertible into common shares
at $3.00 per share.
(C) Issued 9,120 shares at $100 per share; convertible into common shares
at $3.968 per share.
(D) Issued 15,000 shares at $100 per share; convertible into common shares
at $3.968 per share.
(E) Issued 20,220 shares at $100 per share; convertible into common shares
at $3.968 per share.
(F) Issued 2,098 shares at $100 per share; convertible into common shares
at $3.22 per share, liquidation preference at $200 per share.
Mr. Lynford is the brother of the president of Reis. Mr. Lowenthal has
served on the board of directors of Reis since the third quarter of 2000. At the
time of the April 2000 investments noted above, the management of Reis offered
certain persons the opportunity to make an individual investment in Reis,
including, but not limited to, certain directors and officers of the Company who
purchased an aggregate of $410,000 of Series C Preferred shares. During the year
ending December 31, 2002, the Company committed to invest an aggregate of
$629,000 in Reis Series D Preferred shares of which $209,800 was invested in
June 2002, and the balance of $419,000 is subject to call by Reis in two
separate but equal tranches through December 31, 2003. These tranches have a
liquidation preference of 250% and 300%, respectively. Other Preferred
shareholders invested $456,800 directly at the time of the Company's fiscal 2002
investment and committed to invest an additional $913,600. Two of these
Preferred shareholders, including the Hunt Trust, own interests in Reis Capital
and certain other Series D Preferred share investors are Company officers and
directors. The aggregate committed capital is $2,000,000, including amounts
already funded.
At December 31, 2002, the Company's investment in Reis, through direct
ownership and its pro rata share of investment in Reis Capital, amounted to
approximately 21.4% of Reis' equity on an as converted basis. The pro rata
converted interest in Reis owned by the other partners of Reis Capital, either
directly or indirectly through Reis Capital aggregate 18.36%. The investments of
the Company's officers and directors together with shares of common stock
previously held by Mr. Lynford represent approximately 3.2% of Reis equity, on
an as converted basis. Additionally, a company controlled by the Chairman of EQR
owns Series C and Series D Preferred shares with an aggregate 4.5% converted
interest. Messrs. Lynford, Lowenthal and certain directors of the Company who
have invested directly in Reis, have and will continue to recuse themselves from
any investment decisions made by the Company pertaining to Reis.
17
The aggregate amounts raised have been utilized by Reis to carry out its
business plan to expand the number of real estate markets covered by its
services, move to an internet-based delivery system to its customers, to
increase marketing of its products to expand its customer base, to accelerate
the introduction of its new product line, develop a new product related to its
existing business and for general corporate purposes as well as future working
capital.
Information provided by Reis is used by Second Holding for due diligence
procedures on certain real estate-related investment opportunities. Second
Holding incurred fees of $240,000, $360,000 and $360,000 in connection with such
services for each of the years ended December 31, 2002, 2001 and 2000,
respectively. The Company's share of such fees was $120,000, $180,000 and
$180,000 for the years ended December 31, 2002, 2001 and 2000, respectively.
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board
of Directors as amended on March 10, 2003, a copy of which is attached hereto as
Appendix A. The Audit Committee is composed of four independent directors as
defined by the American Stock Exchanges' listing standards and Section 10A(m)(3)
of the Securities Exchange Act of 1934. Each member of the Audit Committee is
able to understand fundamental financial statements. The members of the Audit
Committee during the year ended December 31, 2002 and as of the date of this
report are Mr. Bernstein, Mr. Frary, Mr. Frucher and Mr. Germain (Chairman). The
Audit Committee held five meetings during fiscal 2002.
The function of the Audit Committee is to report to the Board various
auditing and accounting matters, review the Company's accounting practices and
policies, select and engage the independent auditors, and review the scope of
the audit procedures, the nature of all audit and nonaudit services to be
performed, the fees to be paid to the independent auditors and the performance
of the independent auditors.
The Audit Committee has met and held discussions with management and the
independent auditors. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the audited consolidated financial statements with management and
the independent auditors. The Audit Committee reviewed with the independent
auditors, who are responsible for expressing an opinion on the conformity of
those audited financial statements with generally accepted accounting
principles, their judgments as to the quality, not just the acceptability of the
Company's accounting principles and also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent auditors
provided to the Audit Committee the written disclosures required by the
Independence Standards Board's Standard No. 1, and the Audit Committee discussed
with the independent auditors that firm's independence.
Based on the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the representations of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report on From 10-K
for the year ended December 31, 2002 filed with the Securities and Exchange
Commission.
March 17, 2003
Mark S. Germain, Chairman Richard S. Frary
Martin Bernstein Meyer S. Frucher
18
COMMON SHARE PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total Stockholder return on the
Common Shares for the period commencing January 1, 1998 through December 31,
2002 with the cumulative return total on the Russell 2000 Index ("Russell 2000")
and the Company's peer group for the same period. Total return values were
calculated based on cumulative total return assuming (i) the investment of $100
in the Russell 2000, in the Company's peer group and in the Common Shares on
January 1, 1998, and (ii) reinvestment of dividends, which in the case of the
Company have not been paid. The total return for the Common Shares since January
1, 1998 is approximately -48.5% versus approximately -36.9% for the Company's
peer group and approximately -5.6% for the Russell 2000. The Company's peer
group consists of LNR Property Group, Inc., Capital Trust, Inc., Crescent
Operating, Inc., Prime Legacy Corporation and Stratus Properties, Inc.
EDGAR Representation of Data Points Used in Printed
WRP Peer Group Russell 2000
--- ---------- ------------
January 1, 1998.......... $ 100.00 $ 100.00 $ 100.00
December 31, 1998........ $ 67.07 $ 70.89 $ 94.00
December 31, 1999........ $ 55.28 $ 78.01 $ 118.78
December 31, 2000........ $ 51.22 $ 71.10 $ 110.35
December 31, 2001........ $ 62.11 $ 64.07 $ 119.60
December 31, 2002........ $ 51.54 $ 63.13 $ 94.38
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and
greater-than-ten-percent Stockholders are required by regulation of the SEC to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 2002, all Section 16(a) filing requirements applicable to its
officers, directors and greater-than-ten-percent beneficial owners were in
compliance with the filing requirements with respect to transactions during
2002.
19
STOCKHOLDERS PROPOSALS
Proposals of Stockholders intended to be presented at the annual meeting of
Stockholders to be held in 2004 must be received by the Company at its principal
executive offices no later than December 28, 2003 for inclusion in the Company's
proxy statement and form of proxy relating to that meeting. Accordingly, under
the current By-laws, for a Stockholder nomination or business proposal to be
considered at the 2004 Annual Meeting of Stockholders, a notice of such nominee
or proposal must be received not earlier than March 12, 2004 and not later than
April 11, 2004. For additoinal requirements, a Stockholder may refer to the
Company's By-laws, a current copy of which may be obtained without charge upon
request from the Company's Secretary.
In addition, the Bylaws of the Company provide that in order for a
Stockholder to nominate a candidate for election as a director at an annual
meeting of Stockholders or propose business for consideration at such a meeting,
notice must be given to the Secretary of the Company no more than 90 days nor
less than 60 days prior to the first anniversary of the preceding year's annual
meeting. Accordingly, under the current By-laws, for a Stockholder nomination or
business proposal to be considered at the 2004 Annual Meeting of Stockholders, a
notice of such nominee or proposal must be received not earlier than March 12,
2004 and not later than April 11, 2004. For additional requirements, a
Stockholder may refer to the Company's By-laws, a current copy of which may be
obtained without charge upon request from the Company's Secretary.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 2002,
including financial statements, has been concurrently sent to the Stockholders.
The Annual Report is not a part of the proxy solicitation materials. Additional
copies of the Company's Annual Report and Form 10-K for the year ended December
31, 2002, as filed with the SEC, may be obtained without charge by contacting
Investor Relations at the Company's principal executive offices at 535 Madison
Avenue, 26th Floor, New York, NY 10022 or by accessing the Company's website at
www.wellsford.com.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers and
nominees should forward soliciting materials to the beneficial owners of the
Common Shares held of record by such persons, and the Company will reimburse
them for their reasonable forwarding expenses. In addition to the use of the
mails, proxies may be solicited by directors, officers and regular employees of
the Company, who will not be specially compensated for such services, by means
of personal calls upon, or telephonic or telegraphic communications with
Stockholders or their personal representatives. MacKenzie Partners, Inc. has
been retained to assist in the solicitation of proxies for a fee not to exceed
$3,000 plus reimbursement of out-of-pocket expenses. No officer or director of
the Company has an interest in, or is related to any principal of, MacKenzie
Partners, Inc.
OTHER MATTERS
The Board knows of no matters other than those described in this Proxy
Statement which are likely to come before the Annual Meeting. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of proxy intend to vote the proxies in accordance with their
best judgment.
-------------------
20
APPENDIX A
As adopted by the Board of Directors
April 20, 2000
As amended by the Board of Directors
March 10, 2003
WELLSFORD REAL PROPERTIES, INC.
AUDIT COMMITTEE CHARTER
1 ORGANIZATION
There shall be an Audit Committee of the Board of Directors (the "Board")
of Wellsford Real Properties, Inc. (the "Company") composed of at least three
directors, each of whom directly or indirectly is independent of the management
of the Company and free of any relationship, that in the opinion of the Board,
would interfere with their exercise of independent judgment as a member of the
Audit Committee. The members of the Audit Committee shall be elected by the
Board. Each member of the Audit Committee shall satisfy the independence
requirements of the American Stock Exchange ("AMEX") and applicable law,
including the Sarbanes-Oxley Act of 2002 ("SOA") and the regulations there
under.
All members of the Audit Committee shall understand financial statements
and be financially literate, and at least one member of the Audit Committee
shall have accounting or related financial management expertise as required by
the applicable law including the SOA and the rules there under, and the rules of
the AMEX. The Board shall appoint the chairperson of the Audit Committee, and if
the Board does not designate a chairperson the Audit Committee shall elect a
chairperson, from its own membership.
2 STATEMENT OF POLICY
The Audit Committee shall assist the Board in fulfilling its responsibility
relating to the Company's accounting, reporting practices, and the quality and
integrity of its financial reports and other financial information provided by
the Company to any non-tax governmental body or the public. The Audit Committee,
rather than management of the Company, shall be solely responsible for the
appointment, compensation and oversight of the Company's independent auditors,
and the independent auditor shall report directly to the Audit Committee. The
Audit Committee shall serve as an independent and objective party to monitor the
Company's financial reporting process and internal control system. The Audit
Committee shall endeavor to maintain free and open communication between the
Board, the independent auditors, and financial personnel and senior management
of the Company. Consistent with these functions, the Audit Committee shall
encourage continuous improvement of, and should foster adherence to, the
Company's accounting and financial policies, procedures and practices at all
levels.
21
Members of the Audit Committee should enhance their familiarity with
finance and accounting by participating in educational programs which cost the
Company shall reimburse the director.
The Audit Committee shall also be responsible for reviewing and approving
all related party transactions involving the Company and any director, executive
officer, other employee, or family member.
The Audit Committee shall have the authority and will have appropriate
funding from the Company to engage any independent advisors and consultants,
including legal counsel, that it determines are necessary to carry out its
duties.
3 MEETINGS
The Audit Committee shall meet five times per year or more frequently as
the circumstances require. As part of its job to foster open communication, the
Audit Committee may ask members of management or others to attend meetings and
provide pertinent information. The Audit Committee may also meet with the chief
financial officer and the independent auditor in separate executive sessions.
The Audit Committee may appoint subcommittees which will report to the Audit
Committee.
o Meetings may be in person or by telephone conference call and should
allow for timely preparation and filing of the Company's interim and
year-end financial statements.
o Minutes of each meeting of the Audit Committee will be prepared.
4 RESPONSIBILITIES
The primary responsibility of the Audit Committee is to assist the Board in
fulfilling the Board's oversight responsibilities with respect to financial
reporting to shareholders and the Securities and Exchange Commission ("SEC"),
the system of internal controls that management has established and the external
audit process, and report the results of their activities to the Board.
Management is responsible for preparing the Company's financial statements, and
the independent auditors are responsible for auditing those financial
statements. The independent auditors' accountability is to the Audit Committee.
The Audit Committee's policies and procedures should remain flexible, in order
to best react to changing conditions and to help ensure that the Company's
accounting and reporting practices are in accordance with all requirements and
are of the highest quality. In carrying out its responsibilities, the Audit
Committee shall:
22
Document/Report Review
o Review this Charter at least annually and propose changes to the Board
for its approval as conditions dictate.
o Include a copy of the Charter as an appendix to the Company's proxy
statement at least once every three years.
o Review the financial statements and reports contained in the
Company's Form 10-K or the annual report to Shareholders or other
financial information submitted to any non-tax governmental body,
or the public, including reports filed by the Company on Form 10-Q,
with management, key financial personnel, and the independent
auditors to determine whether the independent auditors, as well as
Company personnel, are satisfied with the disclosure and content of
such documents.
Independent Auditors
o Have sole authority to appoint or replace the independent auditor
(subject, if applicable, to stockholder ratification) and be directly
responsible for approval of fees and other compensation to be paid to
the independent auditors.
o Pre-approve audit and non-audit services provided by the independent
auditor consistent with applicable law and exchange requirements.
o Review and discuss with the Board any relationship between the
independent auditors and the Company or any other relationships that
may adversely affect the independence of the independent auditors,
including in connection therewith, the nature of all services provided
by the auditors. Discuss such relationships with the auditors and
evaluate the impact of such relationships on the objectivity of the
independent auditors.
o Ensure that the independent auditor submits, on a periodic basis, a
formal written statement to the Audit Committee delineating all
relationships between the independent auditor and the Company.
o Determine that procedures have been established to ascertain whether
the independent auditors of joint ventures, in which the Company has a
significant investment, are independent with respect to the Company.
23
o Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the
independent auditor.
o Review the performance of the independent auditors; determine whether
it is appropriate to adopt a policy of rotating independent auditors
on a regular basis; approve any proposed discharge of the independent
accountants when circumstances warrant and conduct a formal review of
the selection of independent auditors not less frequently than every
five years.
o Determine that there is appropriate rotations of partner level
personnel assigned to the Company's audit engagement as required by
the rules and regulations.
o Consider whether the independent auditor's provision and
implementation of non-audit services to the Company is compatible with
maintaining the independent auditor's independence and is consistent
with applicable law and stock exchange requirements.
Process
o Meet with the independent auditors and the financial management of the
Company to review the scope of the audit proposed for the current
year, the audit procedures to be utilized and at its conclusion,
review the audit, including the comments or recommendations of the
independent auditors.
o Review with the independent auditors and the financial and accounting
personnel of the Company out of the presence of management, the
adequacy of the accounting and financial controls, computerized
information system controls and security and matters that the Audit
Committee or the foregoing parties believe should be discussed
privately with the Audit Committee. Review with the independent
auditors the adequacy of financial and accounting personnel and
cooperation received during the course of the audit or quarterly
reviews.
o Elicit any recommendations for improvement of particular areas where
augmented controls are desirable. Emphasis should be given to the
adequacy of the internal controls designed to expose any activity that
might be unethical or otherwise improper.
o Advise financial management and the independent auditors that they are
expected to provide a timely analysis of significant current financial
reporting issues, best reporting practices and quality of accounting
principles followed by the Company in preparing its financial
statements.
o Determine, with regard to new or unusual transactions or events,
including related party transactions, the independent auditors'
reasoning for the appropriateness of
24
the accounting principles, estimates, judgments and disclosure
practices adopted by management.
o Consider and recommend to the Board, if appropriate, major changes to
the Company's accounting principles and practices as suggested by the
independent auditors or management.
o Review any year-to-year changes in accounting principles or practices.
o Review any significant disagreement or changes required in the
independent auditors' audit plans among management and the independent
auditors in connection with the preparation of the financial
statements.
o Review with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
o Review with management and the independent auditor and approve all
transactions or courses of dealing with parties related to the
Company.
o Review with management and the independent auditor any correspondence
with regulators or governmental agencies and any employee complaints
or published reports which raise material issues regarding the
Company's financial statements, auditing or accounting policies.
o Inquire of management and the independent auditors about any potential
financial or reporting risks or exposures to the Company and review
with management the steps management has taken to minimize such risk.
o The Audit Committee shall make itself available to meet with
management of the Company to discuss any matters which it or
management deem appropriate.
Ethical and Legal Compliance
o Ascertain that the Company has procedures in place to identify and
resolve conflicts of interest with respect to employees, directors and
joint venture partners. Such procedures should include retention of
documentation with respect to such matters and discussions with the
Board, if appropriate.
o Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters.
o Establish procedures for the confidential, anonymous submission by
employees of the Company of concerns regarding questionable
accounting, internal accounting controls or auditing matters.
25
o Submit the minutes of its meetings to, and discuss the matters
discussed at each committee meeting with, the Board.
o Investigate any matter brought to its attention within the scope of
its duties, with the power to retain professional advice for this
purpose if, in its judgment, that is appropriate.
o Review, with the Company's counsel, legal and regulatory matters that
may have a material impact on the Company's financial statements,
compliance policies and programs, including corporate securities
trading policies.
o Perform any other activities consistent with this Charter, the
organizational documents and governing law, as the Board or the Audit
Committee deems necessary or appropriate.
Report
o Comply with all reporting requirements of the SOA, the SEC and any
exchange on which the Company's securities are listed.
26
PROXY
WELLSFORD REAL PROPERTIES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned stockholder of Wellsford Real Properties, Inc., a Maryland
corporation (the "Company"), hereby appoints Jeffrey H. Lynford as proxy for the
undersigned, with full power of substitution, to vote and otherwise represent
all the shares that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held on June 9, 2003 at 9:30 a.m. at the
offices of Bryan Cave LLP, 1290 Avenue of the Americas, 31st floor, New York, NY
10104, and at any adjournment(s) or postponement(s) thereof, with the same
effect as if the undersigned were present and voting such shares, on the
following matters and in the following manner as further described in the
accompanying Proxy Statement. The undersigned hereby revokes any proxy
previously given with respect to such shares.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND THE
PROPOSALS AND IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S)
THEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1
1. The election of the following persons as Directors of the Company to
serve for the term set forth in the accompanying Proxy Statement.
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
Nominees:
Bonnie R. Cohen Meyer "Sandy" Frucher
/ / FOR all nominees
/ / WITHHELD as to all nominees
---------------------------------------------
/ / FOR all nominees except as noted above
2. The ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2003.
/ / FOR / / AGAINST / / ABSTAIN
3. To vote and otherwise represent the shares on any other matters which
may properly come before the meeting or any adjournment(s) or postponement(s)
thereof, in their discretion.
/ / MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
/ / MARK HERE IF YOU PLAN TO
ATTEND THE MEETING
Please sign exactly as name appears hereof
and date. If the shares are held jointly,
each holder should sign. When signing as
an attorney, executor, administrator,
trustee, guardian or as an officer signing
for a corporation, please give full title
under signature.
Dated: ----------------, 2003
------------------------------
Signature
------------------------------
Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
2