<PAGE>
================================================================================
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 Section 240.14a-11(c) or Section 240.14a-12
BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO]
BRE PROPERTIES, INC.
March 26, 1999
Dear Shareholder:
It is a pleasure to invite you to attend our Annual Meeting of Shareholders
to be held on Tuesday, May 11, 1999 at 10:00 a.m. Pacific Daylight time, in the
Oak Room of the Westin St. Francis Hotel, 335 Powell Street, San Francisco,
California.
This booklet includes the notice of meeting and proxy statement, which
contain information about the formal business to be acted on by shareholders.
The Annual Meeting will also feature a report on the operations of your
Company, followed by a question and discussion period. After the Meeting, you
will have the opportunity to speak informally with the directors and officers.
At the Annual Meeting, you will be asked to vote on: (i) electing three Class
II directors for a term of three years, (ii) approving the 1999 BRE Stock
Incentive Plan and (iii) such other matters as may properly come before the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE THREE
DIRECTOR NOMINEES AND TO APPROVE PROPOSAL 2 TO BE VOTED ON AT THE ANNUAL
MEETING.
It is important that your shares be voted whether or not you plan to be
present at the Annual Meeting. Please complete, sign, date and return the
enclosed form of proxy promptly, or you may utilize our telephone voting
procedure, as more fully described in this document. If you attend the Annual
Meeting and wish to vote your shares personally, you may revoke any previously
executed proxy.
Please vote promptly and we look forward to seeing you at the Annual Meeting.
Sincerely,
BRE Properties, Inc.
/s/ Frank C. McDowell
Frank C. McDowell
President & Chief Executive Officer
<PAGE>
BRE PROPERTIES, INC.
Notice of Annual Meeting of Shareholders
----------------
Notice is hereby given that the Annual Meeting of Shareholders of BRE
Properties, Inc. (the "Company") will be held on May 11, 1999 at 10:00 a.m.
Pacific Daylight time, in the Oak Room of the Westin St. Francis Hotel, 335
Powell Street, San Francisco, California, for the following purposes:
1. To elect three Class II directors for a term of three years.
2. To approve the 1999 BRE Stock Incentive Plan.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on March 8, 1999 are
entitled to vote at the meeting.
By Order of the Board of Directors
LeRoy E. Carlson,
Secretary
Dated: March 26, 1999
<PAGE>
BRE PROPERTIES, INC.
44 Montgomery Street, 36th Floor
San Francisco, CA 94104-4809
Telephone: (415) 445-6530
Facsimile: (415) 445-6505
----------------
PROXY STATEMENT
----------------
Annual Meeting of Shareholders
The enclosed proxy is solicited by the Board of Directors of BRE Properties,
Inc., a Maryland corporation (the "Company"), for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on May 11, 1999
at 10:00 a.m. Pacific Daylight time, or at any adjournment thereof. The
meeting will be held in the Oak Room of the Westin St. Francis Hotel, 335
Powell Street, San Francisco, California. At the meeting, holders of record of
the Company's common stock ("Common Stock") at the close of business on March
8, 1999 (the "Record Date") are entitled to vote. On that date, the Company's
outstanding capital stock consisted of 44,289,290 shares of Common Stock, each
share of which is entitled to one vote at the meeting.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Directors, officers and employees of the Company may also, without
additional compensation, solicit proxies by mail, personal interview,
telephone and telecopy.
The Company will request banks, brokerage houses and other institutions,
nominees or fiduciaries to forward the soliciting material to the beneficial
owners of shares and to obtain authorization for the execution of proxies. The
Company will, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to the beneficial owners. If a shareholder is a
participant in the Company's Direct Stock Purchase and Dividend Reinvestment
Plan, the proxy card represents a voting instruction as to the number of full
shares in the plan account, as well as any shares held directly by the
shareholder.
In lieu of mailing the proxy card in the postage-paid envelope provided,
shareholders of record can vote their shares by calling the toll-free
telephone number on the proxy card. The telephone voting procedure is designed
to authenticate shareholders by use of a control number on your proxy card.
The procedure allows shareholders to vote their shares and to confirm that
their instructions have been properly recorded. Specific instructions to be
followed by any shareholder of record interested in voting by telephone are
set forth on the enclosed proxy card.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting as specified in such proxies.
Votes at the Annual Meeting will be tabulated by one or more independent
inspectors of election appointed by the Company. If no vote is specified in an
executed proxy, the shares represented by such signed proxy will be voted for
the election of the three nominees for Class II Director, for the approval of
the 1999 BRE Stock Incentive Plan, and in the proxy holder's discretion upon
such other business as may properly come before the meeting. The three
nominees for election as Class II Directors who receive the highest number of
votes voting in person or by proxy at the Annual Meeting, provided a quorum is
present and voting, shall be elected as directors (Proxy Item No. 1). The
affirmative votes of the holders of a majority of the shares present and
voting in person or by proxy at the Annual Meeting, provided a quorum is
present and voting, shall be required to approve the 1999 BRE Stock Incentive
Plan (Proxy Item No. 2).
In tallying shareholder votes, abstentions (i.e., shares for which a proxy
is presented but abstains from voting on one or more matters) and "broker non-
votes" (i.e., shares held by brokers or nominees for which proxies are
presented but as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular
1
<PAGE>
matter because it is a non-routine matter) will be counted for purposes of
determining whether a quorum is present for the conduct of business at the
Annual Meeting. However abstentions and non-votes will not constitute votes
for or against any proposal and will be disregarded in determining votes cast.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
The Company's principal executive offices are located in 44 Montgomery
Street, 36th Floor, San Francisco, California 94104-4809. The Company's
telephone number is (415) 445-6530.
This Proxy Statement and the enclosed proxy card are scheduled to be mailed
to shareholders commencing on or about March 26, 1999.
2
<PAGE>
ELECTION OF DIRECTORS
(Proxy Item No. 1)
The Company's Board of Directors (the "Board") consists of nine members,
divided into three classes, designated Class I, Class II and Class III. The
Articles of Incorporation provide that there shall be from three to 15
directors, as determined from time to time by the Board. Currently, there are
three Class I directors, three Class II directors and three Class III
directors.
At the Annual Meeting, three Class II directors are to be elected for a term
of three years (expiring in the year 2002) or until the election and
qualification of their successors. The persons proposed for reelection as the
Class II directors are John McMahan, L. Michael Foley and Gregory M. Simon.
The accompanying proxies solicited by the Board will (unless otherwise
directed, revoked or suspended) be voted for the reelection of Messrs.
McMahan, Foley and Simon, who are the present Class II directors.
In the unanticipated event that any nominee should become unavailable for
election or upon election should be unable to serve, the proxies will be voted
for the election of such other person or persons as shall be determined by the
persons named in the proxy in accordance with their judgment or, if none, the
size of the Board will be reduced.
The following table sets forth certain information as to the nominees, as
well as the other current members of the Board, including their age, principal
business experience during the past five years, the year they each first
became a director, Board committee membership, and other directorships
currently held in companies with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15(d) of that Act or any Company registered as an
Investment Company under the Investment Company Act of 1940.
Nominees--Class II Directors:
<TABLE>
<CAPTION>
Board
Principal Business Experience Director Committee
Name During Past Five Years Age Since(1) Membership
---- ----------------------------- --- -------- ----------
<C> <S> <C> <C> <C>
John McMahan Chairman of the Board of the 61 1993 Executive*,
Company. Managing Principal, Strategic Planning,
The McMahan Group, real Capital Markets,
estate strategic management Compensation
consultants, since 1996.
President, John McMahan
Associates, Inc., a
management consulting firm,
and McMahan Real Estate
Securities, Inc., a real
estate investment firm, 1994
to 1996. President and Chief
Executive Officer,
Mellon/McMahan Real Estate
Advisors, Inc., a real estate
advisory firm, 1990-94.
L. Michael Foley Principal, L. Michael Foley 60 1994 Audit,
and Associates, real estate Compensation*,
and corporate consulting, Strategic Planning,
since 1996. Senior Vice Capital Markets
President and Chief Financial
Officer, Coldwell Banker
Corporation, 1995-1996.
Chairman and Chief Executive
Officer, Sears Savings Bank,
1989-93. Senior Executive
Vice President, Coldwell
Banker Real Estate Group,
Inc., 1986-93. Executive Vice
President, Homart Development
Co., 1983-1993. Trustee,
Western Investment Real
Estate Trust.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Board
Principal Business Experience Director Committee
Name During Past Five Years Age Since(1) Membership
---- ----------------------------- --- -------- ----------
<C> <S> <C> <C> <C>
Gregory M. Simon Self employed as a private 57 1991 Development
investor, since 1991. Senior and Acquisitions*,
Vice President, H.F. Ahmanson Strategic Planning,
& Co. and Home Savings of Compensation,
America, from 1983 to 1991.
Vice President and Director,
Golden Orange Broadcasting, a
privately held corporation.
</TABLE>
Class III Directors--Term Expires in 2000:
<TABLE>
<S> <C> <C> <C> <C>
Frank C. McDowell President and Chief Executive 50 1995 Executive
Officer of the Company, since
June 1995. Chief Executive
Officer and Chairman of
Cardinal Realty Services,
Inc., 1992-95. Senior Vice
President, Head of Real
Estate, First Interstate Bank
of Texas, 1988-92. Director,
National Association of Real
Estate Investment Trusts.
William E. Borsari Chairman, The Walters 60 1992 Asset Management*,
Management Company, a real Development
estate asset management and Acquisitions,
company, for more than five Executive,
years. Strategic Planning
Edward E. Mace President and Chief Executive 47 1998 Strategic Planning*
Officer of Fairmont Hotels
since 1996. From 1994 to
1996, Midwest regional
director for management
consulting for the Real
Estate Industry Group of KPMG
Peat Marwick in Chicago.
President and managing
partner for Lincoln Property
Company of Europe from 1990
to 1994.
</TABLE>
Class I Directors--Term Expires in 2001:
<TABLE>
<S> <C> <C> <C> <C>
Robert A. Fiddaman Chairman of SSR Realty 61 1998 Development
Advisors, a real estate and Acquisitions
investment and management
firm from 1996 to 1997.
President and Chief Executive
Officer of Metric Realty from
1993 to 1996.
Roger P. Kuppinger Financial advisor to public 58 1995 Capital Markets*,
and private companies, since Audit,
1994. Senior Vice President Strategic Planning
and Managing Director, Sutro
& Co., Inc., an investment
banking company, from 1969 to
1994. Director, Realty Income
Corporation.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Board
Principal Business Experience Director Committee
Name During Past Five Years Age Since(1) Membership
---- ----------------------------- --- -------- ----------
<C> <S> <C> <C> <C>
Arthur G. von Thaden President and Chief Executive 66 1981 Audit*,
Officer of the Company from Asset Management
1970 to June 1995. Chief
Executive Officer,
BankAmerica Realty Services,
Inc., a real estate
investment advisory firm,
from 1970 to 1987.
</TABLE>
- --------
* Denotes committee chairman.
(1) For Mr. von Thaden, includes service as a trustee of the Company's
predecessor, BankAmerica Realty Investors. For Messrs. Kuppinger, Simon
and Borsari (who joined the Board in March 1996), includes service as a
trustee of Real Estate Investment Trust of California ("RCT"), which
merged with the Company in March 1996.
A description of the business experience of the other executive officers of
the Company is contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, filed with the Securities and Exchange
Commission.
Vote Required
The three nominees who receive the highest numbers of votes shall be elected
as Class II directors. The Board of Directors unanimously recommends that the
shareholders vote FOR Messrs. McMahan, Foley and Simon.
Board and Committee Meetings; Compensation of Directors
During the year ended December 31, 1998, the Board held 12 regular meetings
and no special meetings. All of the directors attended 75% or more of the
meetings of the Board and the committees on which they served during 1998,
except Mr. McMahan who attended two of three compensation committee meetings.
In response to the Company's rapid growth since 1995, the Board has created
several committees in order to more effectively direct and review the
Company's operations and strategic outlook. In addition, the committees allow
management timely interface and response to factors affecting the ongoing
operations of the Company. Further, management regularly consults with
committee chairmen to review possible actions and seek counsel. Where
appropriate, the Board delegates authority to committees (within specified
parameters) to finalize the execution of various Board functions. While the
committee structure has improved the level of Board oversight, it has also
greatly increased the effort and time required of Board members who serve on
the various committees.
The Board has established the following committees: Audit, Executive,
Compensation, Strategic Planning, Capital Markets, Development and
Acquisitions and Asset Management. The present members of these committees are
indicated in the preceding section of this Proxy Statement.
The Audit Committee reviews the consolidated financial statements and
accounting policies with both management and the independent auditors. Such
review includes an assessment as to whether the consolidated financial
statements are complete and consistent with information known to them and
reflect appropriate accounting principles. The Audit Committee also reviews
the insurable risks impacting the Company and the management thereof. The
Audit Committee meets with the independent auditors in preparation for, and in
review of, the annual audit. During 1998, the Audit Committee met formally
four times.
The Executive Committee has all powers of the Board in the management and
affairs of the Company, subject to limitations prescribed by the Board and by
Maryland law, but meets only in the event of unusual or exceptional
circumstances affecting the Company. The Executive Committee did not meet
during 1998.
5
<PAGE>
The Compensation Committee reviews the compensation of officers and the
management succession plan, administers the Company's stock compensation plans
and nominates directors. The Compensation Committee met numerous times on an
informal basis and met formally three times during 1998.
The Strategic Planning Committee supplements and assists the full Board in
the review and definition of a strategic plan for the Company, including such
considerations as growth, geographic concentration and asset type. Further,
the Strategic Planning Committee conducts an ongoing evaluation and assessment
of the Company's prospects and future in the industry. The Strategic Planning
Committee did not meet formally during 1998; however, committee members
discussed strategic planning issues during full Board meetings.
The Capital Markets Committee reviews and establishes a capital markets
strategy and supervises management's implementation of such strategy. Further,
the Capital Markets Committee is delegated certain powers from time to time in
the execution of the financial affairs of the Company. The Capital Markets
Committee met formally seven times during 1998 and had extensive informal
meetings.
The Development and Acquisitions Committee reviews, analyzes and recommends
to the Board whether proposed development opportunities and acquisitions
should be undertaken. This process includes site visits to properties and
meeting with management and staff to review potential development
opportunities and acquisitions. The Development and Acquisitions Committee met
formally eight times during 1998.
The Asset Management Committee reviews property performance and annual
budgets and determines which assets should be divested. The Asset Management
Committee met formally seven times during 1998 and held numerous informal
meetings, including meeting with management and several property tours.
The Company has adopted a policy of paying retainer and meeting fees for
non-employee directors solely in stock options having an exercise price equal
to the fair market value of the Common Stock on the date of grant. The Amended
and Restated Non-Employee Director Stock Option Plan provides that each non-
employee director will receive annual stock options for 25,000 shares of
Common Stock (50,000 shares for the Chairman of the Board) in lieu of cash
compensation. Options for an additional 5,000 shares may be granted to each
non-employee director if for the preceding fiscal year the increase in the
Company's funds from operations ("FFO") per share over the prior year places
the Company at or above the 80th percentile in this category for the ten
largest publicly traded multifamily real estate investment trusts. In the
event the FFO is below the 50th percentile, the non-employee directors receive
no additional options. If the FFO places the Company between the 50th to 80th
percentiles, the non-employee directors receive a pro rated number of options.
Further, options for up to 8,000 shares may be granted per non-employee
director for committee membership and/or chairmanship. However, non-employee
directors who serve as members of the Executive Committee do not receive stock
options as compensation for such committee membership. Options granted under
the Plan have a term of ten years and the automatic annual grants become
exercisable as to one-twelfth of the shares per month, so that the options are
fully vested by the first anniversary of the date of grant. The additional
option grant for 5,000 shares related to the FFO per share increase (if such
requirement has been met) vests immediately. All non-employee directors are
also reimbursed for their reasonable out-of-pocket expenses in attending
meetings. On February 19, 1999, options for 2,983 shares were granted to all
non-employee directors based on the Company's 1998 performance in accordance
with the calculation described above.
The Board has adopted a share ownership guideline of having each new
director own within three years of joining the Board a number of shares of
Common Stock equal to $150,000 divided by the price of a share of the Common
Stock. In order to facilitate share ownership and retention, reload options
for 100,305 shares were granted to non-employee directors in 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of its equity securities, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company.
6
<PAGE>
To the Company's knowledge, based solely on review of the copies of such
reports furnished to it and written representations that no other reports were
required during the year ended December 31, 1998, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with, except for Mr. Mace, who
inadvertently filed late reports showing his purchase of 2,000 shares in May
1998, and 43 shares in each of June and October 1998 pursuant to the Company's
Direct Stock Purchase and Dividend Reinvestment Plan.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 28, 1999, information
regarding the shares of Common Stock beneficially owned by each person who is
known by the Company to own beneficially more than 5% of the Common Stock, by
each director, by each named executive officer (as hereinafter defined) and by
all directors and executive officers as a group. The amounts shown are based
upon information provided by the individuals named.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Name and Address Owned(1) Owned(1)(2)
---------------- ------------ ------------
<S> <C> <C>
Prudential Life
Insurance Company of
America................ 3,727,106 (3)(4) 8.4%
751 Broad Street
Newark, NJ 07102-3777
State Farm Insurance
Companies.............. 3,521,058 (3)(5) 7.9%
One State Farm Plaza
Bloomington, IL 61701
John McMahan............ 117,817 (6)
William E. Borsari...... 102,122 (7)
Robert Fiddaman......... 33,468 (8)
L. Michael Foley........ 104,918 (9)
Roger P. Kuppinger...... 87,681(10)
Edward Mace............. 34,817(11)
Frank C. McDowell....... 121,614(12)
Gregory M. Simon........ 111,644(13)
Arthur G. von Thaden.... 117,304(14)
LeRoy E. Carlson........ 95,724(15)
Bruce Ward.............. 592,547(16) 1.3%
John H. Nunn............ 66,783(17)
All directors and
executive officers
as a group (12
persons)............... 1,586,439 3.6%
</TABLE>
- --------
(1) The amounts and percentages of Common Stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities. Except as otherwise indicated, each individual has sole voting
and sole investment power with regard to the shares owned.
(2) Except where otherwise indicated, does not exceed 1%.
(3) Based on information furnished by such holder or contained in filings made
with the Securities and Exchange Commission.
(4) The Prudential Insurance Company of America ("Prudential") may have direct
or indirect voting and/or investment discretion over 3,727,106 shares of
the Company's common stock which are held for the benefit of Prudential's
clients by its separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or other affiliates.
(5) Includes 3,226,388 shares held by State Farm Mutual Automobile Insurance
Company, 2,100 shares held by State Farm Variable Product Trust and
292,570 shares held by State Farm Insurance Companies
7
<PAGE>
Employee Retirement Trust. Each entity in the State Farm Insurance
Companies group disclaims beneficial ownership as to all shares for which
such entity has no right to receive the proceeds of the sale of such
shares.
(6) Mr. McMahan--includes 18,324 shares he owns directly, and 99,493 shares
that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before
April 29, 1999.
(7) Mr. Borsari--includes 1,412 shares he owns directly, 956 shares held by
his wife, 15,896 shares held in an intervivos trust and 83,858 shares that
may be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999.
(8) Mr. Fiddaman--includes 5,736 shares owned by a trust where he and his wife
are trustees and 27,732 shares that may be purchased upon the exercise of
stock options that are currently exercisable or that will become
exercisable on or before April 29, 1999.
(9) Mr. Foley--includes 13,466 shares owned by a family trust of which Mr.
Foley and his wife are trustees and share voting and investment power, and
91,452 shares that may be purchased upon the exercise of stock options
that are currently exercisable or that will become exercisable on or
before April 29, 1999.
(10) Mr. Kuppinger--includes 13,709 shares owned by a trust where he and his
wife are trustees and 73,972 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before April 29, 1999.
(11) Mr. Mace--includes 3,086 shares owned by a deferred compensation plan
other than BRE's defined compensation plan and 31,731 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999.
(12) Mr. McDowell--includes 15,164 shares he owns directly, 1,450 shares held
by his wife in which he disclaims any interest, 40,000 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999
and 65,000 shares acquired upon exercise of stock options that are
collateral for recourse loans from the Company. See Stock Loans.
(13) Mr. Simon--includes 56,776 shares he owns directly, 2,112 shares owned by
his wife as separate property, 4,274 shares held in trust for his
children of which Mr. Simon is the trustee and 48,482 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999.
(14) Mr. von Thaden--includes 38,570 shares he owns directly, 252 shares held
by his wife in her Individual Retirement Account, as to which Mr. von
Thaden has no voting or investment power, and 78,482 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999.
(15) Mr. Carlson--includes 63,724 shares he owns directly, 12,000 shares that
may be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999,
and 20,000 shares acquired upon exercise of stock options that are
collateral for recourse loans from the Company. See Stock Loans.
(16) Mr. Ward--includes 577,547 units of interest in a subsidiary of the
Company which are exchangeable into Common Stock on a 1:1 basis or, at
the Company's election, cash in an amount equal to the market value at
the time of the exchange of the Common Stock issuable upon such exchange,
10,000 units of interest which have been earned but not issued and 5,000
shares that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before April
29, 1999.
(17) Mr. Nunn--includes 36,783 shares he owns directly, 10,000 shares that may
be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 1999
and 20,000 shares acquired upon exercise of stock options that are
collateral for recourse loans from the Company. See Stock Loans.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table summarizes the compensation paid to the Company's Chief
Executive Officer and the four other highest paid executive officers (the
"named executive officers") for the years ended December 31, 1998, 1997 and
1996. The employment of Jay W. Pauly, a named executive officer of the Company
for these years, terminated on February 22, 1999.
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation Awards
------------------ -------------------------
All Other
Name and Options/ Compensation
Principal Position Year Salary($) Bonus($) SARs(#)(1) ($)(2)(3)(4)
------------------ ---- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Frank C. McDowell......... 1998 $350,632 $262,000 135,000 $ 4,500
President and Chief 1997 348,001 348,001 30,000 29,834
Executive Officer 1996 313,998 306,798 60,000 2,250
Jay W. Pauly.............. 1998 $255,528 $100,000 32,500 $ 7,550
Senior Executive Vice 1997 244,658 122,500 32,500 5,675
President and 1996(5) 234,644 117,500 45,000(6) 4,863
Chief Operating Officer
LeRoy E. Carlson.......... 1998 $233,590 $100,000 30,000 $ 7,550
Executive Vice President 1997 225,672 100,000 25,000 5,673
and Chief Financial 1996(5) 215,754 90,000 35,000(6) 4,863
Officer
Bruce C. Ward............. 1998 $183,894 $100,000 -- $ 4,500
Executive Vice President, 1997(7) -- -- 25,000 --
Development 1996 -- -- -- --
John H. Nunn.............. 1998 $194,295 $ 90,000 30,000 $ 7,550
Executive Vice President, 1997 174,229 40,000 25,000 5,675
Property Management 1996(5) 156,175 65,000 30,000(6) 4,863
</TABLE>
- --------
(1) Does not include grants pursuant to reload stock options of 40,902 for Mr.
McDowell, 67,881 for Mr. Pauly, 40,591 for Mr. Carlson and 12,071 for Mr.
Nunn.
(2) Consists of contributions to the Company's defined contribution retirement
plan (401(k) Plan) on behalf of the named executive officers. Also
includes the Company's payments of $27,459 in 1997 for Mr. McDowell,
representing the value of the Supplemental Retirement Plan ("SERP") which
he would have received had the SERP not been terminated in 1996.
Additionally includes for each of Messrs. Pauly, Carlson and Nunn for
1998, 1997 and 1996, the $3,050, $3,300 and $2,613 benefit, respectively,
of an interest-free $50,000 loan, assuming a market interest rate equal to
the Company's borrowing cost.
(3) Does not include potential loan forgiveness. See Stock Loans. While the
amount to be forgiven is not yet determinable, the following amounts were
expensed on the Company's financial statements.
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Mr. McDowell..................................... $145,379 $63,583 $62,037
Mr. Pauly........................................ $ 77,528 $29,352 $21,349
Mr. Carlson...................................... $ 51,678 $19,725 $14,252
Mr. Nunn......................................... $ 51,678 $19,725 $14,252
</TABLE>
(4) Does not include one-time housing and relocation allowances for expenses
related to relocating to the San Francisco Bay Area in 1996 of $85,112 for
Mr. Pauly, $44,982 for Mr. Carlson and $48,531 for Mr. Nunn.
(5) Includes compensation from RCT from January 1, 1996 to March 15, 1996.
9
<PAGE>
(6) Does not include stock options for RCT shares, which the Company assumed
on March 15, 1996 in the merger with RCT and were converted to options for
171,000 shares of Common Stock for Mr. Pauly, 114,000 shares for Mr.
Carlson and 96,900 shares for Mr. Nunn.
(7) Mr. Ward joined the Company in January 1998.
Option Grants in 1998
The following table sets forth: (i) grants of stock options made by the
Company during 1998 to each of the named executive officers based on the
Company's and their individual performance for 1997; (ii) the ratio that the
number of options granted to each individual bears to the total number of
options granted to all employees; (iii) the exercise price and expiration date
of these options; and (iv) the estimated potential realizable values assuming
certain stock price appreciation over the ten-year option term.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Potential Realized
Value
at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise or for Option Term(4)
Options/SARs Employees Base Price Expiration ---------------------
Name Granted(1)(2) in Fiscal Year ($/Sh) Date(3) 5% 10%
---- ------------- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 135,000 15.8% $26.8750 03/02/08 $2,281,708 $5,782,297
24,927 2.9% 26.0000 06/05/05 421,305 1,067,669
9,888 1.2% 26.0000 08/26/06 167,122 423,521
6,087 .7% 26.0000 02/13/07 102,880 260,707
Jay W. Pauly............ 32,500 3.8% $26.8750 03/02/08 $ 549,300 $1,392,034
37,615 4.4% 27.6250 03/15/06 632,752 1,611,119
30,266 3.6% 23.9400 03/15/06 511,542 1,296,348
LeRoy E. Carlson........ 30,000 3.5% $26.8750 03/02/08 $ 507,046 $1,284,955
37,354 4.4% 27.6875 03/15/06 631,340 1,599,940
3,237 .4% 27.6875 02/13/07 54,710 138,647
John H. Nunn............ 30,000 3.5% $26.8750 03/02/08 $ 507,046 $1,284,955
9,034 1.1% 27.6250 03/15/06 152,689 386,943
3,037 .4% 27.6250 02/13/07 51,330 130,080
Bruce C. Ward........... -- -- -- -- -- --
</TABLE>
- --------
(1) All options shown in the table were granted under the Company's Amended
and Restated 1992 Employee Stock Plan. The exercise price is 100% of the
fair market value of the Common Stock on the date of grant. All options
held by Messrs. McDowell, Pauly, Carlson, Nunn and Ward may become
immediately exercisable upon termination of employment following a change
in control. See Employment Contracts and Termination of Employment and
Change in Control Arrangements. Messrs. McDowell, Pauly, Carlson and Nunn
immediately exercised, upon grant, options for 10,000, 7,500, 5,000 and
5,000 shares, respectively. See Stock Loans.
(2) The right to receive reload options was given in connection with some
options. The reload options enable the named executive officers to
purchase a number of shares of Common Stock equal to the number of shares
of Common Stock delivered by him to exercise the underlying option. The
effective date of the grant of the reload options will be the date the
underlying option is exercised by delivering shares of Common Stock 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 of the effective date of the grant of
the reload options. Included in the amounts shown are reload options
granted for Messrs. McDowell, Pauly, Carlson and Nunn of 40,902, 67,881,
40,591 and 12,071 shares, respectively.
(3) The options have a term of ten years, subject to acceleration upon a
change in control or termination.
(4) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant of
10
<PAGE>
the option until the end of the option term. The value is net of the
exercise price but is not adjusted for the taxes that would be due upon
exercise. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future stock prices. There can be no
assurance that any of the values reflected in the table will be achieved.
Actual gains, if any, upon future exercise of any of these options will
depend on the actual performance of the Common Stock and the continued
employment of the executive officer holding the option through its vesting
period.
Option Grants on February 22, 1999
On February 22, 1999, the Compensation Committee determined that the
following options would be granted to the named executive officers under the
1999 BRE Stock Incentive Plan upon shareholder approval of that Plan:
<TABLE>
<CAPTION>
Options
Name Granted
---- -------
<S> <C>
Frank C. McDowell.............................................. 160,000(1)
LeRoy E. Carlson............................................... 31,000(2)
Bruce C. Ward.................................................. 31,000(2)
John H. Nunn................................................... 30,000(3)
</TABLE>
- --------
(1) Includes 10,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
(2) Includes 6,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
(3) Includes 5,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
The above options will be granted at the market price of the Common Stock on
the date of approval by the shareholders.
Aggregated Option Exercises in 1998 and Year-End Option Values
The following table sets forth: (i) the number of shares received and the
aggregate dollar value realized in connection with each exercise of
outstanding stock options during 1998 by each of the named executive officers;
(ii) the total number of all outstanding unexercised options held by the named
executive officers as of the end of 1998; and (iii) the aggregate dollar value
of all such unexercised options based on the excess of the market price of the
Common Stock over the exercise price of the option.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Number of Unexercised In-the Money
Shares Options at 12/31/98 Options at 12/31/98(3)
Acquired on Value ------------------------- -------------------------
Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 58,334 $ 429,382 10,000 282,568 $ 47,500 $786,660
Jay W. Pauly............ 96,581 $1,010,121 104,919 124,881 $950,320 $111,091
LeRoy E. Carlson........ 105,000 $1,462,101 -- 90,591 -- $ 65,000
Bruce C. Ward........... -- -- 5,000 20,000 -- --
John H. Nunn............ 87,900 $1,203,234 -- 54,071 -- $ 44,000
</TABLE>
- --------
(1) The amounts shown for Messrs. McDowell, Pauly, Carlson and Nunn include
10,000, 7,500, 5,000 and 5,000 shares, respectively, for the immediate
exercise of stock options granted, which shares represent collateral for
stock loans. There was no value realized for these shares. See Stock
Loans.
(2) Value realized is calculated by subtracting the total exercise price from
the market value of the underlying Common Stock on the date of exercise.
For the options exercised for stock loans on the date of grant, the
exercise price was thus equal to the market price at the time of exercise.
(3) The market value of the Company's Common Stock at December 31, 1998 was
$24.75 per share.
11
<PAGE>
Retirement Plan (401(k) Plan)
The Company's Retirement Plan is intended to be a qualified retirement plan
under Section 401(k) of the Code. Under this plan, participating employees
(including the named executive officers) may contribute up to 6% of their
compensation, but not exceeding the amount allowed under applicable tax laws
($10,000 in calendar 1998), and the Company contributes 75% of the employee's
contribution. All employees of the Company with six months of service are
eligible to participate in the Retirement Plan. The Company's contributions on
behalf of employees who have been employed with the Company (including prior
service for certain entities acquired by the Company) for at least five years
are fully vested.
Stock Loans
From 1995 to December 31, 1998, the Board has approved five-year loans
aggregating $2,726,376 to the named executive officers for the purpose of
immediately exercising a portion of stock options granted on the date of the
loan (the "Stock Loans"). The first of these loans was granted to Mr. McDowell
on June 5, 1995, the date of commencement of his employment with the Company.
Similar loans were granted to Messrs. Pauly, Carlson and Nunn. A provision in
Mr. McDowell's employment agreement entitles him to the financial equivalent
of an annual Stock Loan for 10,000 shares of Common Stock if certain Company
performance goals are met. See Employment Contracts and Termination of
Employment and Change in Control Arrangements--Mr. McDowell--Future Awards.
The Board has adopted the practice of making similar annual performance grants
to the other named executive officers.
The following table summarizes certain information concerning the Stock
Loans granted or to be granted:
<TABLE>
<CAPTION>
To Exercise
Loan Option for Interest
Date Amount No. of Shares Rate(2)(3)
---- -------- ------------- ----------
<S> <C> <C> <C>
February 22, 1999:
McDowell.................................. (1) 10,000 (1)
Carlson................................... (1) 6,000 (1)
Ward...................................... (1) 6,000 (1)
Nunn...................................... (1) 5,000 (1)
March 2, 1998:
McDowell.................................. $268,750 10,000 5.4%
Pauly..................................... $201,563 7,500 5.4%
Carlson................................... $134,375 5,000 5.4%
Nunn...................................... $134,375 5,000 5.4%
February 13, 1997:
McDowell.................................. $123,125 5,000 5.4%
Pauly..................................... $184,188 7,500 5.4%
Carlson................................... $123,125 5,000 5.4%
Nunn...................................... $123,125 5,000 5.4%
August 26, 1996:
McDowell.................................. $200,000 10,000 6.6%
March 15, 1996 (2):
Pauly..................................... $266,250 15,000 7.1%
Carlson................................... $177,500 10,000 7.1%
Nunn...................................... $177,500 10,000 7.1%
June 5, 1995:
McDowell.................................. $612,500 40,000 8.25%
</TABLE>
- --------
(1) The February 22, 1999 loans are not yet determinable as to the amount of
the loan or the interest rate; the making of the loans is contingent on
shareholder approval of the 1999 BRE Stock Incentive Plan.
12
<PAGE>
(2) Payable quarterly except for Mr. McDowell's loans, for which interest
accrues subject to forgiveness. The interest rate is equal to the dividend
yield on the Common Stock purchased on the loan date.
(3) Does not include $50,000 in interest-free loans to each of Messrs. Pauly,
Carlson and Nunn. See Employment Contracts and Termination of Employment
and Change in Control Arrangements--Messrs. Pauly, Carlson and Nunn
Interest--Free Loans.
The Stock Loans are collateralized by the purchased shares with full
recourse to the named executive officers. These loans are forgivable in whole
or in part upon the achievement of Company performance goals related to growth
in assets and growth in FFO per share relative to peers and stock price
multiple relative to peers. The Stock Loans are also forgivable in whole or in
part under certain circumstances similar to the forgiveness applicable to Mr.
McDowell's June 5, 1995 loan as described in Employment Contracts and
Termination of Employment and Change in Control Arrangements --Mr. McDowell --
Stock Loan, Certain Severance Benefits and Messrs. Pauly, Carlson and Nunn --
Certain Severance Benefits. Upon termination, the Stock Loans are forgiven pro
rata for the measurement periods, but the same performance goal criteria are
used. Although certain of the performance goals have been attained, loan
forgiveness will not occur until the five-year term ends.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Mr. McDowell
Effective as of June 5, 1995 (the "Commencement Date"), the Company entered
into a five-year employment agreement with Mr. McDowell. Certain material
terms of the agreement are as follows:
Base Salary and Annual Incentive Bonus. Mr. McDowell receives a current base
salary of $348,902 per year and is eligible to receive an annual incentive
bonus targeted at 50% of base salary and up to 100% of base salary based on
achievement of predefined operating or performance criteria established by the
Board, with emphasis on FFO per share (the "Annual Criteria").
Stock Loan. Upon the commencement of his employment with the Company, Mr.
McDowell received a loan of $612,500 to exercise options to purchase 40,000
shares of Common Stock (at an exercise price of $15.32 per share) issued on
that date (the "McDowell Stock Loan"). The McDowell Stock Loan bears interest
at 8.25% per annum, compounded annually, with all principal and accrued
interest payable in full on June 5, 2000 (the "Payment Date"); provided,
however, that repayment of any principal and accrued interest under the
McDowell Stock Loan (the "Loan Amount") will be forgiven in accordance with
the following formulas (the "Performance Formulas"): (i) 20% of the Loan
Amount will be forgiven if the gross book value of the Company's equity
investments in real estate, investments in limited partnerships and mortgages
is $937 million or more on the Payment Date, and a pro rata portion of 20% of
the Loan Amount will be forgiven if such value is between $791 million and
$937 million; (ii) 20% of the Loan Amount will be forgiven on the Payment Date
if, on the second anniversary date of the McDowell Stock Loan, there has been
an increase in FFO per share of the Common Stock for the two year period
ending April 30, 1997 which is at or above the 80th percentile of the ten
largest publicly-traded multifamily real estate investment trusts (the
"Indexed REITs") for a comparable period, and a pro rata portion of 20% of the
Loan Amount will be forgiven if any such increase is within the 50th and 80th
percentiles; (iii) 30% of the Loan Amount will be forgiven if, on the Payment
Date, there has been an increase in FFO per share of Common Stock for the
three year period ending April 30, 2000 which is at or above the 80th
percentile of the Indexed REITs, and a pro rata portion of 30% of the Loan
Amount will be forgiven if any such increase is within the 50th and 80th
percentiles; and (iv) 30% of the Loan Amount will be forgiven if, as of the
Payment Date, the average of the FFO multiples of Common Stock as of December
31 of each of the five preceding years (computed in each case by dividing the
market price of Common Stock on the last trading day of the calendar year by
the preceding twelve months' FFO) is at or above the 80th percentile of the
average multiple of the Indexed REITs for the same five year period, and a pro
rata portion of 30% of the Loan Amount will be forgiven if such multiple is
within the 50th and 80th percentiles. In addition, repayment of
13
<PAGE>
a pro rata portion of the Loan Amount will be forgiven by the Company upon
termination of Mr. McDowell's employment under the circumstances described in
Certain Severance Benefits. Each of Mr. McDowell's subsequent loans granted in
1996, 1997 and 1998 have substantially the same terms as the McDowell Stock
Loan. See also Stock Loans.
Future Awards. Mr. McDowell will receive annual long-term incentive awards
which, assuming achievement of applicable performance goals, will provide Mr.
McDowell with the financial equivalent of (i) a forgivable performance-based
five-year loan to purchase 10,000 shares of Common Stock pursuant to an
immediately exercisable stock option, on terms similar to the McDowell Stock
Loan (see Stock Loan above), and (ii) performance options to purchase 50,000
shares of Common Stock at market value on the date of award (see Option Grants
in 1998).
Certain Severance Benefits. If at any time during the five-year employment
term the employment of Mr. McDowell is terminated, he shall be entitled to
receive the benefits described below.
(a) Termination Other Than In Connection with a Change in Control.
(i) Termination by the Company Without Cause. If Mr. McDowell is terminated
without cause, Mr. McDowell would receive a lump sum payment equal to his then
base salary, plus an amount equal to the average of his annual bonus, if any,
over the most recent two years, and the Loan Amount would be reduced based on
a pro rata application of the Performance Formulas (the "Performance
Adjustment"), taking into consideration the number of full months worked and
the Company's performance data through the last quarter ended 45 days or more
prior to the termination date.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, Mr. McDowell or his estate will receive a lump sum payment
equal to the estimated annual bonus he would have received for the fiscal year
in question, if any (based on actual performance relative to the Annual
Criteria for the fiscal year and Mr. McDowell's contribution to the date of
death or disability), calculated on a prorated basis to the date of
termination. In addition, the McDowell Stock Loan would be forgiven based on
the Performance Adjustment, with any balance payable 15 days after
termination.
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
would be payable to Mr. McDowell and the outstanding balance of the McDowell
Stock Loan, together with accrued but unpaid interest, would be payable in
full within 15 days of termination.
(b) Termination Following a Change in Control.
(i) Termination by the Company Without Cause or by Mr. McDowell for Good
Reason. If Mr. McDowell is terminated without cause within 12 months following
a Change in Control (defined to include, without limitation, the acquisition
by a person or group of the beneficial ownership of 50% or more of the
Company's outstanding securities and certain changes in the Board of Directors
resulting from proxy contests or other actions by a person or group with
beneficial ownership of 5% or more of the Company's outstanding securities),
or if Mr. McDowell terminates his employment for Good Reason (defined as
material changes in the executive's duties, responsibilities or authority or
the Company's relocation of the executive outside of San Francisco) within 12
months after a Change in Control, he would receive the following benefits: (a)
a lump sum payment equal to (x) two times his then base salary plus an amount
equal to two times the average of his annual bonus over the most recent two
years, if any (based on his current base salary of $348,902 and assuming
average incentive compensation in the maximum amount of $348,902, this payment
would be $1,395,608) plus (y) the estimated annual bonus he would have
received for the fiscal year in question, if any (based on actual performance
relative to the Annual Criteria for the fiscal year and Mr. McDowell's
contribution to date), calculated on a pro rated basis to the date of
termination; (b) all unvested stock options held by Mr. McDowell would vest
and be exercisable for a period of three months; and (c) the McDowell Stock
Loan would be forgiven based on the Performance Adjustment, with any balance
payable upon termination.
14
<PAGE>
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, Mr. McDowell or his estate would
receive the same benefits described in paragraph (a)(ii) above.
(iii) Voluntary Termination Without Good Reason or Termination for
Cause. Upon voluntary termination of employment by Mr. McDowell without Good
Reason within 12 months following a Change in Control, he would receive a lump
sum payment equal to his then base salary plus an amount equal to the average
of his annual bonus over the most recent two years, if any ($697,804, assuming
a $348,902 base salary and maximum incentive bonus). The outstanding balance
of the McDowell Stock Loan would be due on such termination. Upon termination
for "cause" by the Company within 12 months following a Change in Control, no
further compensation would be payable to Mr. McDowell and the outstanding
balance of the McDowell Stock Loan, together with accrued but unpaid interest,
would be payable in full within 15 days of termination.
Any of the foregoing amounts payable to Mr. McDowell following a Change in
Control is subject to reduction to the extent such payments would constitute
"parachute payments" as defined in Section 280G of the Code.
Messrs. Pauly, Carlson and Nunn
Effective on March 15, 1996, the date of the merger with RCT, the Company
entered into employment agreements with Jay W. Pauly, LeRoy E. Carlson and
John H. Nunn. Each agreement was for an initial term of two years, with
automatic renewal on a year-to-year basis thereafter unless terminated in
accordance with its terms. Certain material terms of these agreements are as
follows:
Base Salary. For 1998, Mr. Pauly received a base salary of $260,000. Mr.
Carlson currently receives a base salary of $250,000 and Mr. Nunn currently
receives a base salary of $225,000. Each base salary will be subject to review
each year with an expectation that the base salary will increase in an amount
at least equal to any increase in the Consumer Price Index for the San
Francisco Bay Area over the preceding twelve months.
Annual Incentive Bonus. Each executive shall be eligible to receive an
annual incentive bonus targeted at 40% of base salary, in the case of Mr.
Pauly, and 30% of base salary, in the case of Messrs. Carlson and Nunn. The
amount of the annual bonus will be based on the achievement of predefined
operating or performance goals and other criteria to be established by the
Chief Executive Officer or the Compensation Committee of the Board.
Interest-Free Loans. Upon their employment, Messrs. Pauly, Carlson and Nunn
each received a $50,000 interest-free recourse loan (an "Interest-Free Loan")
to be forgiven either on the fifth anniversary of the date of employment, or
upon earlier termination of employment under the circumstances described in
Certain Severance Benefits. See also Stock Loans.
Certain Severance Benefits. If, at any time during any automatic one-year
renewal period, the employment of Messrs. Pauly, Carlson or Nunn is
terminated, he shall be entitled to receive the benefits described below.
(a) Termination Other Than In Connection with a Change in Control.
(i) Termination by the Company Without Cause. If the executive is terminated
without cause, the executive will receive a lump sum payment equal to his then
annual base salary plus an amount equal to the average of his annual bonus
over the most recent two years, if any. In addition, the Interest-Free Loan
will be forgiven and the Stock Loans will be forgiven based on a pro rata
application of the Performance Formulas (the "Pro Rata Calculation"), taking
into consideration the number of full months employed and the Company's
performance data through the last quarter ended 45 days or more prior to the
termination date.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, the executive or his estate will receive a lump sum payment
equal to the annual bonus the executive would have received for the fiscal
year in question, if any (based on the previous or average annual bonus
amounts), calculated on a prorated basis to the date of termination. In
addition, the Interest-Free Loan will be forgiven and the Stock Loans will be
forgiven based on the Pro Rata Calculation.
15
<PAGE>
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
will be payable to the executive and the outstanding balance of the Interest-
Free Loan and the Stock Loans, together with accrued but unpaid interest, will
be payable in full within 15 days of termination.
(b) Termination Following a Change in Control.
(i) Termination by the Company Without Cause or by the Executive for Good
Reason. If the executive is terminated without cause within 12 months
following a Change in Control or if the executive terminates his employment
for Good Reason within 12 months after a Change in Control, the executive will
receive the following benefits: (a) a lump sum payment equal to two times his
then base salary plus an amount equal to two times the average of his annual
bonus over the most recent two years, if any; (b) all unvested stock options
held by the executive would vest and be exercisable for a period of three
months; and (c) the Interest-Free Loan would be forgiven and the Stock Loans
would be forgiven based on the Pro Rata Calculation, with any balance due
immediately.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, the executive will receive the
same benefits described in paragraph (a)(ii) above, reduced on a pro-rated
basis to the date of termination.
(iii) Voluntary Termination Without Good Reason or Termination for
Cause. Upon voluntary termination of employment by the executive without Good
Reason within 12 months following a Change in Control, the executive will
receive a lump sum payment equal to his then base salary plus an amount equal
to the average of his annual bonus over the most recent two years, if any. The
outstanding balance of the Interest-Free Loan and the Stock Loans, together
with accrued but unpaid interest, will be due on such termination. Upon
termination for "cause" by the Company within 12 months following a Change in
Control, no further compensation will be payable to the executive and the
outstanding balance of the Interest-Free Loan and the Stock Loans, together
with accrued but unpaid interest, will be payable in full within 15 days of
termination.
Any of the foregoing amounts payable to Messrs. Pauly, Carlson and Nunn
following a Change in Control is subject to reduction to the extent such
payments would constitute "parachute payments" as defined in Section 280G of
the Code.
Mr. Pauly's employment with the Company terminated effective as of February
22, 1999. Pursuant to the terms of his contract, the Company anticipates that
Mr. Pauly will receive certain cash severance payments payable upon
termination and that Mr. Pauly's Interest-Free Loan and a pro rata portion of
his Stock Loan may be forgiven.
Mr. Ward
Effective as of January 26, 1998, the Company entered into an Employment
Agreement with Bruce C. Ward for a term of three years unless otherwise
terminated in accordance with its terms. Certain material terms of the
Agreement are as follows:
Base Salary. Mr. Ward receives a current base salary of $250,000 per year.
Mr. Ward's base salary will be subject to review each year based on Mr. Ward's
performance subject to approval of the Board or its Compensation Committee.
Annual Incentive Bonus. Mr. Ward shall be eligible to receive an annual
incentive bonus targeted at 40% of base salary. The annual bonus will be based
on the achievement of predefined operating or performance goals and other
criteria by the Chief Operating Officer or the Chief Executive Officer,
however the actual amount of the annual incentive bonus shall be subject to
approval of the Board of Directors or its Compensation Committee.
16
<PAGE>
(a) Termination Other Than In Connection With A Change In Control.
(i) Termination by the Company Without Cause. If the executive is terminated
without cause, the executive will receive a lump sum payment equal to his then
annual salary plus an amount equal to his annual bonus that the executive
would have received for the fiscal year in question, if any.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, the executive or his estate will receive a lump sum payment
equal to the annual bonus that the executive would have earned for the fiscal
year in question, if any.
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
will be payable to the executive.
(b) Termination Following A Change In Control.
(i) Termination by the Company Without Cause or by the Executive with Good
Reason. If the executive is terminated without cause or if the executive
terminates his employment for Good Reason, the executive will receive: (a) a
lump sum payment equal to two times his base salary plus an amount equal to
two times the annual bonus the executive would have received for that fiscal
year, if any, and (b) all unvested stock options, if any, held by the
executive would vest and be exercisable for a period of three months.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, Mr. Ward will receive the same
benefits described in (a)(ii) above.
(iii) Voluntary Termination Without Good Reason. Upon voluntary termination
of employment by executive without Good Reason, the executive will receive a
lump sum payment from the Company equal to his base salary plus the annual
bonus he would have received for the fiscal year in question, if any.
(iv) Termination for Cause. Upon termination for "cause" by the Company, no
further compensation will be payable to the executive.
Any of the foregoing amounts payable to the executive following a Change in
Control is subject to reduction to the extent such payments would constitute
"parachute payments" as defined in Section 280G of the Code.
17
<PAGE>
COMPENSATION COMMITTEE REPORT ON COMPENSATION
OF EXECUTIVE OFFICERS
Compensation Policies Affecting Executive Officers
General
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation program. The Committee is
composed entirely of outside directors.
The objective of the Company's executive compensation program is to develop
and maintain executive reward programs which contribute to the enhancement of
shareholder value, while attracting, motivating and retaining key executives
who are essential to the long-term success of the Company. As discussed in
detail below, the Company's executive compensation program consists of both
fixed (base salary) and variable (incentive) compensation elements. Variable
compensation consists of annual cash incentives, stock option grants,
incentive stock loans and, on occasion, restricted share grants. These
elements are designed to operate on an integrated basis and together comprise
total compensation value.
Each year, the Committee reviews executive compensation in light of the
Company's performance during the year against previously defined objectives
and compensation data at companies that are considered comparable for Company
performance purposes. In reviewing the Company's performance during 1998, the
Committee considered a variety of additional factors. FFO per share increased
approximately 14% from 1997 levels, which placed the Company's performance in
the upper third of the ten largest multifamily REITs (the "Comparable Group")
and "same store" net operating income increased approximately 12% for the
year, which outpaced all of the Company's Comparable Group. Also during 1998,
the Company completed the integration of the properties, operations and
employees acquired in the November 1997 transaction with Trammell Crow
Residential-West. That transaction added 17 completed apartment communities
totaling 4,786 units, eight development properties totaling approximately
2,445 units as well as development, construction and third-party property
management capabilities. During 1998, delivered development volume totaled
2,121 units and acquisition volume provided an additional 1,597 units.
Although total shareholder return, taking into account dividends paid and
stock price appreciation, was negative for the year, the Company's FFO
multiple, an indication of price performance, was among the best of its
Comparable Group.
Base Salary
Base salary levels of the Company's key executives are largely determined
through an evaluation of the responsibilities of the position held, the
experience of the particular individuals, a comparison with comparable
companies in the real estate industry and the Committee's desire to achieve
the appropriate mix between fixed compensation and incentive based
compensation. In its determination of comparable companies, the Committee
gives primary consideration to comparable companies included in the equity
REIT peer group used for the five-year comparison of total shareholder return
(see Comparative Stock Performance). Salary information about comparable
companies is surveyed by reference to public disclosures made by companies in
the real estate industry. In addition, during 1998, the Committee used salary
survey data supplied by an outside compensation consultant. A change in a key
executive's compensation from the previous year may reflect factors such as
performance, changes in responsibility, contract provisions relative to
inflation and adjustments to maintain a level of consistency with industry
practices.
Annual Cash Incentives
The annual cash incentive is designed to provide a short-term (one-year)
incentive to executive officers with the potential award based on a percentage
of an executive's base salary. For 1998, incentive awards were based on the
achievement of predetermined corporate expectations and a determination as to
an executive's performance against specific objectives agreed upon by the
executive and the Committee at the start of the year. In addition, the
Committee used survey data supplied from the Company's outside compensation
consultant
18
<PAGE>
relative to total cash compensation, including salary and cash incentive
awards. For the executive officers other than the CEO, targeted annual cash
incentive awards are between 30%-40% of base salary; for the CEO, the targeted
annual cash incentive award is 50% of base salary with a maximum annual award
of 100% of base salary. The Summary Compensation Table shows cash incentive
bonuses paid to the named executive officers for 1998 based on such
performance.
Stock Options
Stock options are designed to provide long-term (ten year) incentives and
rewards tied to the price of the Common Stock. The Committee believes that
stock options, which provide value to participants only when shareholders
benefit from stock price appreciation, are an important component of the
Company's annual executive compensation program. The number of options or
shares currently held by an officer is not a factor in determining individual
grants, and the Committee has not established any target level of ownership of
Common Stock by executive officers. However, accumulation and retention of
shares of Common Stock by officers is strongly encouraged. In order to
facilitate share ownership and retention, in 1998 the Company implemented a
program whereby certain executives may receive reload options.
Stock options are awarded annually following the close of each year. The
Company does not adhere to any firmly established formulas for the issuance of
options to employees. In 1998, the Company extended the program of granting
stock options to additional qualified employees at the community management
level and above. In 1999, this program was continued. The Option Grants in
1998 table shows the options granted to the named executive officers during
1998 for 1997 performance. In determining the size of the grants to the named
executive officers, the Committee assessed relative levels of responsibility,
Company and individual performance and the long-term incentive practices of
other comparable companies. Options to be granted to senior executives in 1999
for 1998 performance are contingent upon shareholder approval of the 1999 BRE
Stock Incentive Plan.
In accordance with the provisions of the Company's 1992 Employee Stock Plan,
the exercise price of all options granted was equal to the market value of the
underlying Common Stock on the date of grant. Accordingly, the value of these
grants to the officers is dependent solely upon the future growth and share
value of the Company's Common Stock.
Incentive Stock Loans
Pursuant to the 1992 Employee Stock Plan, in 1998, the Company funded
$739,063 aggregate principal amount of incentive stock loans to the named
executive officers. As more fully described in Stock Loans, these loans were
used to exercise some of the options granted to the named executive officers
under the Plan, and repayment of these loans may be forgiven in whole or in
part upon achievement of certain Company performance goals, including same
store growth in operating income from comparable projects versus the
Comparable Group, FFO per share growth versus the Comparable Group and the
trailing FFO multiple versus the Comparable Group. The Committee believes that
these loans, by encouraging management's acquisition and retention of shares
of Common Stock and by tying forgiveness to Company performance, provide even
greater incentives for management to achieve both the Company's long-term
performance objectives and its current strategic goals.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limit of $1,000,000 on the amount of compensation that may be deducted by the
Company in any year with respect to each of the Company's five most highly
paid executive officers. Certain performance-based compensation that has been
approved by the shareholders is not subject to this deduction limit. The
Company's 1992 Employee Stock Option Plan, and the proposed 1999 BRE Stock
Incentive Plan, are qualified so that stock options and certain other awards
under such plans are not subject to the deduction limitations of Section
162(m). However, certain other types of compensation payments and their
deductibility depend on the timing of an executive officer's vesting or
exercise of previously granted rights, or on interpretations of changes in the
tax laws and other factors beyond
19
<PAGE>
the Company's control. Although the Company generally seeks to preserve the
federal income tax deductibility of compensation paid, in order to maintain
flexibility in compensating executive officers in a manner designed to promote
varying corporate goals, the Committee has not adopted a policy that all
compensation must be deductible. For 1998, the Committee anticipates that
approximately $275,000 of compensation to Mr. McDowell will be subject to the
deduction limitations of Section 162(m).
CEO Performance Evaluation
For 1998, the Committee evaluated Mr. McDowell's performance based on the
factors discussed above under the caption "General," with particular emphasis
on the achievement of operating, portfolio and performance objectives, growth
in FFO per share and same store net operating income and corporate performance
relative to multi-family peer groups. Based on these factors and Mr.
McDowell's individual performance, which the Committee considered exceptional,
in 1999 he received 75% of his potential maximum annual cash incentive
together with the proposed incentive stock loan and stock option grants
described in Stock Loans and Option Grants on February 22, 1999.
The foregoing report is given by the members of the Compensation Committee,
namely:
L. Michael Foley, Chairman
John McMahan
Gregory M. Simon
20
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The line graph below compares the cumulative total shareholder return on the
Common Stock for the last five years with the cumulative total return on the
S&P 500 Index and the NAREIT Equity REIT Total Return Index over the same
period. This comparison assumes that the value of the investment in the Common
Stock and in each index was $100 on December 31, 1993 and that all dividends
were reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BRE Properties, Inc..... $100.00 $ 99.05 $123.73 $182.58 $219.65 $203.83
S&P 500 Index........... $100.00 $ 98.46 $132.05 $158.80 $208.05 $263.53
NAREIT Equity REIT
Index.................. $100.00 $103.89 $118.19 $150.06 $169.61 $152.46
</TABLE>
- --------
(1) Indicates appreciation of $100 invested on December 31, 1993 in the Common
Stock, S&P 500, and NAREIT Equity REIT Total Return Index securities,
assuming reinvestment of dividends.
(2) The NAREIT Equity REIT Total Return Index includes 176 companies with
aggregate equity capitalization (excluding operating units) of
approximately $132 billion.
21
<PAGE>
APPROVAL OF THE 1999 BRE STOCK INCENTIVE PLAN
(Proxy Item No. 2)
1999 BRE Stock Incentive Plan
The 1999 BRE Stock Incentive Plan (the "1999 Plan" or the "Plan") provides
for the grant of stock options, share appreciation rights and restricted and
unrestricted stock to officers and other employees of the Company, as well as
consultants who serve the Company, for an aggregate of up to 2,000,000 shares
of Common Stock. The Plan was adopted by the Board of Directors on January 25,
1999, subject to approval of the shareholders.
The purpose of the 1999 Plan is to attract and retain employees and
consultants by providing them with incentive compensation and a proprietary
interest in the Company. A copy of the Plan is appended hereto. The following
summary of certain provisions of the 1999 Plan does not purport to be complete
and is qualified in its entirety by reference to the Appendix.
Administration of the Plan
The 1999 Plan will be administered by the Board of Directors or by the
Board's Compensation Committee (the "Committee"). To the extent that options
and other awards granted under the Plan are intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the Plan will be administered by a committee of two or
more "outside directors" within the meaning of Code Section 162(m). Awards
under the 1999 Plan are intended to be exempt from the SEC's short-swing
profit rule, pursuant to Rule 16b-3.
The Committee, or the full Board, is authorized to grant awards, to
determine to whom grants are made, and the terms and conditions thereof, and
to adopt rules and regulations relating to the 1999 Plan. The individuals
eligible to participate are those salaried employees (including officers and
directors who are also employees) of the Company, as well as persons who serve
the Company as consultants, as the Committee shall determine.
Shares Available Under the Plan
The Plan authorizes grants for up to 2,000,000 shares of Common Stock,
including 750,000 shares authorized in a Broad-Based Employee Stock Plan that
the Board adopted on November 16, 1998 for employees who are not executive
officers of the Company. The Broad-Based Plan will be incorporated into the
1999 Plan if the 1999 Plan is approved by the shareholders. At February 28,
1999, options for 627,615 shares were outstanding under the Broad-Based Plan
and the remaining 122,385 shares were available for future grants.
In addition to the 1999 Plan and the Broad-Based Plan, at February 28, 1999
there were outstanding grants and shares available for future grants totaling
1,391,448 shares of Common Stock, consisting of: (i) outstanding option grants
for 1,387,776 shares under the 1984 and 1992 Employee Stock Plans;
(ii) 3,672 shares available for future grants under the 1992 Employee Stock
Plan; (iii) outstanding option grants for 793,744 shares under the Non-
Employee Director Plan; (iv) 602,672 shares available for future grants under
the Non-Employee Director Plan; and (v) outstanding non-plan option grants
totaling 156,585 shares, including an option for 66,666 shares held by Mr.
McDowell and an option for 81,919 shares held by Mr. Pauly that was assumed in
the RCT merger. Available shares not used under the 1984 and 1992 Employee
Stock Plans will be added to shares available under the 1999 Plan.
Each award under the 1999 Plan will be subject to customary anti-dilution
provisions applicable in the event of a stock dividend, stock split,
conversion, exchange, reclassification or substitution. In the event of any
other change in the corporate structure or outstanding shares, the Committee
may make such equitable adjustments to the number of shares and the class of
shares available under the Plan or to any outstanding award as it shall deem
appropriate to prevent dilution or enlargement of rights. Upon termination of
any Plan awards, the shares
22
<PAGE>
subject to those awards may again be made the subject of additional Plan
awards. When already-owned shares are delivered to pay the exercise price of a
Plan option, only the net shares issued upon exercise will be deemed utilized
in the Plan. The maximum number of shares which may be the subject of awards
to any one individual under the 1999 Plan is 1,000,000 shares.
Stock Options. The Committee will have discretion to grant either incentive
stock options within the meaning of Section 422 of the Code ("ISOs") or non-
qualified stock options ("NQSOs"). A further description of these two types of
stock options appears below under the heading "Certain Federal Income Tax
Consequences". Stock option grants may be evidenced by written agreements in
such form approved by the Committee consistent with the terms of the Plan. The
Committee will, subject to the terms and conditions of the Plan, determine the
terms and conditions of option grants and the number of shares to be issued
pursuant to such options. The exercise price will be not less than the market
value on the grant date.
The Plan provides that the Committee may, in its discretion, provide that an
option may not be exercised in whole or in part for a specified period or
periods of time. Generally, options vest 20% per year beginning one year after
the grant date and expire ten years from the date of grant. Except as so
specified, an option may be exercised in whole or in part from time to time
for a period of up to ten years from the date of grant. In the discretion of
the Committee, an option may become immediately exercisable upon the
occurrence of certain events, including upon the death or permanent disability
of an optionee or upon a change in control (as defined in the Plan) of the
Company. In the event of the optionee's termination of employment with the
Company, the option will also terminate unless extended by the Committee for
up to three months or for up to 12 months following termination due to death
or permanent disability, and for a period of up to three years following
retirement at or after retirement age. In the event of a merger, sale of
assets or certain other corporate transactions, the Plan authorizes the
Committee, in its discretion, to either accelerate the vesting of outstanding
options or cancel options which were exercisable at any time prior to the
effective date of such transaction.
Payment of the option price upon exercise of an option will be in cash or,
in the discretion of the Committee, in shares of Common Stock already owned by
the optionee having a fair market value equal to the option price, or any
combination of cash and Common Stock having a combined value equal to the
option price. The option holder may in certain circumstances elect to have
shares withheld to satisfy tax withholding requirements in connection with the
exercise of an option. In the discretion of the Committee, an option agreement
may also provide for the extension of an interest-bearing loan from the
Company to the optionee to finance exercise of an option, provided that the
term of the loan does not exceed ten years, the loan is with full recourse to
the optionee, and repayment of the loan is secured by the shares so acquired
by the optionee. The Company has adopted a practice of extending such loans to
the named executive officers on terms described in Stock Loans, including
forgiveness of all or part of the loans to be made under the 1999 Plan if
certain performance conditions are met determined in accordance with Section
4.3 of the Plan. The Plan also provides that the Committee may permit
optionees to use cashless exercise methods that are permitted by law and in
connection therewith the Company may establish a cashless exercise program,
including a program where the commissions on the sale of stock subject to an
exercised option are paid by the Company.
In general, options are transferable only by will or by the laws of descent
and distribution and, during the lifetime of the optionee, the option shall be
exercisable only by the optionee or by the optionee's guardian or legal
representative; however, the Committee has the discretion to permit lifetime
transfers based on recent SEC rule changes, and the Committee is considering
allowing the transfer of NQSOs to an optionee's family members.
The Company has adopted a policy of permitting executive officers to receive
"reload" options when they exercise options using already-owned shares of
Common Stock. A "reload" means the executive officer would receive a new
option, expiring on the expiration date of the original option, for the amount
of shares so delivered, plus any shares delivered or withheld from the
exercise, to pay applicable withholding taxes. A reload option will be at a
price equal to the market price at the time of exercise and have a term
expiring on the same date as
23
<PAGE>
the original option. The reload option will vest and become exercisable 18
months after exercise of the original option or, if sooner, 12 months prior to
the expiration date of the reload option. The exercise of a reload option
using stock will result in a further reload option being granted. Reload
options will not be granted when an option is exercised by a person who is no
longer an employee. The shares relating to reload options that expire
unexercised will not be available for future grant under the Plan.
The Board believes that the availability of reload options encourages
officers to exercise their options at an early date rather than wait until
near expiration of an option, in that the reload concept in effect affords
optionees the benefit of the original option for the option term, while
permitting them to increase their current share holdings by purchasing shares
upon exercise of their options.
Share Appreciation Rights (SARs). The 1999 Plan provides that the Committee
may grant SARs in connection with all or part of any option granted under the
Plan. The number of SARs granted to an optionee may not exceed the number of
shares of Common Stock which the optionee may then purchase upon exercise of
the related option or options.
The holder of an option and related SARs may elect to exercise the SARs or a
part thereof in lieu of exercising the option or a portion thereof. Upon any
exercise of SARs, the optionee must surrender the related option with respect
to a number of shares equal to the number of SARs exercised and, in exchange,
the optionee will receive the excess of the fair market value of the Common
Stock covered by the portion of the option surrendered over its option price.
Payment of SARs may be made in shares of Common Stock valued at fair market
value or, in the discretion of the Committee, in cash. In the event of the
surrender of all or a portion of an option for SARs, the shares represented by
the portion surrendered will not be available for reissuance under the Plan.
If SARs are granted with respect to an option, the existence of the SARs
will require charges to income for compensation expense based on the amount,
if any, by which the market price of the shares of Common Stock subject to the
SARs exceeds the option price over the period of the option. The Company does
not at present intend to grant SARs under the 1999 Plan.
Restricted Share Awards. The Committee may grant restricted shares, i.e.,
shares of Common Stock which are subject to transfer restrictions determined
by the Committee in its sole discretion, and subject to substantial risk of
forfeiture unless and until specific conditions established by the Committee
at the time of grant are met. Such conditions may be based on continuing
employment or service to the Company or achievement of pre-established
performance goals, or both, as determined by the Committee. The specific
categories of and procedures for establishing such goals are set forth in
Section 4.3 of the Plan. The Committee's discretion in establishing
performance goals would not be limited to Section 4.3 when the grantee's
compensation amount is not expected to be subject to the deduction limitations
of Code Section 162(m).
Stock certificates for restricted shares shall be issued in the name of the
holder, but the certificates may be retained in escrow until such time as the
restrictions shall have lapsed. The holder of restricted share shall have all
rights of a shareholder with respect to the Common Stock registered in his or
her name, including voting and dividend rights, unless otherwise provided in
the restricted share award.
Other Stock-Based Share Awards. The 1999 Plan also authorizes the Committee
to award or offer shares of Common Stock, and units representing the right to
receive shares in the future, either restricted or unrestricted, and as
current or deferred compensation for a number of shares (or share units)
having a value on the grant date equal to the amount of such compensation.
Certain Federal Income Tax Consequences
The following discussion is based on federal income tax laws and regulations
in effect on the date of this Proxy Statement and does not purport to be a
complete description of the federal income tax aspects of the 1999
24
<PAGE>
Plan. No information is provided herein with respect to estate, inheritance or
state or local tax laws, although there may be certain tax consequences upon
the receipt or exercise of an award or the disposition of any of the acquired
shares under those laws. The exact federal income tax treatment of awards will
depend on the specific nature of any such award. An award may, depending on
the conditions applicable to the award, be taxable as an option, an award of
restricted or unrestricted shares, an award which is payable in cash, or
otherwise.
Incentive Stock Options. Neither the grant nor the exercise of an ISO is
taxable to the employee receiving the option. If the employee holds the stock
purchased upon exercise of an incentive stock option for at least one year
after the purchase of the stock and until at least two years after the option
was granted, his or her sale of the shares will produce long-term capital gain
or loss, and the Company will not be entitled to any tax deduction. However,
if the employee sells or otherwise transfers the stock before these holding
periods have elapsed, he or she will generally be taxed at ordinary income
rates on the sale in the amount of the excess of the fair market value of the
stock when the option was exercised over the option exercise price, and the
Company will be entitled to a tax deduction in the same amount. Any remaining
gain or loss will be short-term or long-term capital gain or loss as the case
may be. The Company's current practice is to award ISOs up to the limit
permitted by the Code for an ISO, but grants to consultants must be NQSOs.
Non-Qualified Options. Although the grant of NQSOs under the Plan also is
not generally taxable to the optionee, upon exercise the optionee will be
taxed at ordinary income rates on the excess of the fair market value of the
stock received over the option exercise price, and the Company will be
entitled to a tax deduction in the same amount. The amount included in an
individual's income as a result of the exercise of a non-qualified option will
be treated as his or her basis in the shares acquired, and any remaining gain
or loss on the subsequent sale of the shares will be treated as long-term or
short-term capital gain or loss as the case may be.
Restricted Stock. The grant of restricted stock is not a taxable event. When
restrictions imposed upon the restricted stock expire, the holder will
recognize ordinary income in an amount equal to the excess, if any, of the
fair market value of the restricted stock on the date of such expiration over
the purchase price, if any, for the shares. The holder may, however, elect
within 30 days after the date of acquisition to recognize ordinary income on
the date of purchase in an amount equal to the excess of the fair market value
of the restricted stock on the date of grant, determined without regard to the
restrictions imposed on such shares, over the purchase price, if any, for the
shares. If and when the holder recognizes ordinary income attributable to the
restricted stock, the Company will be entitled to a deduction in the same
amount.
Share Appreciation Rights. The grant of an SAR is generally not a taxable
event for the holder. Upon exercise of the SAR, the holder will recognize
ordinary income in an amount equal to the amount of cash or stock received
upon such exercise, and the Company will be entitled to a deduction in the
same amount.
Other Awards. Awards may be granted under the Plan that do not fall into the
categories described above. The federal income tax treatment of these awards
will depend upon the specific terms of such awards. In general, compensation
in lieu of cash will be treated as ordinary, taxable income to the grantee and
deducted by the Company. The Company will generally be required to withhold
applicable taxes with respect to any ordinary income recognized by a
participant in connection with awards made under the 1999 Plan. The Plan
authorizes employees to elect to have the Company withhold shares from any
award in the amount of the tax withholding, in which event the Company would
then pay the withholding amount in cash. Awards granted as share units will
not be taxable before the shares are issued.
Excess Parachute Payments. Where the terms of the agreements pursuant to
which specific awards made under the Plan provide for accelerated vesting or
payment of an award in connection with a change in ownership or control of the
Company, certain amounts with respect to such awards may constitute "excess
parachute payments" under the golden parachute provisions of the Code.
Pursuant to such provisions, an employee will be subject to a 20% excise tax
on any excess parachute payment and the Company will be denied any deduction
with respect to such excess parachute payment.
25
<PAGE>
Alternative Minimum Tax. The amount by which the fair market value of the
shares received upon exercise of an ISO exceeds the exercise price of the
shares is included in the calculation of "alternative minimum taxable income"
of the optionee. The alternative minimum tax imposed on individual taxpayers
is equal to the amount by which 26% of alternative minimum taxable income (28%
for AMTI in excess of $175,000) exceeds the regular federal income tax rate
for a taxable year. For minimum tax purposes, the basis of stock acquired
through the exercise of an incentive stock option equals the fair market value
taken into account in determining the amount of the alternative minimum
taxable income. A portion of a taxpayer's minimum tax attributable to certain
items (including the spread on the exercise of an incentive stock option) may
be credited against the taxpayer's regular tax liability in later years to the
extent that the regular tax liability exceeds the alternative minimum tax.
Section 162(m) Compensation Deduction Limitation. Stock options, SARs,
performance-based restricted stock and forgivable loans granted under the Plan
are intended to be "performance-based compensation" and therefore not subject
to the deduction limitation of Code Section 162(m).
Accounting
The Company has elected to be governed by Accounting Principles Board
Opinion No. 25, so that there is no compensation expense in connection with
the grant or exercise of stock options granted to employees under the Plan.
Financial Accounting Standards Board Statement 123 requires companies to show
in a footnote to their annual financial statements the pro forma effect that
option grants to employees would have had on earnings if the "value" of the
stock options granted that year were treated as compensation expense,
including reload option grants. See Note 7 of the Notes to Consolidated
Financial Statements in the Company's 1998 Annual Report to shareholders.
Stock options granted to consultants would, however, involve an earnings
charge for the value of the option on the vesting date(s). Restricted and
unrestricted stock grants under the Plan would involve an earnings charge for
the value of the shares, as would SARs as discussed above.
Amendment and Duration of the Plan
The 1999 Plan expires January 24, 2009. The Plan may be terminated or
amended by the Board at any time; however, an amendment increasing the number
of shares subject to the Plan, or extending the term of the Plan, will be
subject to shareholder approval.
Recent Stock Price
On March 17, 1999, the closing price of a share of the Company's Common
Stock on the New York Stock Exchange was $23.25.
Participation in the Plan by Executive Officers
Following approval of the Plan by the shareholders, the Committee expects to
grant options for a total of 252,000 shares at the market price on the grant
date, to the named executive officers as follows:
New Plan Benefits
<TABLE>
<CAPTION>
1999 BRE
Stock Incentive Plan
-------------------------
Number
Name and Position Dollar Value($) of Shares
----------------- --------------- ---------
<S> <C> <C>
Frank C. McDowell, President and Chief Executive
Officer.......................................... (1) 160,000
LeRoy E. Carlson, Executive Vice President and
Chief Financial Officer.......................... (1) 31,000
Bruce C. Ward, Executive Vice President........... (1) 31,000
John H. Nunn, Executive Vice President............ (1) 30,000
Executive Group................................... (1) 252,000
</TABLE>
- --------
(1) The dollar values of the options the Committee expects to grant are not
determinable until such grants are made.
26
<PAGE>
These options will be immediately exercised upon grant by Mr. McDowell for
10,000 shares, by Messrs. Carlson and Ward for 6,000 shares each and by Mr.
Nunn for 5,000 shares (see Stock Loans). Future awards to be made to the named
executive officers under the 1999 Plan, other than those outlined above, are
not presently determinable.
Vote Required for Approval; Recommendation of Board of Directors
The approval of a majority of the shares present and voting at the meeting
is required to approve the 1999 Plan. The Board of Directors has unanimously
approved the Plan and unanimously recommends that shareholders vote FOR the
1999 Plan. If the 1999 Plan is not approved by the shareholders, no awards
will be made under the Plan.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for presentation at the next
Annual Meeting of Shareholders must submit the proposal to BRE Properties,
Inc., 44 Montgomery Street, 36th Floor, San Francisco, CA 94104-4809,
Attention: Secretary. Such proposal must be received not later than November
27, 1999 for inclusion in the Company's proxy statement and form of proxy
relating to next year's Annual Meeting and provided that the proposals are in
compliance with applicable laws and regulations.
Shareholder proposals to be presented at the 2000 Annual Meeting outside the
process of Rule 14a-8 of the Securities and Exchange Commission's Proxy Rules
must be received by the Company on or before February 10, 2000 or such notice
will be considered untimely under Rule 14a-4(c)(1) of the Commission's Proxy
Rules.
OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement will be brought before the Annual Meeting.
By Order of the Board of Directors
March 26, 1999
Upon written request of any shareholder entitled to receive this Proxy
Statement, the Company will provide, without charge, a copy of its annual
report on Form 10-K as filed with the Securities and Exchange Commission. Any
such request should be addressed to the Company at 44 Montgomery Street, 36th
Floor, San Francisco, CA 94104-4809, Attention: Investor Relations Department.
This request must include a representation by the shareholder that as of March
8, 1999, the shareholder was entitled to vote at the Annual Meeting.
27
<PAGE>
1999 BRE STOCK INCENTIVE PLAN
January 25, 1999
ARTICLE I
GENERAL
1.1 Purpose of the Plan. The purpose of the 1999 BRE Stock Incentive Plan
(the "Plan") is to attract and retain employees and consultants who perform
services for the Company or a Subsidiary of the Company and afford them the
opportunity to acquire a stock ownership interest in the Company, thereby
providing them incentive compensation based on the success of the Company.
1.2 Definitions. As used in the Plan and the related Award Agreements, the
following terms will have the meanings stated below:
(a) "Award" means any Option, SAR, Restricted Shares or other stock-based
award granted pursuant to the Plan.
(b) "Award Agreement" means the written agreement, if any, between the
Company and a participant pursuant to which an Award may be granted. The
Committee shall determine the terms of each Award Agreement, subject to the
terms and conditions of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) A "Change of Control" occurs when any person or group together with its
affiliates and associates (other than the Company or any of its subsidiaries
or employee benefit plans), after the effective date of the Plan, acquires
direct or indirect beneficial ownership of 40 percent or more of the then
outstanding Shares or commences a tender or exchange offer which results in
the offeror owning 40 percent or more of the then outstanding Shares. The
terms "group," "affiliates," "associates" and "beneficial ownership" shall
have the meanings ascribed to them in the rules and regulations promulgated
under the Exchange Act.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "Company" means BRE Properties, Inc., a Maryland corporation.
(g) "Committee" means the Compensation Committee appointed by the Board to
administer the Plan. The Committee shall consist solely of two or more members
of the Board who are not employees. The Board shall have the power from time
to time to add or remove members of the Committee and to fill vacancies
arising for any reason.
(h) "Eligible Participants" means salaried employees, including officers and
directors who are employees, of the Company or any Subsidiary, and persons
that serve the Company or a Subsidiary as a consultant. An Award may be
granted to a prospective employee prior to the date the employee performs
services for the Company or a Subsidiary, provided that any such Award shall
not become vested prior to the date the employee first performs such services.
(i) "Exchange Act" means the Securities Exchange Act of 1934.
(j) The "Fair Market Value" of a Share on any date means the closing price
per Share on the New York Stock Exchange for that day (or, if no Shares were
publicly traded on that Exchange on that date, the next preceding day that
Shares were so traded on that Exchange).
(k) "Incentive Stock Option" or "ISO" means an Option that meets the
requirements of Section 422(b) of the Code.
A-1
<PAGE>
(l) "Non-qualified Stock Option" or "NQSO" means an Option that is not
intended to qualify as an ISO.
(m) "Option" means an option to purchase Shares and shall be either an ISO
or a NQSO.
(n) "Optionee" means the holder of an Option.
(o) "Option Price" means the price to be paid for Shares upon exercise of an
Option as determined in accordance with Section 2.2.
(p) "Restricted Shareholder" shall have the meaning set forth in Section
4.1.
(q) "Restricted Shares" means Shares issued pursuant to Article IV.
(r) "Share Appreciation Right" or "SAR" means a right granted pursuant to
Article III.
(s) "Shares" means shares of common stock, $.01 par value, of the Company.
(t) "Share Units" means a right to receive shares in the future.
(u) "Subsidiary" means any corporation or other entity in which the Company
owns, directly or indirectly, 50 percent or more of the total combined voting
power, or which is otherwise controlled by the Company.
1.3 Administration of Plan.
(a) The Plan shall be administered by the Committee; provided, however, that
(i) the Board shall at all times be entitled to act in the Committee's stead,
and (ii) to the extent permitted by applicable law, the Committee may delegate
any of its responsibilities and powers to any of its members or other persons
selected by the Committee. Subject to the provisions of the Plan, the
Committee shall have the sole authority to determine:
(i) The Eligible Participants to whom Awards shall be granted. Awards may
be made to the same person on more than on occasion;
(ii) The number of Shares to be covered by an Award;
(iii) Which Options granted shall be ISOs and which shall be NQSOs;
(iv) The period and conditions, if any, under which each Award shall vest
or be exercisable (including acceleration of an Award); and
(v) The terms and conditions of each Award Agreement.
(b) The Committee's decision construing, interpreting and administering the
Plan shall be conclusive and binding on all parties. No member of the
Committee or the Board shall be liable for any action taken or determination
made in good faith with respect to the Plan or to any Award granted pursuant
to the Plan.
1.4 Types of Grants and Awards Under Plan. Awards under the Plan may be in
the form of Options, SARs, Restricted Shares or other stock-based Awards. The
date of grant of an Award hereunder shall be deemed to be the date of action
by the Committee, notwithstanding that issuance may be conditioned on the
execution of an Award Agreement.
1.5 Transferability. Except as permitted by the Committee, Awards under the
Plan shall not be transferable by the holder other than by will or the laws of
descent and distribution and shall be exercisable during the holder's lifetime
only by the holder or the holder's guardian or legal representative.
A-2
<PAGE>
1.6 Shares Subject to Plan. The maximum number of Shares which may be issued
under this Plan (subject to adjustment in accordance with Section 6.4) shall
be 2,000,000 Shares, including the 750,000 Shares authorized in the Company's
1998 Broad-Based Employee Stock Plan (which plan shall terminate and be
incorporated herein upon shareholder approval of this 1999 Plan); plus any
Shares that are subject to Awards granted under any other prior stock plan of
the Company to the extent that, following termination of that prior plan, the
Award is forfeited, expires or is canceled without delivery of Shares. In the
event that any outstanding Award under this Plan shall expire or terminate for
any reason, the Shares allocable to the unused or forfeited portion of that
Award may again be available for additional Awards under the Plan. In the
event that the Option Price is paid by delivery of already-owned Shares upon
exercise of an Option, only the net Shares issued shall be deemed utilized for
purposes of this Section 1.6; provided, however, that the maximum number of
Shares for which ISOs may be granted under the Plan shall be 2,000,000 Shares.
1.7 Maximum Awards to a Participant. The maximum number of Shares that may
be covered by Awards granted under the Plan to any one person shall be
1,000,000 Shares.
1.8 Effective Date and Term of Plan.
(a) The Plan shall be effective on January 25, 1999, subject to approval,
within 12 months after that date, by a majority of those outstanding Shares of
voting stock of the Company voting in person or by proxy at a duly held
shareholder meeting. To the extent any Awards are granted prior to shareholder
approval of the Plan, the Awards shall be contingent on shareholder approval
of the Plan.
(b) The Board may terminate the Plan at any time. If not sooner terminated
by the Board, the Plan will expire on January 24, 2009. Expiration or
termination of the Plan will not affect the validity of any Awards then
outstanding.
ARTICLE II
STOCK OPTIONS
2.1 Option Agreements. The grant of an Option may be evidenced by a written
Option Agreement. Each Option Agreement shall state the number of Shares
subject to the Option, the Option Price, the Option period, the method of
exercise, the manner of payment, the restrictions on transfer, and such other
terms and conditions as the Committee shall determine consistent with the
Plan.
2.2 Option Price. The price to be paid for Shares upon the exercise of an
Option shall be fixed by the Committee at the time the Option is granted, but
shall in no event be less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.
2.3 Duration of Option. No Option shall be exercisable after the expiration
of ten years from the date of grant.
2.4 Date of Exercise. Any Option may be exercised at any time following the
date of grant, in whole or in part, unless the Committee shall otherwise
provide for vesting or other restrictions under which an Option may be
exercised by the Optionee, in whole or in part. In the discretion of the
Committee, an Option may become immediately and fully exercisable upon the
occurrence of certain times or events, including, without limitation, (i) in
the event of death or permanent disability of the Optionee or (ii) upon a
Change of Control.
2.5 Method of Exercise. The Committee shall establish procedures governing
the exercise of an Option consistent with the purposes of the Plan. Such
procedures may include, without limitation, delivery to the Company of written
notice of exercise accompanied by payment in full of the Option Price for the
Shares to which the exercise relates and payment of any amount necessary to
satisfy any withholding tax liability that may result from exercise of the
Option.
A-3
<PAGE>
2.6 Payment of Option Price. Upon exercise of an Option, the Option Price
for the Shares to which the exercise relates shall be paid in full in cash or,
as permitted by the Committee, (i) by tendering to the Company, by either
actual delivery or by attestation of ownership, already-owned Shares having a
Fair Market Value equal to the Option Price on the date of exercise, (ii) by
cashless exercise methods which are permitted by law, including, without
limitation, methods whereby a broker sells the Shares to which the exercise
relates or holds them as collateral for a margin loan, delivers the Option
Price to the Company, and delivers the remaining proceeds to the Optionee (and
in connection therewith the Company may establish a cashless exercise program,
including a program where, in the discretion of Committee, the commissions on
the sale of Shares to which the exercise relates are paid by the Company), or
(iii) by any combination of cash and already-owned Shares or such cashless
exercise methods having a combined value equal to the Option Price. In the
discretion of the Committee, already-owned Shares must have been owned by the
Optionee at the time of exercise for at least the period of time specified by
the Committee (which generally shall be not less than six months). Whenever
payment of the Option Price would require delivery of a fractional Share, the
Optionee shall deliver the next lower whole number of Shares and a cash
payment shall be made by the Optionee for the balance of the Option Price.
2.7 Option Exercise Loans. An Option Agreement may provide for the extension
of a loan from the Company to the Optionee to finance exercise of the Option.
Any such loan shall have a term that does not exceed ten years, shall be
secured by a pledge of the Shares acquired pursuant to exercise of the Option,
shall be with full recourse against the Optionee, shall bear interest at rates
determined by the Committee, and shall contain such other terms and conditions
as the Committee shall determine consistent with the Plan. The Committee may
in its discretion provide for forgiveness of all or part of the loans,
conditioned on achievement of one or more of the performance goals determined
in accordance with Section 4.3, consistent with the requirements for
"performance-based compensation" under Code Section 162(m).
2.8 Termination of Employment. Options shall normally terminate immediately
upon termination of an Optionee's employment with the Company for any reason,
or not more than three months following the date of termination if permitted
by the Committee, acting in its discretion. However, (i) if an Optionee dies
or becomes permanently disabled, the Committee may in its discretion allow the
Optionee or the Optionee's estate, personal or legal representative or
beneficiary, to exercise the Option (to the same extent the Optionee could
have exercised it on the date of death or permanent disability) for a period
of up to 12 months from the date of death or disability and (ii) if an
Optionee retires at or after retirement age the Committee may in its
discretion allow the Optionee to exercise the Option (to the same extent the
Optionee could have exercised it on the date of retirement) for a period of up
to three years from the date of retirement, but, in either (i) or (ii), not
beyond the original Option term.
ARTICLE III
SHARE APPRECIATION RIGHTS
3.1 Grant of SARs. Share appreciation rights may be granted in connection
with all or any part of any Option granted under the Plan. The number of SARs
granted to an Optionee shall not exceed the number of Shares which the
Optionee may purchase upon exercise of the related Option. SARs granted under
the Plan shall be included in the related Award Agreement between the Company
and the Optionee.
3.2 Exercise of SARs. A holder of SARs may exercise such rights, in whole or
in part, in lieu of exercise of the related Option, only to the same extent
and subject to the same conditions as the related Option is then exercisable
and unexercised. At the time of exercise, the Optionee shall surrender the
Option with respect to the number of Shares equal to the number of SARs
exercised, and the number of Shares available for the grant of future Options
and SARs under the Plan shall be reduced by the number of Shares with respect
to which an Option is so surrendered. The Committee, in its discretion, may
prescribe terms, conditions and limitations on the exercise of SARs.
3.3 Payment of SARs. Upon exercise of SARs, in consideration of the
surrender of the related Option, the holder thereof shall be entitled to
receive, with respect to each such right, an amount equal to the excess of
A-4
<PAGE>
the Fair Market Value of one Share at the time of exercise over the Option
Price per Share for the Shares subject to the related Option and SAR being
exercised. This amount shall be payable as the Optionee shall elect, in cash,
Shares or any combination of cash and Shares; provided, however, that the
Committee shall have sole discretion to consent to or disapprove any election
to receive cash in full or partial payment of such amount. If the Optionee is
to receive all or any portion of such amount in Shares, the number of Shares
shall be determined by dividing such amount or portion thereof by the Fair
Market Value per Share at the time of exercise. If the number of Shares so
determined is not a whole number, such number shall be reduced to the next
lower whole number.
ARTICLE IV
RESTRICTED SHARES
4.1 Award of Restricted Shares. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, award Shares to be held under the restrictions
set forth in this Article IV to any Eligible Participant. Upon making such an
award, the Company shall cause Restricted Shares to be issued and registered
in the name of the person to whom Restricted Shares are awarded (the
"Restricted Shareholder").
4.2 Restrictions. Restricted Shares shall be subject to forfeiture upon such
terms and conditions, e.g., continued employment or service and performance
goals, and to such restrictions against sale, transfer or other disposition as
may be determined by the Committee at the time Restricted Shares are awarded.
The Committee may, in its discretion, remove, modify or accelerate the release
of restrictions on any Restricted Shares, including upon a Change of Control.
4.3 Performance Goals.
(a) The Committee may designate whether any Restricted Share Award is
intended to be "performance-based compensation" under Code Section 162(m). Any
such Awards designated as intended to be "performance-based compensation"
shall be conditioned on the achievement of one or more performance goals. Each
performance goal that may be used by the Committee for such Awards shall
identify one or more business criteria that is to be monitored during the
relevant period. Such criteria may include, among other things, any of the
following when compared to the Company's prior performance or to peer
companies designated by the Committee: funds from operations per Share ("FFO
per Share"); ratio of Common Stock price to FFO per Share; same property
performance; return on net assets; operating ratios; cash flow; shareholder
return; revenue growth; net income; earnings per Share; debt reduction; return
on investment; or revenue.
(b) The Committee shall determine the target level of performance that must
be achieved with respect to each criterion that is identified in a performance
goal in order for a performance goal to be treated as attained.
4.4 Forfeiture of Restricted Shares. In the event of the forfeiture of any
Restricted Shares, the Company shall have the right to reacquire all or any
portion of such Shares, as determined by the Committee in its sole discretion,
without the payment of consideration in any form to such Restricted
Shareholder, and the Restricted Shareholder shall unconditionally forfeit any
right, title or interest to such Restricted Shares. All forfeited Restricted
Shares shall be transferred and delivered to the Company. The Committee may,
in its sole discretion, waive in writing the Company's right to reacquire some
or all of a holder's Restricted Shares, whereupon such Shares shall become
fully vested in such Restricted Shareholder.
4.5 Escrow. In order to administer the provisions of this Article IV, the
stock certificates evidencing Restricted Shares, although issued in the name
of the Restricted Shareholder, shall be held by the Company in escrow subject
to delivery to the Restricted Shareholder upon vesting. A person's receipt of
an Award of Restricted Shares pursuant to the Plan shall constitute the grant
of an irrevocable power of attorney to the Company to permit the transfer and
delivery to the Company of any or all Restricted Shares which are forfeited to
the Company.
A-5
<PAGE>
4.6 Dividends on Restricted Shares. While the Restricted Shares are held in
escrow, all cash dividends the Company pays on the Restricted Shares shall be
subject to such terms, conditions and restrictions on payment as the Committee
shall determine, and shall be delivered directly to the Restricted
Shareholder, to the escrow account, or otherwise held in the manner specified
by the Committee. Share dividends or other dividends in kind on any Restricted
Shares held in escrow shall be paid into such escrow in the name of the
Restricted Shareholder and shall be subject to the same restrictions on
disposition and forfeiture provisions applicable to the Restricted Shares on
which such dividend was paid.
ARTICLE V
OTHER STOCK-BASED AWARDS
The Committee, in its discretion, may grant Awards under the Plan in the
form of Shares or Share Units, either current or deferred, restricted or
unrestricted, and in tandem or combination with, or as an alternative to, any
other compensation plan of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or messenger or
facsimile transmission, addressed
(a) if to the Company, at
BRE Properties, Inc.
44 Montgomery Street, Suite 3600
San Francisco, CA 94104-4809
Attn: Treasurer
(b) if to the Award holder, at the last address shown on the Company's
personnel records, or
(c) to such address as either party shall later designate by notice to the
other.
6.2 Amendment or Termination. The Board may, at any time and from time to
time, modify, amend, suspend or terminate the Plan in any respect; except that
an amendment increasing the number of Shares subject to the Plan or extending
the term of the Plan shall require approval within 12 months by the
shareholders in the manner specified in Section 1.8(a) of the Plan. The Board
or the Committee may also modify or amend the terms and conditions of any
outstanding Award, subject to the consent of the holder and consistent with
the provisions of the Plan.
6.3 Leave of Absence. The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any grant under the
Plan. Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (a) whether or not any such leave of absence shall be
treated as a termination of employment or service within the meaning of the
Plan and (b) the impact, if any, of any such leave of absence on grants and
awards under the Plan.
6.4 Recapitalization. In the event of any change in capitalization which
affects the Shares, whether by stock dividend, stock distribution, stock
split, subdivision or combination of Shares, reclassification, merger or
consolidation or otherwise, such proportionate adjustments, if any, as the
Committee in its discretion deems appropriate to reflect such change shall be
made with respect to the total number of Shares in respect of which Awards may
be granted under the Plan, the number of Shares covered by each outstanding
Award and the Option Price per Share under each Option; however, any
fractional Shares resulting from any such adjustment shall be eliminated.
A-6
<PAGE>
6.5 Reorganization. If the Company merges or consolidates with another
entity and is not the surviving entity, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets while unexercised
Options remain outstanding under the Plan, then either (a) after the effective
date of the merger, consolidation, liquidation, sale or other disposition, as
the case may be, each holder of any outstanding Option shall be entitled, upon
exercise of an Option, to receive, in lieu of Shares, the number and class or
classes of shares of stock or other securities or property to which the holder
would have been entitled if, immediately prior to the merger, consolidation,
liquidation, sale or other disposition, the holder had been the holder of
record of a number of Shares equal to the number of Shares as to which the
Option may be exercised; or (b) all Options, from and after a date at least 30
days prior to the effective date of the merger, consolidation, liquidation,
sale or other disposition, as the case may be, shall be exercisable in full
and all outstanding Options which are so exercisable prior to the effective
date of such merger consolidation, liquidation, sale or other disposition may
be canceled by the Committee, in its discretion, as of such effective date.
6.6 General Restriction. Each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (a) the
listing, registration or qualification of the related Shares upon any
securities exchange or under any state or federal law, (b) the consent or
approval of any government regulatory body, or (c) an agreement by the
recipient of an Award restricting disposition of Shares, is necessary or
desirable as a condition of, or in connection with, the making of an Award or
the issue for purchase of Shares thereunder, then such grant shall not be
effective in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
6.7 Withholding Taxes. The Company, with the approval of the Committee, may,
at the request of an employee, retain Shares which would otherwise be
delivered to the employee upon exercise of an Option or granting or vesting of
Restricted Shares or other Award, to satisfy any withholding tax liability
that may result from such exercise or vesting. The Shares shall be valued for
this purpose at their Fair Market Value on the date of the exercise or
vesting, as the case may be. Whenever, under the Plan, payments by the Company
are made in cash, such payments shall be net of an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements.
6.8 No Right to Employment. Nothing in the Plan nor in any agreement entered
into pursuant to the Plan shall confer upon any Award holder the right to
continue in the employment or service of the Company, nor affect any right
which the Company may have to terminate the employment or service of such
person.
6.9 Rights as Shareholder. No Optionee shall have rights as a shareholder
with respect to Shares acquired under the Plan unless and until the
certificates for such Shares are delivered to him or her.
6.10 Exchange Act Section 16. With respect to persons subject to Section 16
of the Exchange Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successor under the Exchange
Act. To the extent any provision of the Plan or action by the Plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
A-7
<PAGE>
[LOGO]
PRINTED ON RECYCLED PAPER
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH ITEM LISTED BELOW. Please mark [X]
your votes
as indicated
in this
1. ELECTION OF DIRECTORS sample
FOR all WITHHOLD AUTHORITY *EXCEPTIONS Nominees: 01 L. Michael Foley; 02 John McMahan;
nominees listed to vote for all nominees and 03 Gregory M. Simon
to the right listed to the right
[_] [_] [_] (INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "Exceptions" box and write that nominee's name
2. APPROVAL OF THE 1998 BRE STOCK INCENTIVE PLAN in the space provided below.)
FOR AGAINST ABSTAIN *Exceptions _______________________________________________________
[_] [_] [_]
Please sign exactly as name appears on this proxy. When signing as
attorney, executor, administrator, trustee, custodian, guardian or
corporate officer, give full title. If more than one trustee, all
should sign.
______ Dated: ______________________________________________________ 19__
|
| __________________________________________________________________
Signature of Shareholder
__________________________________________________________________
Votes MUST be indicated in Black or Blue ink.
Sign, Date and Return this Proxy Card Promptly Using the Enclosed
Envelope.
____________________________________________________________________________________________________________________________________
FOLD AND DETACH HERE
<CAPTION>
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day - 7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form.
- -----------------------------------------------------------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1.
- -----------------------------------------------------------------------------------------------------------------------------------
When asked, please confirm by Pressing 1.
- -----------------------------------------------------------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Proposal separately, please press 0. You will hear these instructions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proposal 1 - To vote FOR ALL nominees, press 1, to WITHHOLD FOR ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen to the instructions
Proposal 2 - To vote FOR, press 1; AGAINST, press 0.
When asked, please confirm by pressing 1.
The instructions are the same for all remaining proposals.
or
--
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
</TABLE>
<PAGE>
PROXY CARD
BRE PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Frank C. McDowell, John McMahan and
LeRoy E. Carlson, or any of them, as proxies, with full power of substitution,
to vote as directed all shares of common stock of BRE Properties, Inc. that
the undersigned is entitled to vote at the Annual Meeting of Shareholders of
BRE Properties, Inc. The Annual Meeting will be held in the Oak Room of the
Westin St. Francis Hotel, 335 Powell Street, San Francisco, California at
10:00 a.m., Pacific Daylight time, on May 11, 1999. By signing this Proxy, the
undersigned also authorizes each designated proxy to vote at his discretion on
any other matter that may properly come before the Annual Meeting or any
adjournment thereof. If this card contains no specific voting instructions, my
(our) shares will be voted FOR election of all nominees for Director and FOR
Item 2.
(Continued, and to be signed and dated on the reverse side).
________________________________________________________________________________
FOLD AND DETACH HERE
