<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ARDEN REALTY, 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ARDEN REALTY, INC.
11601 Wilshire Boulevard
Fourth Floor
[ARDEN LOGO] Los Angeles, CA 90025
April 24, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Arden Realty, Inc. to be held on May 22, 2000 at 10:00 a.m., local time, at
the Fairmont Miramar Hotel at 101 Wilshire Boulevard, Santa Monica, California
90401.
Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
Stockholders and Proxy Statement that follows. Also included is a Proxy Card and
postage paid return envelope.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend, we hope that you will complete and return your Proxy
Card in the enclosed envelope as promptly as possible.
Sincerely,
/s/ RICHARD S. ZIMAN
Richard S. Ziman
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
ARDEN REALTY, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2000
------------------------
To the stockholders of Arden Realty, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders, or the
Annual Meeting, of Arden Realty, Inc., a Maryland corporation, will be held at
the Fairmont Miramar Hotel located at 101 Wilshire Boulevard, Santa Monica,
California 90401 on May 22, 2000, at 10:00 a.m., local time, for the following
purposes:
1. To elect three directors to serve until the annual meeting of
stockholders in the year 2003 and until their successors are duly
elected and qualified;
2. To consider and act upon an amendment to the 1996 Stock Option and
Incentive Plan of Arden Realty, Inc. and Arden Realty Limited
Partnership to increase the number of shares of Common Stock reserved
for issuance thereunder, referred to as the Incentive Plan Amendment;
3. To consider and act upon one stockholder proposal, if presented to the
meeting; and
4. To transact such other business as may properly come before the meeting
or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for determining the stockholders entitled to receive notice of
and to vote at the Annual Meeting or any adjournment or postponement thereof. A
list of stockholders will be available for inspection at the offices of Arden
Realty, Inc. at 11601 Wilshire Boulevard, Fourth Floor, Los Angeles, California
90025, at least 10 days prior to the Annual Meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors,
/S/ David A. Swartz
David A. Swartz
General Counsel and Secretary
April 24, 2000
Los Angeles, California
<PAGE> 4
ARDEN REALTY, INC.
11601 WILSHIRE BOULEVARD
FOURTH FLOOR
LOS ANGELES, CA 90025
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 2000
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Arden Realty, Inc., a Maryland corporation, of proxies
from the holders of our issued and outstanding common shares of stock, $.01 par
value per share, the Common Shares, to be exercised at the Annual Meeting of
Stockholders, or the Annual Meeting, to be held on May 22, 2000 at the Fairmont
Miramar Hotel located at 101 Wilshire Boulevard, Santa Monica, California 90401
at 10:00 a.m., local time, and at any adjournment(s) or postponement(s) thereof
for the purposes set forth in the accompanying Notice of Annual Meeting. The
terms "Arden Realty", "us", "we" and "our" as used in this statement refer to
Arden Realty, Inc.
This Proxy Statement and enclosed form of proxy are first being mailed to
our stockholders on or about April 24, 2000.
At the Annual Meeting, our stockholders will be asked to consider and vote
upon the following proposals, the Proposals:
1. The election of three directors to serve until the annual meeting of
stockholders to be held in the year 2003 and until their successors are
duly elected and qualified;
2. The amendment to the 1996 Stock Option and Incentive Plan of Arden
Realty, Inc. and Arden Realty Limited Partnership to increase the number
of shares of Common Stock reserved for issuance thereunder, the
Incentive Plan Amendment;
3. One shareholder proposal, if presented to the meeting; and
4. Such other business as may properly come before the Annual Meeting.
Only the holders of record of our Common Shares at the close of business on
March 31, 2000, or the Record Date, are entitled to notice of and to vote at the
Annual Meeting. Each such Common Share is entitled to one vote on all matters.
As of the Record Date, 63,316,424 of our Common Shares were outstanding. A
majority of the Common Shares outstanding must be represented at the Annual
Meeting in person or by proxy to constitute a quorum for the transaction of
business at the Annual Meeting. Abstentions and broker non-votes will count
toward the presence of a quorum.
In order to be elected as a director, a nominee must receive a plurality of
all votes cast at the Annual Meeting at which a quorum is present. For purposes
of calculating votes cast in the election of directors, abstentions will not be
counted as votes cast and will have no effect on the result of the vote on the
Proposal regarding the election of director nominees. The affirmative vote of
the holders of a majority of the shares cast at a meeting at which the total
vote cast on the proposal represents more than 50% of all shares entitled to
vote is required for approval of the proposed Incentive Plan Amendment. For
purposes of this proposal, abstentions and broker non-votes will have no effect
if more than 50% of the votes entitled to be cast (excluding abstentions and
broker non-votes) are cast. If fewer than 50% of the votes entitled to be cast,
(excluding abstentions and broker non-votes) are cast, however, abstentions and
broker non-votes will have the effect of votes against the Incentive Plan
Amendment proposal. The stockholder proposal must be
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<PAGE> 5
approved by a majority of the votes cast, assuming a quorum is present.
Abstentions and broker non-votes will have no effect on the result of the
stockholder proposal vote.
The Common Shares represented by all properly executed proxies returned to
us will be voted at the Annual Meeting as indicated or, if no instruction is
given, FOR the nominees for director and the Incentive Plan Amendment and
AGAINST approval of the stockholder proposal. As to any other business which may
properly come before the Annual Meeting, all properly executed proxies will be
voted by the persons named therein in accordance with their discretion. We do
not presently know of any other business which may come before the Annual
Meeting. Any person giving a proxy has the right to revoke it at any time before
it is exercised (a) by filing with the Secretary of Arden Realty a duly signed
revocation or a proxy bearing a later date or (b) by electing to vote in person
at the Annual Meeting. Mere attendance at the Annual Meeting will not revoke a
proxy.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, THAT INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ARDEN REALTY SINCE THE DATE HEREOF.
------------------------
The date of this proxy statement is April 24, 2000.
2
<PAGE> 6
EXECUTIVE OFFICERS
The following is a biographical summary of the experience of our executive
and senior officers.
RICHARD S. ZIMAN. Mr. Ziman, 57, is a founder of Arden Realty and has
served as Chairman of the Board and Chief Executive Officer since our formation.
Mr. Ziman has been involved in the real estate industry for over 25 years. In
1990, Mr. Ziman formed Arden Realty Group, Inc., a California corporation and
served as its Chairman of the Board and Chief Executive Officer from its
inception until the formation of Arden Realty in 1996. In 1979 Mr. Ziman
co-founded Pacific Financial Group, a diversified real estate investment and
development firm headquartered in Beverly Hills, California, of which he was the
Managing General Partner. Mr. Ziman received his Bachelor's Degree and his Juris
Doctorate Degree from the University of Southern California and practiced law as
a partner of the law firm of Loeb & Loeb from 1971 to 1980, specializing in
transactional and financing aspects of real estate.
VICTOR J. COLEMAN. Mr. Coleman, 38, is a founder of Arden Realty and has
served as President and Chief Operating Officer and as a Director since our
formation. Mr. Coleman was the President, Chief Operating Officer and cofounder
of Arden Realty Group, Inc. from 1990 to 1996. From 1987 to 1989, Mr. Coleman
was Vice President of Los Angeles Realty Services, Inc. and earlier in his
career from 1985 to 1987 was Director of Marketing/Investment Advisor of
Development Systems International and an associate at Drexel Burnham Lambert
specializing in private placements with institutional and individual investors.
Mr. Coleman received his Bachelor's Degree from the University of California at
Berkeley and received his Master of Business Administration Degree from Golden
Gate University.
DIANA M. LAING. Ms. Laing, 45, has served as our Executive Vice President
and Chief Financial Officer since August 1996. Prior to joining Arden Realty,
Ms. Laing served, from 1985 to 1996, as Executive Vice President and Chief
Financial Officer of South West Property Trust, Inc., a publicly traded
apartment properties real estate investment trust, and its predecessor Southwest
Realty, Ltd. Ms. Laing also served from 1982 to 1985 as Controller, Treasurer
and Vice President -- Finance of Southwest Realty, Ltd. From 1981 to 1982, Ms.
Laing was Controller of Crawford Energy, Inc. and she served as a member of the
audit staff of Arthur Andersen & Company from 1978 to 1981. Ms. Laing is a
Certified Public Accountant and a member of the American Institute of CPAs and
the Texas Society of Certified Public Accountants. Ms. Laing received her
Bachelor of Science Degree in Accounting from Oklahoma State University.
JEFFREY A. BERGER. Mr. Berger, 38, served as our Senior Vice
President -- Acquisitions from October 1997 to December 1999 and has served as
our Senior Vice President -- Project Development and Technology since January
2000. Prior to joining Arden Realty, Mr. Berger served as Vice President and
Director of Berger Realty Group, a privately held real estate company in
Chicago, Illinois. Berger Realty Group managed and leased approximately 1,000
apartment units, and over two million rentable square feet of office, retail,
and R&D industrial properties. Mr. Berger was responsible for all acquisitions
and finance and for managing a staff of approximately 75 people. Prior to
joining Berger Realty Group, Mr. Berger served as Assistant Vice President of
Real Estate Acquisitions for Heitman Financial. Mr. Berger received his Bachelor
of Science Degree in Communication Studies from Northwestern University.
DANIEL S. BOTHE. Mr. Bothe, 34, served as our Vice President -- Finance
from December 1996 to December 1997 and has served as our Senior Vice
President -- Finance since January 1999. From 1993 to 1996, Mr. Bothe was a
management consultant with the E&Y Kenneth Leventhal Real Estate Group of Ernst
& Young LLP. From 1988 to 1991, Mr. Bothe served as a member of the audit staff
of KPMG Peat Marwick LLP specializing in real estate. Mr. Bothe is a Certified
Public Accountant in the State of California and a member of the America
Institute of CPAs. Mr. Bothe received his Bachelor of Science Degree in
Accounting from San Diego State University and his Master of Business
Administration Degree from the University of Southern California.
RICHARD S. DAVIS. Mr. Davis, 41, served as our Chief Accounting Officer
since January 1999 and has served as our Senior Vice President -- Chief
Accounting Officer since December 1999. From 1996 to 1997, Mr. Davis was with
Catellus Development Corporation where he was responsible for accounting and
finance for the asset management and development divisions. From 1985 to 1996,
Mr. Davis served as a member of
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<PAGE> 7
the audit staff of both KPMG Peat Marwick LLP and Price Waterhouse LLP,
specializing in real estate. Mr. Davis is a Certified Public Accountant in the
states of California and Missouri and a member of the American Institute of
CPAs. Mr. Davis received his Bachelor of Science Degree in Accounting from the
University of Missouri at Kansas City.
RANDY J. NOBLITT. Mr. Noblitt, 43, has served as our Senior Vice
President -- Property Operations since November 1997. From 1995 to 1997, Mr.
Noblitt operated a management consulting practice serving the real estate
industry. From 1993 to 1995, Mr. Noblitt served as Senior Vice President of
Tishman West in charge of the Southern California operation. In 1992 and 1993,
Mr. Noblitt served as Senior Portfolio Manager and Director of Management
Services for Cushman & Wakefield in Southern California. Mr. Noblitt's career
includes extensive experience in asset management, leasing and development of
all commercial property types. Mr. Noblitt received his Bachelor of Science
Degree in Business Administration from California State University, Northridge.
ROBERT C. PEDDICORD. Mr. Peddicord, 38, served as our Vice
President -- Leasing from December 1996 to September 1997 and has served as our
Senior Vice President -- Leasing since October 1997. From 1987 to 1996, Mr.
Peddicord was a Managing Director in the West Los Angeles office of Julien J.
Studley, representing landlords and tenants in the leasing of office space. From
1984 to 1986, Mr. Peddicord served as a branch Vice President for Great Western
Financial Corporation. Mr. Peddicord received his Bachelor's Degree in Economics
from the University of California at Los Angeles.
HERBERT L. PORTER. Mr. Porter, 62, has served as our Senior Vice
President -- Construction and Development since our formation. Mr. Porter served
as Director of Construction and Capital Improvements for Arden Realty Group,
Inc. from 1993 to 1996. From 1973 to 1992, Mr. Porter was a partner/owner in his
own real estate development and property management company specializing in
medium to high-rise commercial office buildings. Mr. Porter's over 25 years in
commercial office development include planning, financing, acquiring, obtaining
entitlements and approvals, designing, construction, marketing, leasing, tenant
improvement build-out and outright sale of commercial properties. Mr. Porter
received his Bachelor's Degree from the University of Southern California.
DAVID A. SWARTZ. Mr. Swartz, 34, served as our Associate General Counsel
from May 1998 and has served as our General Counsel and Secretary since August
1999. From September 1991 until his employment with Arden Realty, Mr. Swartz was
a real estate attorney with the law firm of Allen, Matkins, Leck, Gamble &
Mallory, LLP, where he managed and negotiated commercial real estate
transactions and handled litigation for major institutional clients. Mr. Swartz
has also served as legal advisor to property owners, building and asset
managers, real estate brokers and tenants. A graduate of The Wharton School of
the University of Pennsylvania with a Bachelor of Science in Economics, Mr.
Swartz received his Juris Doctorate from UCLA School of Law in 1991.
BRIGITTA B. TROY. Ms. Troy, 59, has served as our Senior Vice
President -- Acquisitions since our formation. Ms. Troy served as Director of
Acquisitions for Arden Realty Group, Inc. from 1993 to 1996 and Pacific
Financial Group from 1982 to 1989. During the period from 1989 to 1993, she was
principal of Esquire Investment Partners, a real estate advisory firm. A
graduate of Radcliffe College, Ms. Troy received her Juris Doctorate Degree from
the University of Southern California Law School and a Master of Business
Administration from the UCLA Graduate School of Management. Ms. Troy is also a
member of the State Bar of California.
4
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
we paid for services rendered during the fiscal years ended December 31, 1999
and 1998 and 1997 to our Chief Executive Officer and to our four other most
highly compensated executive officers, or the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------- ----------------------------------------------------
OTHER ANNUAL OPTIONS RESTRICTED LTIP ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION(1) GRANTED (#) STOCK PAYOUTS COMPENSATION(2)
-------------- ---- -------- -------- --------------- ----------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard S. Ziman............ 1999 $390,000 $225,000 $47,100 125,000 -- -- $5,000
Chairman of the Board and 1998 $330,000 $247,500 $ 9,600 422,000 -- -- $5,000
Chief Executive Officer 1997 $300,000 $228,000 $ 9,600 211,000 -- -- $2,177
Victor J. Coleman........... 1999 $300,000 $165,000 $36,650 80,000 -- -- $5,000
President, Chief Operating 1998 $275,000 $206,250 $ 7,800 280,000 -- -- $5,000
Officer and Director 1997 $250,000 $162,500 $ 7,800 140,000 -- -- $3,667
Diana M. Laing.............. 1999 $225,000 $123,750 $ 6,000 60,000 -- -- $5,000
Executive Vice President 1998 $214,500 $160,875 $ 6,000 200,000 --(3) -- $5,000
and Chief Financial Officer 1997 $195,000 $114,500 $ 6,000 60,000 -- -- $2,177
Andrew J. Sobel(4).......... 1999 $205,000 $123,750 $ 2,600 60,000 --(4) -- $5,000
Executive Vice President 1998 $187,500 $140,625 -- 200,000 --(3) -- $4,977
and Director of Property 1997 $150,000 $ 87,500 -- 45,000 -- -- $2,177
Operations
Robert C. Peddicord......... 1999 $196,000 $ 70,000 -- 50,000 -- -- $5,000
Senior Vice President -- 1998 $112,300 $127,600 -- 70,000 -- -- $4,576
Leasing 1997 $106,250 $ 68,750 -- -- -- -- $2,350
</TABLE>
- ---------------
(1) Represents an annual auto allowance and payments of $37,500 and $28,850 in
1999 to Messrs. Ziman and Coleman, respectively, related to unused vacation
time.
(2) Represents the amount we contributed pursuant to a 401(k) retirement plan.
Under the terms of this plan, we match 50% of the employee's contribution to
the plan, up to a maximum match of 5% of the employee's salary. Employees
may contribute up to 20% of their salary subject to certain limitations
imposed by the Internal Revenue Code.
(3) Restricted stock is awarded pursuant to our Long-Term Incentive Program. All
awards granted under the Long-Term Incentive Program are made in accordance
with the provisions of the 1996 Stock Option and Incentive Plan of Arden
Realty, Inc. and Arden Realty Limited Partnership. In August 1998, we issued
42,553 shares of our Common Stock to this executive. These shares are
encumbered by a promissory note, the Note, in the amount of $1.0 million.
The Note is recourse and secured by the shares of Common Stock issued, bears
interest at 6% per annum with all accrued interest and principal due on
August 14, 2004. Provided that the executive is still employed by Arden
Realty, the outstanding principal amount of the Note will be forgiven as
follows: (i) August 14, 2001, $100,000; (ii) August 14, 2002, $166,667;
(iii) August 14, 2003, $200,000; (iv) August 14, 2004, $200,000.
Additionally, provided that the executive is still employed by Arden Realty,
all accrued and unpaid interest and the outstanding principal amount of the
Note will be forgiven upon a change in control (as defined) of Arden Realty
or upon the death or disability of the executive.
(4) Mr. Sobel resigned effective February 18, 2000 to become the President of a
technology information company. At the time of his resignation, Mr. Sobel
surrendered the common stock underlying his Note to Arden Realty and
executed a new note, the New Note, in the amount of $223,887, representing
the difference between the value of the common stock surrendered and the
unpaid principal and interest on the original Note. The New Note bears
interest at 6.2% per annum, with all accrued interest and principal due on
February 18, 2002. In addition, Arden Realty and Mr. Sobel entered into a
consulting and non-competition agreement for a term of two years. Under this
agreement, Mr. Sobel will receive compensation of $6,000 per month which
will be applied against unpaid interest and principal on the New Note. Mr.
Sobel will also have until the expiration of the consulting and
non-competition period to exercise the 170,000 stock options that were
vested as of his resignation date.
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<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information relating to options granted to
purchase our Common Shares to the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
COMMON SHARES TOTAL OPTIONS SHARE PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED (#) FISCAL YEAR SHARE DATE 5% 10%
---- ------------- ------------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Ziman.......... 125,000 17.61% $19.125 12/3/09 $1,503,000 $3,810,000
Victor J. Coleman......... 80,000 11.27% $19.125 12/3/09 $962,000 $2,438,000
Diana M. Laing............ 60,000 8.45% $19.125 12/3/09 $722,000 $1,829,000
Andrew J. Sobel........... 60,000(3) 8.45% $19.125 12/3/09 $722,000 $1,829,000
Robert C. Peddicord....... 50,000 7.04% $19.250 11/30/09 $605,000 $1,534,000
</TABLE>
- ---------------
(1) The options granted to Messrs. Ziman, Coleman and Ms. Laing become
exercisable in two equal installments beginning on the first anniversary of
the date of grant. The options granted to Mr. Peddicord become exercisable
in three equal installments beginning on the first anniversary of the date
of grant. All options granted in 1999 have a term of ten years subject to
earlier termination in certain events related to termination of employment.
The exercise price for all options granted in 1999 is equal to the fair
market value of our outstanding Common Shares on the date of grant.
(2) Assumed annual rates of stock price appreciation for illustrative purposes
only. Actual stock prices will vary from time to time based upon market
factors and our financial performance. We cannot assure you that these
appreciation rates will be achieved.
(3) The options granted to Mr. Sobel were forfeited on February 18, 2000, the
effective date of his resignation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning exercised and
unexercised options held by the Named Executive Officers at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Ziman........... -- -- 618,334 406,333 $16,700 $117,200
Victor J. Coleman.......... -- -- 483,333 266,667 $15,700 $ 75,000
Diana M. Laing............. -- -- 190,000 180,000 $ 3,000 $ 56,000
Andrew J. Sobel(2)......... -- -- 170,000 175,000 $ 2,500 $ 56,000
Robert C. Peddicord........ -- -- 33,333 96,667 -- $ 40,700
</TABLE>
- ---------------
(1) Based on the December 31, 1999 closing price of $20.06 per share of Arden
Realty's common share, as reported by the New York Stock Exchange.
(2) Mr. Sobel resigned effective February 18, 2000 to become the President of a
technology information company. At the time of his resignation, Mr. Sobel
entered into a consulting and non-competition agreement with us for a term
of two years. Under this agreement, Mr. Sobel will also have until its
expiration to exercise the 170,000 exercisable options previously granted to
him. The 175,000 unexercisable options previously granted to Mr. Sobel were
forfeited.
EMPLOYMENT AGREEMENTS
Arden Realty has entered into employment agreements with Messrs. Ziman,
Coleman and Peddicord and Ms. Laing. Mr. Sobel also had an employment agreement
with Arden Realty that terminated at Mr. Sobel's
6
<PAGE> 10
request on February 18, 2000. The employment agreements of Messrs. Ziman and
Coleman had an original expiration date of October 1999, and are subject to
automatic one-year extensions following the expiration of those terms. Ms.
Laing's employment agreement has a term which expires in January 2002, and is
subject to automatic one-year extensions following the expiration of its
original term. The employment agreements for Messrs. Ziman and Coleman and Ms.
Laing provide for a base compensation and bonus to be determined by Arden
Realty's Compensation Committee.
In May 1999, Arden Realty entered into an employment agreement with Mr.
Peddicord with an initial term expiring in December 2000. Mr. Peddicord's
employment agreement provides for annual base compensation in 1999 of $196,000
and a bonus to be determined by Arden Realty's Compensation Committee.
The annual compensation and bonuses paid to these executives for 1999 are
presented in the Summary Compensation table above.
The employment agreements of Messrs. Ziman, Coleman and Peddicord and Ms.
Laing entitle the executives to participate in the 1996 Stock Option and
Incentive Plan. Each executive has been allocated the number of stock options
presented in the tables above. Each executive will also receive certain other
insurance and pension benefits.
In the event of a termination of any of these executives by Arden Realty
without "cause," a termination by the executive for "good reason," or a
termination pursuant to a "change in control" of Arden Realty, as those terms
are defined in their respective employment agreements, the terminated executive
will be entitled to (1) a single severance payment and (2) continued receipt of
certain health benefits for a specified period of time following the date of
termination. The single severance payments for Messrs. Ziman and Coleman and Ms.
Laing are equal to the sum of three times the respective executive's average
annual base compensation for the preceding 36 months and three times the highest
annual bonus received in the preceding 36 month period. The single severance
payment for Mr. Peddicord is equal to the sum of two times his average annual
base compensation for the preceding 24-month period and an amount equal to two
times his most recent annual bonus. Messrs. Ziman and Coleman and Ms. Laing will
continue to receive the severance benefits described above for three years
commencing on the date of termination and Mr. Peddicord will continue to receive
the severance benefits for up to 18 months commencing on the date of
termination. In the event of a termination without cause, in addition to payment
of the single severance payment, for Messrs. Ziman, Coleman and Peddicord and
Ms. Laing, any unvested stock options will become fully vested as of the date of
termination. In addition, if any of Messrs. Ziman's, Coleman's, Peddicord's or
Ms. Laing's severance payments or benefits are deemed to be parachute payments
under the Internal Revenue Code, Arden Realty has agreed to make additional
payments to the executive to compensate him or her for the additional tax
obligations.
As part of their employment agreements, each of Messrs. Ziman and Coleman
and Ms. Laing are bound by a non-competition covenant which prohibits them from
engaging in (1) the acquisition, renovation, management or leasing of any office
properties in the Los Angeles, Orange and San Diego counties of Southern
California and (2) any active or passive investment in or reasonably relating to
the acquisition, renovation, management or leasing of office properties in the
Los Angeles, Orange and San Diego counties of Southern California for a period
of one year following the date of that executive's termination, unless the
termination was without cause.
STOCK INCENTIVE PLAN
Arden Realty has adopted the 1996 Stock Incentive Plan for the purpose of
attracting and retaining executive officers, directors and employees.
The Stock Incentive Plan is qualified under Rule 16b-3 under the Securities
Exchange Act of 1934. The Stock Incentive Plan is administered by the
Compensation Committee and provides for the granting of stock options, stock
appreciation rights or restricted stock with respect to up to 4.2 million shares
of common stock to executives or other key employees. Stock options may be
granted in the form of "incentive stock options,"
7
<PAGE> 11
as defined in Section 422 of the Code, or non-statutory stock options and,
subject to the time vesting provisions of each grant, are exercisable for up to
10 years following the date of grant. The exercise price of each option will be
set by the Compensation Committee, provided, however, that the price per share
must be equal to or greater than the fair market value of Arden Realty's common
stock on the grant date.
The Stock Incentive Plan also provides for the issuance of stock
appreciation rights which will generally entitle a holder to receive cash or
stock, as determined by the Compensation Committee, at the time of exercise
equal to the difference between the exercise price and the fair market value of
the common stock. In addition, the Stock Incentive Plan permits Arden Realty to
issue shares of restricted stock to executives or other key employees upon terms
and conditions as determined by the Compensation Committee.
401(k) PLAN
The Arden Realty 401(k) Plan and Trust covers our eligible employees and
any designated affiliates.
The 401(k) Plan permits our eligible employees to defer up to 20% of their
annual compensation, subject to certain limitations imposed by the Internal
Revenue Code. The employees' elective deferrals are immediately vested and
non-forfeitable upon contribution to the 401(k) Plan. Employees are generally
eligible to participate in the 401(k) Plan after four months of service. We
currently make matching contributions to the 401(k) Plan equal to 50% of each
participating employee's contribution with a maximum match of 5% of annual
compensation. Employees vest 25% in our matching contributions for each full
year of service, vesting 100% after four full years of service.
The 401(k) Plan qualifies under Section 401 of the Internal Revenue Code so
that contributions by employees or by us to the 401(k) Plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) Plan, and so that our contributions are deductible by us when made.
CERTAIN TRANSACTIONS
Pursuant to the recommendations of our Board of Directors, a Merger
Committee of the Board of Directors comprised of three non-employee directors
and outside legal counsel, on April 28, 1999, we acquired Namiz, Inc., or Namiz,
in a tax-free, stock-for-stock merger in which we issued 775,196 shares of our
common stock to Namiz's stockholders, the Namiz merger. Prior to the
acquisition, Namiz was wholly owned by Messrs. Ziman and Coleman. At the time of
the acquisition, Namiz's sole assets were common limited partner units, or OP
Units, of Arden Realty Limited Partnership, or the Operating Partnership. In the
merger, each share of Namiz common stock then issued and outstanding was
converted into approximately 775.2 shares of our common stock, with the exchange
ratio calculated by dividing 775,196 (the number of common OP Units owned by
Namiz) by 1,000 (the number of shares of Namiz common stock issued and
outstanding immediately prior to the merger). As a result, Namiz's stockholders
converted their proportionate interest in the common OP Units held by Namiz into
an economically equivalent number of shares of our common stock. The shares of
our common stock were issued to Namiz's stockholders in reliance upon an
exemption from registration provided by Section 4(2) under the Securities Act as
a transaction by an issuer not involving a public offering.
BOARD OF DIRECTORS, MEETINGS AND ATTENDANCE
Pursuant to our charter, or the Charter, we have seven directors, who are
divided into three classes, as nearly equal in number as possible. The director
classes currently consist of: three members whose terms will expire at this
Annual Meeting, two members whose terms will expire at the 2001 annual meeting
of stockholders and two members whose terms will expire at the 2002 annual
meeting of stockholders.
Our Board of Directors, or the Board, held nine meetings during our last
full fiscal year. All Directors attended at least 75% of the aggregate of (i)
the total number of meetings of the Board while they were on the Board and (ii)
the total number of meetings of the committees of the Board on which such
directors served.
8
<PAGE> 12
BOARD COMMITTEES
Our Board has an Audit Committee, an Executive Committee, a Compensation
Committee, and an Acquisition Committee. During 1999, the Board of Directors
also established a Merger Committee.
Audit Committee. The Audit Committee consists of Mr. Good, its Chairman,
and Mr. Covitz. On March 17, 2000, the Board of Directors also appointed Mr.
Flax to serve on the Audit Committee. All members of the Audit Committee are
independent of management of Arden Realty and are financially literate. As a
senior partner in an accountancy corporation, Mr. Good also has significant
accounting and related financial management expertise.
The primary responsibility of the Audit Committee is to oversee our
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Arden Realty's management is responsible for
preparing our financial statements, and our independent auditors are responsible
for auditing those financial statements.
The Audit Committee will provide assistance to the Board in fulfilling its
oversight responsibility to the stockholders, potential stockholders, the
investment community, and others relating to our financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the annual independent audit of our financial statements, and the
legal compliance and ethics programs as established by management and the Board.
In so doing, it is the responsibility of our Audit Committee to maintain free
and open communication between the Audit Committee, independent auditors, and
our management. In discharging its oversight role, the Audit Committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities, and personnel of Arden Realty and the power to
retain outside counsel, or other experts for this purpose.
AUDIT COMMITTEE CHARTER
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the Audit Committee may supplement
them as appropriate.
- The Audit Committee shall have a clear understanding with Arden Realty's
management and the independent auditors that the independent auditors are
ultimately accountable to the Board and the Audit Committee, as
representatives of our stockholders. The Audit Committee shall have the
ultimate authority and responsibility to evaluate and, where appropriate,
replace the independent auditors. The Audit Committee shall discuss with
the auditors their independence from Arden Realty and Arden Realty's
management and the matters included in the written disclosures required
by the Independence Standards Board. Annually, the Audit Committee will
review and recommend to the Board the selection of our independent
auditors, subject to stockholders' approval.
- The Audit Committee shall discuss with the independent auditors the
overall scope and plans for their respective audits including the
adequacy of staffing and compensation. Also, the Audit Committee will
discuss with Arden Realty's management and the independent auditors the
adequacy and effectiveness of the accounting and financial controls,
including Arden Realty's system to monitor and manage business risk, and
legal and ethical compliance programs. Further, the Audit Committee will
meet separately with the independent auditors, with and without Arden
Realty's management present, to discuss the results of their
examinations.
- The Audit Committee shall review the interim financial statements with
Arden Realty's management and the independent auditors prior to the
filing of Arden Realty's Quarterly Report on Form 10-Q. Also, the Audit
Committee will discuss the results of the quarterly review and any other
matters required to be communicated to the Audit Committee by the
independent auditors under generally accepted auditing standards. The
Chairman of the Audit Committee may represent the entire Audit Committee
for the purposes of this review.
9
<PAGE> 13
- The Audit Committee shall review with Arden Realty's management and the
independent auditors the financial statements to be included in Arden
Realty's Annual Report on Form 10-K, including their judgment about the
quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the
disclosures in the financial statements. Also, the Audit Committee will
discuss the results of the annual audit and any other matters required to
be communicated to the Audit Committee by the independent auditors under
generally accepted auditing standards.
This charter governs the operations of the Audit Committee and it was
approved by the full Board on April 17, 2000. The Audit Committee will review
and reassess the charter at least annually.
The Audit Committee met four times during 1999.
Executive Committee. The Executive Committee consists of Mr. Ziman, its
Chairman, and Mr. Coleman. Subject to our conflict of interest policies, the
Executive Committee has authority to dispose of real property and the power to
authorize on behalf of the full Board of Directors, the execution of certain
contracts and agreements, including those related to our debt financings (and,
consistent with the Partnership Agreement of the Operating Partnership, to cause
the Operating Partnership to take such actions). The Executive Committee did not
meet during 1999.
Compensation Committee. The Compensation Committee consists of Mr. Roath,
its Chairman, and Messrs. Good and Gold. The function of the Compensation
Committee is to:
- Establish, review, modify, and adopt compensation plans and arrangements
for Arden Realty.
- Review, determine and establish the compensation (including bonuses) of
our officers.
The Compensation Committee met five times during 1999.
Acquisitions Committee. The Acquisitions Committee consists of Mr. Ziman,
its Chairman, and Messrs. Coleman, and Covitz. The Acquisition Committee has the
authority to approve the acquisition of real property with purchase prices up to
$20 million. Any acquisition greater in amount require full Board approval. The
Acquisitions Committee met one time during 1999.
Merger Committee. The Merger Committee consisted of Mr. Good, its Chairman,
and Messrs. Covitz and Roath. The Merger Committee was formed in February 1999
to review and make recommendations regarding the Namiz Merger. The Merger
Committee met four times during 1999.
COMPENSATION OF DIRECTORS
Each director received annual compensation of $18,000 in 1999 and will
receive $25,000 beginning in 2000 for their services. Each Director also
receives $1,000 for each Board meeting attended and an additional $1,000 for
each committee meeting attended, unless the committee meeting is held on the day
of a Board meeting. Each director who is not an employee is also reimbursed for
reasonable expenses incurred to attend director and committee meetings.
Directors who are also our officers are not paid any directors' fees.
In addition, under our stock incentive plan, upon his initial appointment
to the Board, each non-employee director is automatically granted options to
purchase 10,000 Common Shares of our stock at the then current market price.
These initial options vest during the directors' continued service at a rate of
2,500 Common Shares per year.
On October 15, 1997, each non-employee director was granted options to
purchase an additional 10,000 common shares at the closing stock price on such
date ($32.25). On December 15, 1998, each non-employee director was granted
options to purchase an additional 40,000 common shares at the closing stock
price on such date ($22.50). On November 30, 1999, each non-employee director
was granted options to purchase an additional 10,000 Common Shares at the
closing stock price on such date ($19.25). These options vest during the
directors' continued service over a three-year period, with one third of the
options vesting on each
10
<PAGE> 14
anniversary of the grant date. The following table sets forth certain
information concerning exercised and unexercised options held by non-employee
directors as of December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
UNDERLYING OPTIONS GRANTED(#) EXERCISE
------------------------------ PRICE EXPIRATION
NAME EXERCISABLE UNEXERCISABLE PER SHARE DATE
---- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C>
Carl D. Covitz................................. 7,500 2,500 $20.00 10/04/06
6,667 3,333 $32.25 10/15/07
13,333 26,667 $22.50 12/15/08
-- 10,000 $19.25 11/30/09
Larry S. Flax.................................. 5,000 5,000 $27.00 2/13/07
6,667 3,333 $32.25 10/15/07
13,333 26,667 $22.50 12/15/08
-- 10,000 $19.25 11/30/09
Peter S. Gold.................................. 2,500 7,500 $25.94 7/22/08
13,333 26,667 $22.50 12/15/08
-- 10,000 $19.25 11/30/09
Steven C. Good................................. 7,500 2,500 $20.00 10/04/06
6,667 3,333 $32.25 10/15/07
13,333 26,667 $22.50 12/15/08
-- 10,000 $19.25 11/30/09
Kenneth B. Roath............................... 7,500 2,500 $20.00 10/04/06
6,667 3,333 $32.25 10/15/07
13,333 26,667 $22.50 12/15/08
-- 10,000 $19.25 11/30/09
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks and none of our employees
participate on the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of the
three non-employee directors whose names appear at the end of this report, each
has general review authority over compensation levels of all corporate officers
and key management personnel, oversees benefit and compensation programs, and,
from time to time, considers and recommends new programs to the Board.
The Compensation Committee is responsible for reviewing the performance of,
and recommending to the Board, the compensation of Mr. Ziman, our Chairman of
the Board and Chief Executive Officer. The Board has the final authority to set
Mr. Ziman's compensation.
In 1999, Mr. Ziman received an annual base salary of $390,000 pursuant to
his employment agreement, as well as a performance-based cash bonus of $225,000.
In determining the amount of the cash bonus to Mr. Ziman, the Compensation
Committee considered the overall performance of Arden Realty for 1999 as
compared to other real estate investment trusts. In addition, Mr. Ziman received
an option exercisable for 125,000 Common Shares. The Compensation Committee
believes that the option grant to Mr. Ziman in 1999 is consistent with the
long-term performance objectives of Arden Realty, and is also consistent with
the Compensation Committee's philosophy to link a substantial portion of the
chief executive officer's compensation with the long-term value created for our
stockholders. The options vest equally over two years, with the first half
becoming exercisable one year from the date of grant.
The Compensation Committee also reviews the individual performance level
for other senior executives whose compensation is detailed in this Proxy
Statement.
Set forth below is a report of the Compensation Committee addressing our
compensation policies for 1999.
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<PAGE> 15
OVERALL POLICY
The key elements of our senior executive compensation program consist of
base salary, cash bonuses and a long-term incentive opportunity. The program is
intended to enable us to attract, motivate, and retain senior executives, by
providing a fully competitive total compensation package based on both
individual and corporate performance, taking into account both annual and
long-term performance goals, and recognizing individual initiative and
achievement. In the view of the Compensation Committee, the program fully
satisfied those goals in 1999.
The program employs cash incentives based upon performance and stock
options with time vesting provisions. The Compensation Committee endorses the
view that performance-based annual cash compensation and stock-based long-term
incentives aid in aligning management and stockholders' interests and enhance
value to stockholders. Accordingly, these elements play an important role in the
total compensation packages for our executive officers.
ANNUAL COMPENSATION PROGRAM
Annual total cash compensation for senior executives consists of base
salary and performance based cash bonuses.
Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for executives, including a
comparison to base salaries for comparable positions at other real estate
companies.
The amount of bonus awards is determined by evaluating the performance of
the senior executive and our overall performance.
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for senior executives consists of the use
of stock options and restricted stock awards. In 1999, all of our senior
executives participated in the long-term incentive program. The primary purpose
of the program is to offer an incentive for the improvement of our long-term
performance and promote growth in stockholder value.
Options and restricted stock awards may be granted under the stock option
program to our senior executives at the discretion of the Compensation
Committee. The exercise price for all option shares granted to senior executives
is the fair market value on the date of the grant. There were no restricted
stock awards in 1999.
Annual compensation and stock options granted to our senior executive
officers in 1999 are summarized in the Executive Compensation Table of this
Proxy Statement.
Compensation Committee
Kenneth B. Roath, Chairman
Peter S. Gold
Steven C. Good
Date: April 24, 2000
The above report of the Compensation Committee will not be deemed to be
incorporated by reference into any filing by Arden Realty under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate the same by reference.
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<PAGE> 16
PERFORMANCE GRAPH
As a part of the rules of the Securities and Exchange Commission, or the
Commission, concerning executive compensation disclosure, we are obligated to
provide a chart comparing the yearly percentage change in the cumulative total
stockholder return on our Common Shares over a five year period. However, since
our Common Shares have been publicly traded since only October 4, 1996, this
information is provided from that date through December 31, 1999.
The following line graph compares the change in our cumulative stockholder
return on our Common Shares to the cumulative total return of the Standard &
Poor's 500 Stock Index, or the S&P 500 Index, and the NAREIT Equity REIT Total
Return Index, or the NAREIT Index, from October 3, 1996, the effective date of
our initial public offering, to December 31, 1999. The graph assumes the
investment of $100 in Arden Realty Common Stock and each of the indices on
October 3, 1996 and as required by the Commission, the reinvestment of all
distributions. The return shown on the graph is not necessarily indicative of
future performance.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NAREIT ALL EQUITY REIT
ARDEN REALTY, INC. S&P 500 INDEX
------------------ ------- ----------------------
<S> <C> <C> <C>
10/4/96 100.00 100.00 100.00
12/31/96 124.44 106.05 118.24
6/30/97 119.09 127.91 124.98
12/31/97 146.85 141.45 142.19
6/30/98 127.48 166.50 135.04
12/31/98 118.54 181.82 117.31
6/30/99 130.80 204.33 122.91
12/31/99 111.28 220.08 111.89
</TABLE>
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<PAGE> 17
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Shares (or Common Shares for which limited partnership
interests in the Operating Partnership, or OP Units, are exchangeable) as of
March 31, 2000 for (1) each person known by us to be the beneficial owner of
five percent or more of our outstanding Common Shares (or Common Shares for
which OP Units are exchangeable), (2) each director and each Named Executive
Officer and (3) our directors and officers as a group. Except as indicated
below, all such Common Shares are owned directly, and the indicated person has
sole voting and investment power.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OF COMMON SHARES
NAME AND ADDRESS(1) COMMON STOCK(2) OUTSTANDING
------------------- ------------------- -------------
<S> <C> <C>
Cohen & Steers Capital Management, Inc.............. 6,472,100(3) 11.55%
757 Third Avenue
New York, NY 10017
Morgan Stanley Dean Witter.......................... 4,709,500 7.4%
1585 Broadway
New York, NY 10036
Franklin Resources, Inc............................. 3,498,783(4) 5.5%
777 Mariners Island Blvd
San Mateo, CA 94404
Richard S. Ziman.................................... 2,288,957(5) 3.46%
Victor J. Coleman................................... 1,226,257(6) 1.86%
Diana M. Laing...................................... 237,553(7) *
Andrew J. Sobel..................................... 173,750(8) *
Robert C. Peddicord................................. 36,667(9) *
Carl D. Covitz...................................... 27,500(9) *
Larry S. Flax....................................... 25,000(9) *
Peter S. Gold....................................... 19,833(10)
Steven C. Good...................................... 29,100(11) *
Kenneth B. Roath.................................... 28,500(12) *
All directors and officers as a group (17
persons).......................................... 4,326,368(13) 6.6%
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address for each of the persons listed is
11601 Wilshire Boulevard, Fourth Floor, Los Angeles, CA 90025.
(2) The number of common shares beneficially owned is based on the Securities
and Exchange Commission regulations regarding the beneficial ownership of
securities. The number of shares of common stock beneficially owned by a
person assumes that all OP Units held by the person are exchanged for
common shares, that none of the OP Units held by other persons are so
exchanged, that all options and warrants exercisable within 60 days of
March 31, 2000 to acquire common shares held by the person are exercised
and that no options or warrants to acquire common shares held by other
persons are exercised.
(3) Represents the number of common shares beneficially owned pursuant to a
Form 13G/A filed with the Securities and Exchange Commission on February
10, 2000.
(4) Represents the number of common shares beneficially owned pursuant to a
Form 13G filed with the Securities and Exchange Commission on January 19,
2000.
(5) Includes (a) 441,212 OP Units owned by entities which are 100% owned by Mr.
Ziman, (b) 136,674 OP Units owned by a family partnership, in which Mr.
Ziman has shared voting and investment power and of which Mr. Ziman is a
20% general partner and disclaims beneficial ownership of the remaining 80%
in which he has no pecuniary interests, (c) 88,962 OP Units owned of record
by two Trusts, of which Mr. Ziman is the trustee with sole voting and
disposition power, and (d) 618,334 shares related to exercisable stock
options.
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<PAGE> 18
(6) Includes (a) 283,388 OP Units owned by a family trust of which Mr. Coleman
is the trustee with sole voting and disposition power, (b) 99,458 OP Units
owned by an entity which is 100% owned by Mr. Coleman and (c) 483,333
shares related to exercisable stock options.
(7) Includes 42,553 shares encumbered by a $1.0 million note payable to Arden
Realty, and 190,000 shares related to exercisable stock options.
(8) Includes 170,000 shares related to exercisable stock options.
(9) Represents shares related to exercisable stock options.
(10) Includes 4,000 shares which are owned of record by a family trust of which
Mr. Gold is a co-trustee with shared investment and voting power and 15,833
shares related to exercisable stock options.
(11) Includes 1,200 shares held in trust by the Good Swartz & Berns Pension
Plan, 400 shares in Mr. Good's 401(k) Plan with Good, Swartz & Berns and
27,500 shares related to exercisable stock options.
(12) Includes 27,500 shares related to exercisable stock options.
(13) Includes 1,851,668 shares related to exercisable stock options.
COMPLIANCE WITH FEDERAL SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), requires the directors and executive officers, and persons who own more
than 10% of a registered class of the equity securities, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and The New York Stock Exchange. Such persons
are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on our review of copies of such forms received by
us with respect to fiscal 1999, or written representations from certain
reporting persons, we believe that during fiscal 1999 all of our directors and
executive officers and persons who own more than 10% of the Common Stock
complied with the reporting requirements of Section 16(a), except for late
filings relating to exempt transactions occurring in prior years, as follows:
Richard S. Ziman a Form 4 for two exempt transactions in 1996 and two exempt
transactions in 1997, Victor J. Coleman a Form 4 for five exempt transactions in
1996, eleven exempt transactions in 1997 and three exempt transactions in 1998,
Andrew J. Sobel a Form 4 for one exempt transaction in 1997, Diana M. Laing a
Form 4 for one exempt transaction in 1997, Richard S. Davis a Form 3 for one
exempt transaction in 1998, Jeffrey A. Berger a Form 3 for one exempt
transaction in 1997, Randy J. Noblitt a Form 3 for one exempt transaction in
1998, Herbert L. Porter a Form 4 for one exempt transaction in 1997, Carl D.
Covitz a Form 4 for one exempt transaction in 1997, Larry S. Flax a Form 4 for
one exempt transaction in 1997, Steven C. Good a Form 4 for one exempt
transaction in 1997 and Kenneth B. Roath a Form 4 for one exempt transaction in
1997.
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to our Charter, we have seven directors, who are divided into
three classes, as nearly equal in number as possible. The directors currently
are divided into three classes, consisting of three members whose terms will
expire at this Annual Meeting, two members whose terms will expire at the 2001
annual meeting of stockholders and two members whose terms will expire at the
2002 annual meeting of stockholders.
Pursuant to the Charter, at each annual meeting the successors to the class
of directors whose terms expire at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the third year
following the year of their election. Accordingly, at the Annual Meeting, the
nominees for election will be elected to hold office for a term of three years
until the annual meeting of stockholders to be held in the year 2003, and until
their respective successors are duly elected and qualified.
EXCEPT WHERE OTHERWISE INSTRUCTED, PROXIES SOLICITED BY THIS PROXY
STATEMENT WILL BE VOTED FOR THE ELECTION OF THE BOARD'S NOMINEES LISTED BELOW.
Each nominee has consented to be named in this Proxy Statement and to serve as a
director if elected.
The information below relating to the nominees for election as director and
for each of the other directors whose terms of office continue after the Annual
Meeting has been furnished to us by the respective individuals.
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<PAGE> 19
NOMINEES FOR DIRECTOR
CARL D. COVITZ. Mr. Covitz, 61, has served as a member of our Board of
Directors since our formation as a public company in October 1996. For the past
20 years, Mr. Covitz has served as the owner and President of Landmark Capital,
Inc., a national real estate development and investment company involved in the
construction, financing, ownership and management of commercial, residential and
warehouse properties. Mr. Covitz has also previously served, from 1990 to 1993,
as Secretary of the Business, Transportation & Housing Agency of the State of
California as well as Under Secretary and Chief Operating Officer of the U.S.
Department of Housing and Urban Development from 1987 to 1989. Mr. Covitz is
currently on the Board of Directors of Century Housing Corporation and is the
past Chairman of the Board of several organizations including the Federal Home
Loan Bank of San Francisco and the Los Angeles City Housing Authority. Mr.
Covitz received his Bachelor's Degree from the Wharton School at the University
of Pennsylvania and his Master of Business Administration from the Columbia
University Graduate School of Business. If elected, Mr. Covitz' term as Director
will expire at the year 2003 annual meeting of stockholders.
LARRY S. FLAX. Mr. Flax, 57, has served as a member of our Board of
Directors since December 1996. Mr. Flax is Co-Founder and Co-Chairman of the
Board of California Pizza Kitchen. Prior to becoming a restaurateur in 1985, Mr.
Flax served in Los Angeles as Assistant U.S. Attorney from 1968 to 1972, Chief
of Civil Rights from 1970 to 1971 and Assistant Chief of the Criminal Division
for the United States Department of Justice from 1971 to 1972. Mr. Flax attended
the University of Washington as an undergraduate and received his Juris Doctor
from the University of Southern California Law School in 1967. If elected, Mr.
Flax's term as a Director will expire at the year 2003 annual meeting of
stockholders.
KENNETH B. ROATH. Mr. Roath, 64, has served as a member of our Board of
Directors since our formation as a public company in October 1996. Mr. Roath is
currently Chairman, President and Chief Executive Officer of Health Care
Property Investors, Inc., a leader in the health care REIT industry. Mr. Roath
is past Chairman of the National Association of Real Estate Investment Trusts,
or NAREIT, and also serves as a special member of the Board of Governors and is
a past member of the Executive Committee of NAREIT. He is a director of
Franchise Finance Corporation of America. Mr. Roath received his Bachelor's
Degree in accounting from San Diego State University. If elected, Mr. Roath's
term as a Director will expire at the year 2003 annual meeting of stockholders.
VOTE REQUIRED AND BOARD RECOMMENDATION
The directors will be elected by a favorable vote of a plurality of all
votes cast at a meeting at which a quorum is present. For purposes of the
election of the directors, abstentions will count toward calculation of a quorum
but will not be counted as votes cast and will have no effect on the results of
the vote. Unless instructed to the contrary, the shares represented by the
proxies will be voted FOR the election of the nominees named above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
CARL D. COVITZ, LARRY S. FLAX AND KENNETH B. ROATH TO SERVE UNTIL THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD IN THE YEAR 2003 AND UNTIL THEIR SUCCESSORS
ARE DULY ELECTED AND QUALIFIED.
OTHER DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
Information concerning the other directors whose terms do not expire at the
Annual Meeting is set forth below.
RICHARD S. ZIMAN. Chairman of the Board and Chief Executive Officer of
Arden Realty, Inc. Biographical information regarding Mr. Ziman is set forth
under "Executive Officers" in this Proxy Statement. Mr. Ziman's term as a
Director is scheduled to expire at the year 2002 annual meeting of stockholders.
VICTOR J. COLEMAN. President, Chief Operating Officer of Arden Realty, Inc.
Biographical information regarding Mr. Coleman is set forth under "Executive
Officers" in this Proxy Statement. Mr. Coleman's term as a Director is scheduled
to expire at the year 2002 annual meeting of stockholders.
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PETER S. GOLD. Mr. Gold, 74, has served as a member of our Board of
Directors since July 1999. During a career that spanned more than 30 years at
Price Pfister, Inc., Mr. Gold served as owner, President, Chairman and Chief
Executive Officer. Price Pfister, Inc., is one of the largest faucet
manufacturers in the world. Mr. Gold executed a leveraged buyout of Price
Pfister, Inc. and eventually took that company public in 1987 before selling it
in 1988. Mr. Gold remained in his position as Chairman and Chief Executive
Officer of Price Pfister, Inc. until his retirement in 1990. Mr. Gold is a
Director Emeritus of Home Depot, Inc., and is currently a chairman and a member
of the board of trustees of two private organizations. Mr. Gold attended the
University of Southern California, received his Juris Doctor Degree from
Southwestern University School of Law and received a Doctor of Humane Letters
from Pitzer College. Mr. Gold's term as Director will expire at the year 2001
annual meeting of stockholders.
STEVEN C. GOOD. Mr. Good, 57, has served as a member of our Board of
Directors since our formation as a public company in October 1996. Mr. Good is
the senior partner in the firm of Good Swartz & Berns, an accountancy
corporation founded in 1993, which evolved from the firm of Block, Good and
Gagerman, which he founded in 1976. Prior to 1976, Mr. Good reached the level of
partner at Laventhol & Horwath, a national accounting firm, and later at
Freedman Morse Horowitz & Good. Mr. Good is a founder and past Chairman of CU
Bancorp, where he was chairman of the bank's operations from 1982 through 1992.
For the past eleven years he has been a member of the Board of Directors of Opto
Sensors, Incorporated. Mr. Good received his Bachelor of Science in Business
Administration from the University of California at Los Angeles and attended
UCLA's Graduate School of Business. Mr. Good's term as Director will expire at
the year 2001 annual meeting of stockholders.
PROPOSAL 2: AMENDMENT TO THE 1996 STOCK OPTION AND INCENTIVE PLAN OF
ARDEN REALTY, INC. AND ARDEN REALTY LIMITED PARTNERSHIP
On January 11, 2000, the Board unanimously authorized an amendment, or the
Amendment, to the 1996 Incentive Plan. Subject to stockholder approval, the
Amendment provides for an increase in the number of Common Shares reserved for
issuance under the Plan from 4,200,000 to 6,500,000.
The summary of the provisions of the Amendment and of the 1996 Incentive
Plan which follows is not intended to be complete, and reference should be made
to the Amendment and the 1996 Incentive Plan for complete statements of the
terms and provisions. The Amendment is attached hereto as exhibit "A," however,
due to its length, the 1996 Incentive Plan is not included with this Proxy
Statement. To obtain a copy of the 1996 Incentive Plan, requests should be
directed to: Secretary, Arden Realty, Inc., 11601 Wilshire Boulevard, Fourth
Floor, Los Angeles, California 90025, telephone number (310) 966-2600.
BACKGROUND AND GENERAL NATURE AND PURPOSE OF THE PLAN
The 1996 Incentive Plan was unanimously adopted by the Board on September
16, 1996 and was approved by its sole stockholder on September 16, 1996.
The principal purposes of the 1996 Incentive Plan are to provide
performance incentives for directors, non employee directors, officers, other
key employees and our consultants through the grant or issuance of options,
restricted stock, performance awards, dividend equivalents, deferred stock,
stock payments and stock appreciation rights, or SARs, thereby stimulating their
personal and active interest in our development and financial success, further
aligning their interests with the interests of the stockholders and inducing
them to remain in our employ.
The shares of stock subject to options, awards of restricted stock,
performance awards, dividend equivalents, awards of deferred stock, stock
payments or SARs will initially be Common Shares. The 1996 Incentive Plan limits
the number of shares subject to options that any individual may receive in any
year under the 1996 Incentive Plan to 425,000.
The 1996 Incentive Plan provides for appropriate adjustments in the number
and kind of shares subject to the 1996 Incentive Plan and to outstanding grants
under the 1996 Incentive Plan in the event of a stock split, stock dividend or
certain other types of recapitalizations.
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If any portion of a stock option, SAR or other award terminates or lapses
unexercised, or is canceled upon the grant of a new option, SAR or other award
(which may be at a higher or lower exercise price than the option, SAR or other
award so canceled), the shares which were subject to the unexercised portion of
the option, SAR or other award may again be optioned, granted or awarded under
the 1996 Incentive Plan.
The 1996 Incentive Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and is not a qualified plan
under Section 401(a) of the Internal Revenue Code of 1986, as amended. Proceeds
received by us from the sale of Common Shares pursuant to the 1996 Incentive
Plan will be used for general corporate purposes.
DESCRIPTION OF AMENDMENT OF THE 1996 INCENTIVE PLAN
The Amendment increases the number of Common Shares reserved for issuance
under the Plan from 4,200,000 to 6,500,000.
The 1996 Incentive Plan constitutes an important part of our compensation
programs. In order to attract and retain the services of experienced and capable
persons who can make significant contributions to the further growth and success
of the Company, the Board and the Compensation Committee believe that it is in
the best interest of the Company and its stockholders to approve the Amendment.
ADMINISTRATION
The 1996 Incentive Plan is administered by the Compensation Committee of
the Board, consisting solely of two or more Directors, none of whom is or may be
an officer or employee of ours. The Compensation Committee is authorized to
select from among the eligible employees and consultants the individuals to whom
options, SARs, restricted stock and other awards are to be granted and to
determine the number of shares to be subject to and the terms and conditions of
the options, SARs, restricted stock or other awards, consistent with the 1996
Incentive Plan. The Compensation Committee is also authorized to adopt, amend
and rescind rules relating to the administration of the 1996 Incentive Plan.
PAYMENT FOR SHARES
The exercise or purchase price for all options, SARs, restricted stock and
other rights to acquire Common Shares, together with any applicable tax required
to be withheld, must be paid in full in cash at the time of exercise or purchase
but may, with the approval of the Committee, be paid in whole or in part in
Common Shares owned by the option holder (or issuable upon exercise of the
option) having a fair market value on the date of exercise equal to the
aggregate exercise price of the shares to be purchased. The Committee may also
authorize other lawful consideration to be applied to the payment of the
exercise or purchase price of an award.
AMENDMENT AND TERMINATION
Amendments of the 1996 Incentive Plan to increase the number of shares as
to which options, SARs, restricted stock and other awards may be granted (except
for adjustments resulting from stock splits and the like) will require the
approval of our stockholders within twelve months before or after the action by
the Board or the Compensation Committee. In all other respects the 1996
Incentive Plan can be amended, modified, suspended or terminated by the Board or
the Compensation Committee alone, unless the action would otherwise require
stockholder approval as a matter of applicable law, regulation or rule.
Amendments of the 1996 Incentive Plan will not, without the consent of the
participant, affect a participant's rights under an option, SAR, restricted
stock or other award previously granted, unless the award itself otherwise
expressly so provides. The 1996 Incentive Plan will terminate after ten years
from the date adopted by the Board or the date approved by the stockholders,
whichever is sooner.
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ELIGIBILITY
Any key employee of (i) Arden Realty, (ii) the Operating Partnership, (iii)
any corporation that is a "Corporate Subsidiary" (as those terms are defined in
the 1996 Incentive Plan) or (iv) any partnership, limited liability company or
corporation that is then a "Partnership Subsidiary" (as that term is defined in
the 1996 Incentive Plan), including the Chairman of the Board and our four most
highly compensated officers other than the Chairman of the Board, is eligible to
receive options, SARs, restricted stock and other awards under the 1996
Incentive Plan. Consultants and other independent contractors maintaining a
significant business relationship with the Company, the Operating Partnership, a
Corporate Subsidiary or a Partnership Subsidiary are eligible to receive
non-qualified stock options, SARs, restricted stock and other awards under the
1996 Incentive Plan. In addition, the 1996 Incentive Plan provides for the
automatic grant of non qualified stock options to our non-employee directors
pursuant to a formula, as described in further detail below.
AWARDS UNDER THE 1996 INCENTIVE PLAN
The 1996 Incentive Plan provides that the Compensation Committee may grant
or issue stock options, SARs, restricted stock, deferred stock, dividend
equivalents, performance awards, stock payments or any combination thereof. Each
grant or issuance will be set forth in a separate agreement with the person
receiving the award and will indicate the type, terms and conditions of the
award.
Incentive stock options, or ISOs, will be designed to comply with the
provisions of the Internal Revenue Code of 1986, as amended, or the Code, and
will be subject to restrictions contained in the Code, including the requirement
that the exercise price be equal to at least 100% of the fair market value of
the Common Shares on the grant date and that the term be limited to 10 years,
but may be subsequently modified so as to be disqualified from treatment as an
incentive stock option. Incentive stock options may not be granted to persons
that are not employees.
Nonqualified stock options, or NQSOs, will provide for the right to
purchase Common Shares at a specified price which may not be less than fair
market value on the date of grant, and usually will become exercisable (in the
discretion of the Committee) in one or more installments after the grant date.
NQSOs expire not later than 10 years after the date the options are granted.
The 1996 Incentive Plan also provides for NQSOs to be granted to our
non-employee directors as follows: (i) Each person who was a non-employee
director as of the date of the initial public offering of Common Shares
automatically was granted an option to purchase 10,000 Common Shares vesting in
four equal annual installments on the date of such initial public offering and
(ii) each person who is initially elected to the Board after the consummation of
the initial public offering of Common Shares and who is a non-employee director
at the time of such initial election automatically shall be granted an NQSO to
purchase 10,000 Common Shares on the date of such initial election to the Board.
Members of the Board who are employees who subsequently retire from Arden Realty
and remain on the Board will not receive an option grant pursuant to the grant
to such initial non-employee directors described above.
Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to restrictions specified by the Compensation
Committee. Restricted stock may be repurchased by us at the original purchase
price upon a participant's termination of employment or consultancy. Purchasers
of restricted stock, unlike recipients of options, may have voting rights and
will receive dividends prior to the time when the restrictions lapse.
Deferred stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based upon a vesting schedule
or performance criteria established by the Compensation Committee. Unlike
restricted stock, deferred stock will not be issued until the deferred stock
award has vested, and recipients of deferred stock generally will have no voting
or dividend rights prior to the time the vesting conditions are satisfied.
SARs may be granted in connection with a stock option, or independently.
SARs granted by the Compensation Committee in connection with a stock option
typically will provide for payments to the holder
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based upon increases in the price of the Common Shares over the exercise price
of the related option. There are no limitations specified in the 1996 Incentive
Plan upon the exercise of SARs or upon the amount of gain realizable from the
exercise of SARs. The Compensation Committee may elect to pay SARs in cash or in
Common Shares or in a combination of cash and Common Shares.
Dividend equivalents are rights to receive the equivalent value of
dividends paid on Common Shares. They represent the value of the dividends per
share paid by the Company, calculated with reference to the number of shares
covered by stock options, SARs, deferred stock or performance awards held by the
participant.
Performance awards include cash bonuses, stock bonuses or other performance
or incentive awards paid in cash, Common Shares or in a combination of cash and
Common Shares. Typically they consist of "phantom" stock awards which provide
for payments based upon increases in the market value, book value, net profits
or other measure of value of our Common Shares or other specific performance
criteria determined appropriate by the Compensation Committee, in each case over
a period or periods determined by the Compensation Committee.
Stock payments include payments in the form of Common Shares, options or
other rights to purchase Common Shares, made as part of a deferred compensation
arrangement and in lieu of all or any portion of compensation that would
otherwise be paid to an employee. Stock payments may be based upon the fair
market value, book value, net profits or other measure of value of the Common
Shares or other specific performance criteria determined appropriate by the
Compensation Committee, determined on the date such stock payment is made or on
any date thereafter.
MISCELLANEOUS PROVISIONS
The terms of options and other rights to acquire Common Shares granted
under the 1996 Incentive Plan may provide for termination of the options or
other rights upon our dissolution or liquidation, the merger or consolidation of
us into or with another corporation, the exchange of all or substantially all of
our assets for the securities of another corporation, the acquisition by another
corporation of all or substantially all of our assets or the acquisition by
another corporation of 80% or more of our then outstanding voting stock; but in
that event the Compensation Committee may also give the option holder or other
grantee the right to exercise the outstanding options or rights in full during
some period prior to the occurrence of any of those events, even though the
options or rights have not yet become fully exercisable.
The 1996 Incentive Plan specifies that we may make loans to key employees
in connection with their exercise of options, purchase of shares or realization
of the benefits of other awards granted under the 1996 Incentive Plan. The terms
and conditions of the loans, if any are made, are to be set by the Compensation
Committee.
In consideration of the granting of a stock option, SAR, dividend
equivalent, performance award, stock payment, or right to receive restricted or
deferred stock, the employee or consultant must agree in the written agreement
embodying the award to remain in the employ of, or to continue as a consultant
for, Arden Realty, the Operating Partnership, a Corporate Subsidiary or a
Partnership Subsidiary for at least one year after the award is granted.
The dates on which options or other awards under the 1996 Incentive Plan
first become exercisable and on which they expire will be set forth in
individual stock options or other agreements setting forth the terms of the
awards. The agreements generally will provide that options and other awards
expire on or soon after the termination of the individual's status as an
employee or consultant, although the Compensation Committee may provide that
options and other awards continue to be exercisable following a termination
without cause, or following a change in control of the Company, or because of
the individual's retirement, death, disability or otherwise. Similarly,
restricted stock granted under the 1996 Incentive Plan that has not vested
generally will be subject to repurchase by the Company in the event of the
participant's termination of employment or consultancy.
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No option, SAR or other right to acquire Common Shares granted under the
1996 Incentive Plan may be assigned or transferred by the grantee, except by
will or the laws of descent and distribution, although the shares underlying
those rights may be transferred if the option has been exercised or all
applicable restrictions have lapsed. During the lifetime of the holder of any
option or right, the option or right may be exercised only by the holder.
The Company will be entitled to require participants to discharge
withholding tax obligations in connection with the issuance, vesting or exercise
of any option or other right granted under the 1996 Incentive Plan. Shares held
by or to be issued to a participant may also be used to discharge tax
withholding obligations related to the issuance, vesting or exercise of options
or other rights or the receipt of other awards, subject to the discretion of the
Compensation Committee to disapprove that use.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE 1996 INCENTIVE PLAN
The tax consequences of the 1996 Incentive Plan under current federal law
are summarized in the following discussion which deals with the general tax
principles applicable to the 1996 Incentive Plan, and is intended for general
information only. In addition, the tax consequences described below are subject
to the limitation of the 1993 Omnibus Budget Reconciliation Act ("OBRA"), as
discussed in further detail below. State and local income taxes are not
discussed, and may vary depending on individual circumstances and from locality
to locality.
Nonqualified Stock Options. For federal income tax purposes, the recipient
of NQSOs granted under the 1996 Incentive Plan will not have taxable income upon
the grant of the option, nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSOs the optionee will realize ordinary income, and
the Company will be entitled to a deduction, in an amount equal to the
difference between the option exercise price and the fair market value of the
stock at the date of exercise. An optionee's basis for the stock for purposes of
determining his gain or loss on his subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise of
the NQSO.
Incentive Stock Options. There is no taxable income to an employee when an
ISO is granted to him or when that option is exercised; however, the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price will be an "item of adjustment" for purposes of alternative minimum
tax. Gain realized by an optionee upon sale of stock issued on exercise of an
ISO is taxable at capital gains rates, and no tax deduction is available to us,
unless the optionee disposes of the shares within two years after the date of
grant of the option or within one year of the date the shares were transferred
to the optionee. In such event the difference between the option exercise price
and the fair market value of the shares on the date of the option's exercise
will be taxed as ordinary income; the balance of the gain, if any, will be taxed
as capital gain. The Company will be entitled to a deduction with regard to an
ISO only to the extent the employee has ordinary income. An ISO exercised more
than three months after an optionee's retirement from employment, other than by
reason of death or disability, will be taxed as an NQSO, with the optionee
deemed to have received income upon such exercise taxable at ordinary income
rates. The Company will be entitled to a tax deduction equal to the ordinary
income, if any, realized by the optionee.
Stock Appreciation Rights. No taxable income is realized upon the receipt
of an SAR, but upon exercise of the SAR the fair market value of the shares
received, determined on the date of exercise of the SAR, or the amount of cash
received in lieu of shares, must be treated as compensation taxable as ordinary
income to the recipient in the year of such exercise. We will be entitled to a
deduction for compensation paid in the same amount which the recipient realized
as ordinary income.
Restricted Stock and Deferred Stock. An employee to whom restricted or
deferred stock is issued will not have taxable income upon issuance and we will
not then be entitled to a deduction, unless in the case of restricted stock an
election is made under Section 83(b) of the Code. However, when restrictions on
shares of restricted stock lapse, such that the shares are no longer subject to
repurchase by us, the employee will realize ordinary income and we will be
entitled to a deduction in an amount equal to the fair market value of the
shares at the date such restrictions lapse, less the purchase price therefor.
Similarly, when deferred stock vests and is issued to the employee, the employee
will realize ordinary income and we will be entitled to a
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deduction in an amount equal to the fair market value of the shares at the date
of issuance. If an election is made under Section 83(b) with respect to
restricted stock, the employee will realize ordinary income at the date of
issuance equal to the difference between the fair market value of the shares at
that date less the purchase price therefor and the Company will be entitled to a
deduction in the same amount. The Code does not permit a Section 83(b) election
to be made with respect to deferred stock.
Dividend Equivalents. A recipient of a dividend equivalent award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When a dividend equivalent is paid, the
participant will recognize ordinary income, and we will be entitled to a
corresponding deduction.
Performance Awards. A participant who has been granted a performance award
will not realize taxable income at the time of grant, and we will not be
entitled to a deduction at that time. When an award is paid, whether in cash or
Common Shares of ours, the participant will have ordinary income, and we will be
entitled to a corresponding deduction.
Stock Payments. A participant who receives a stock payment in lieu of a
cash payment that would otherwise have been made will be taxed as if the cash
payment has been received, and we will have a deduction in the same amount.
Deferred Compensation. Participants who defer compensation generally will
recognize no income, gain or loss for federal income tax purposes when NQSOs are
granted in lieu of amounts otherwise payable, and we will not be entitled to a
deduction at that time. When and to the extent options are exercised, the
ordinary rules regarding nonqualified stock options outlined above will apply.
Effect of 1993 Omnibus Budget Reconciliation Act on the 1996 Incentive
Plan. Under OBRA, which became law in August 1993, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid in 1996 and thereafter) for certain executive officers exceeds $1
million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under OBRA, the deduction
limit does not apply to certain "performance-based" compensation established by
an independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options and SARs will satisfy
the performance-based exception if the awards are made by a qualifying
compensation committee, the plan sets the maximum number of shares that can be
granted to any particular employee within a specified period and the
compensation is based solely on an increase in the stock price after the grant
date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date).
It is our policy generally to design our compensation programs to conform
with the OBRA legislation and related regulations so that total compensation
paid to any employee will not exceed $1 million in any one year, except for
compensation payments in excess of $1 million which qualify as
"performance-based." The Company intends to comply with other requirements of
the performance-based compensation exclusion under OBRA, including option
pricing requirements and requirements governing the administration of the 1996
Incentive Plan, so that the deductibility of compensation paid to top executives
thereunder is not expected to be disallowed.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote of the holders of a majority of the shares cast at a
meeting at which the total vote cast on the proposal represents more than 50% of
all shares entitled to vote is required for approval of the proposed Incentive
Plan Amendment. For purposes of this proposal, abstentions and broker non-votes
will have no effect if more than 50% of the votes entitled to be cast (excluding
abstentions and broker non-votes) are cast. If fewer than 50% of the votes
entitled to be cast, (excluding abstentions and broker non-votes) are cast,
however, abstentions and broker non-votes will have the effect of votes against
the Incentive Plan Amendment proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE PROPOSED
AMENDMENT TO THE 1996 INCENTIVE PLAN
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PROPOSAL 3: STOCKHOLDER PROPOSAL
We were notified that United Food and Commercial Workers Union
International Pension Plan for Employees, 1775 K Street, NW, Washington D.C.,
20006, beneficial owner of 57,700 shares of common stock of Arden Realty, Inc.,
intends to present the following proposal at our 2000 annual meeting.
THE COMPANY ACCEPTS NO RESPONSIBILITY FOR THE PROPOSAL AND THE BOARD URGES
YOU TO VOTE AGAINST IT FOR THE REASON SET FORTH IN THE BOARD'S RESPONSE TO THE
PROPOSAL. In accordance with the proxy regulations, the following is the
complete text of the proposal exactly as submitted.
STOCKHOLDER PROPOSAL
"Resolved: The shareholders of Arden Realty, Inc. (the "Company") request
the Board of Directors to redeem the stockholder rights issued in August
1998 unless such issuance is approved by the affirmative vote of the
outstanding shareholders, to be held as soon as is practicable.
SUPPORTING STATEMENT
On August 14, 1998, the Board of Directors of Arden Realty issued, without
shareholder approval, certain shareholder rights pursuant to a Stockholder
Rights Agreement. These rights are a type of anti-takeover device, commonly
referred to as a "poison pill," which injure shareholders by reducing management
accountability and adversely affecting shareholder value.
While management and the Board of Directors should have the appropriate
tools to ensure that all shareholders benefit from any proposal to acquire the
Company, the future possibility of takeover does not justify the unilateral
imposition of a poison pill. As Nell Minow and Robert Monks note in their book
Power and Accountability, poison pills "amount to major de facto shifts of
voting rights away from shareholders to management, on matters pertaining to the
sale of the corporation. They give target boards of directors absolute veto
power over any proposed business combination, no matter how beneficial it might
be for the shareholders."
Rights plans like ours have become increasingly unpopular in recent years.
In 1999, a majority of shareholders at Eastman Kodak, Fort James, Bergen
Brunswig, Lubrizol, Chubb, Union Carbide, J.C. Penney, Novell, Quaker Oats, and
Owens Corning among others, voted in favor of proposals asking management to
redeem or repeal poison pills. In addition, the Council of Institutional
Investors -- an organization of large public, Taft-Hartley and corporate pension
plans with combined assets of more than $1 trillion -- calls for shareholder
approval of all poison pills in its Shareholder Bill of Rights.
To assure shareholders that management and Board of Directors respect the
right of shareholders to participate in the fundamental decisions that affect
the Company's governance and performance, we urge the Company to redeem the
Stockholder Rights Agreement or subject it to a vote as soon as may be
practical."
BOARD RESPONSE TO THE STOCKHOLDER PROPOSAL
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The Board adopted our current Stockholders Rights Agreement (the "Plan") in
1998 to protect our stockholders against abusive takeover tactics and to ensure
that each stockholder would be treated fairly in any transaction involving an
acquisition of control of Arden Realty. The purpose of the Plan was to
strengthen the Board's ability, in a manner consistent with its duties, to
protect and maximize the value of stockholders' investment in us in the event of
an unsolicited attempt to acquire control of us.
The Board, of which five of seven members are independent, non-employee
members, believes that our Plan encourages potential acquirers to negotiate in
good faith directly with the Board, which is in the best position to evaluate
the adequacy and fairness of proposed offers and to negotiate on behalf of all
stockholders. The Plan was designed to guard against hostile tender offers made
for less than a full and fair price, open
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market accumulations and other abusive tactics used to gain control of us
without paying all stockholders a premium. Without the protections and benefits
of the Plan, the Board could lose important bargaining power in negotiating a
transaction with a potential acquiror or pursuing potentially superior
alternatives. The Plan is not intended to, and will not, prevent a takeover on
terms determined by the Board to be fair and equitable to all stockholders, nor
is it intended as a deterrent to a stockholder's initiation of a proxy contest.
If the Board determines that an offer adequately reflects our value and is in
the best interests of all stockholders, the Board may redeem the Plan.
Several studies performed in 1997 and 1998 by Georgeson & Co., a nationally
recognized investor relations firm, about the impact of shareholder rights
plans, validate the Board's rationale for the Plan. These studies demonstrate
that a target company with a rights plan is likely to command a higher premium
than one without a plan and is no less likely to become a takeover target.
Moreover, 2,500 companies have adopted stockholder rights plans similar to the
Plan. In addition, in 1999 the General Assembly of Maryland, where we are
incorporated, specifically validated stockholder rights plans.
Your Board's commitment has always been, and always will be, to serve the
best interest of Arden Realty. Your Board's legal responsibilities and duties
require it to act in the best interest of Arden Realty, including protecting
stockholder interest and maximizing stockholder value in the event of a takeover
bid for us. To this end, the Board believes that a stockholder rights agreement,
which the Board has adopted and may amend without stockholder approval, provides
the Board with the ability to respond to a takeover bid in beneficial ways not
available to individual stockholders. Thus, your Board believes that a
requirement for stockholders to approve the Plan or any new rights plan
undermines the Board's power to fulfill its legal responsibilities and duties
and advance stockholder interests.
VOTE REQUIRED AND BOARD RECOMMENDATION
The stockholder proposal must be approved by a majority of the votes cast,
assuming a quorum is present. Abstentions and broker non-votes will have no
effect on the result of the stockholder proposal vote.
THEREFORE, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST" THIS
STOCKHOLDER PROPOSAL.
AUDITORS
Subject to its discretion to appoint alternative auditors if it deems such
action appropriate, the Board of Directors has retained Ernst & Young, LLP as
our auditors for the current fiscal year. The Board of Directors has been
advised that Ernst & Young, LLP is independent with regard to Arden Realty
within the meaning of the Securities Act and the applicable published rules and
regulations thereunder. Representatives of Ernst & Young, LLP are expected to be
present at the Annual Meeting and will have the opportunity to make statements
if they desire and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order for stockholder proposals otherwise satisfying the eligibility
requirements of SEC Rule 14a-8 to be considered for inclusion in our Proxy
Statement, they must be received by us at our principal office in Los Angeles,
California, on or before January 24, 2001.
In addition, if a stockholder desires to bring business (including director
nominations) before our 2001 Annual Meeting that is or is not the subject of a
proposal timely submitted for inclusion in our Proxy Statement, written notice
of such business, as prescribed in our Bylaws, must be received by our Secretary
between December 25, 2000 and January 24, 2001. For additional requirements, a
stockholder may refer to our Bylaws, Section 12, "Nominations and Stockholder
Business," a copy of which may be obtained from the Company's Secretary. If we
do not receive timely notice pursuant to our Bylaws, any proposal will be
excluded from consideration at the meeting regardless of any earlier notice
provided in accord with SEC Rule 14a-8.
24
<PAGE> 28
PROXY SOLICITATION EXPENSE
The cost of soliciting proxies will be borne by Arden Realty. In addition
to solicitation by mail, our directors, officers and employees may solicit
proxies by telephone, telegram or otherwise. These directors, officers and
employees of Arden Realty will not be additionally compensated for such
solicitation, but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. We will also request persons, firms and corporations
holding shares beneficially owned by others to send proxy materials to, and
obtain proxies from, the beneficial owners of such shares and will, upon
request, pay the holders' reasonable expenses for doing so.
April 24, 2000
By Order of the Board of Directors
/S/ David A. Swartz
David A. Swartz
General Counsel and Secretary
25
<PAGE> 29
EXHIBIT A
AMENDMENT TO THE
1996 STOCK OPTION AND INCENTIVE PLAN OF
ARDEN REALTY, INC. AND ARDEN REALTY LIMITED PARTNERSHIP
This Amendment to the 1996 Stock Option and Incentive Plan of Arden Realty,
Inc. and Arden Realty Limited Partnership (the "Amendment") is adopted by Arden
Realty, Inc., a Maryland corporation (the "Company") effective as of May 22,
2000.
RECITALS
A. The 1996 Stock Option and Incentive Plan of Arden Realty, Inc. and Arden
Realty Limited Partnership (the "1996 Incentive Plan") was adopted by
the Board of Directors and approved by the stockholders of the Company
on September 16, 1996.
B. Section 10.2 of the 1996 Incentive Plan provides that the Board may
amend the 1996 Incentive Plan, subject in certain instances to receipt
of approval of the stockholders of the Company.
C. Section 422 of the Internal Revenue Code of 1986, as amended, requires
that there be stated in the 1996 Incentive Plan an aggregate number of
shares issuable upon exercise of incentive stock options granted under
the 1996 Incentive Plan.
D. On May 29, 1998, the Board of Directors of the Company unanimously
adopted an Amendment to the 1996 Incentive Plan increasing the number of
shares of Common Stock reserved for issuance from 1,500,000 to 4,200,000
shares. This Amendment to the 1996 Incentive Plan was approved by the
stockholders at the Company's Special Meeting held on July 22, 1998.
E. On January 11, 2000, the Board of Directors of the Company unanimously
adopted an amendment to the 1996 Incentive Plan increasing the number of
shares of Common Stock reserved for issuance from 4,200,000 to 6,500,000
shares.
F. The 1996 Incentive Plan Amendment was presented to the stockholders for
approval at the 2000 Annual Meeting held on May 22, 2000.
AMENDMENT
The 1996 Incentive Plan is amended as provided herein and except as so
amended the 1996 Incentive Plan remains in full force and effect. Terms used
herein not otherwise defined shall have the meaning ascribed to them in the 1996
Incentive Plan.
1. Article II, Section 2.1, Paragraph (a) -- Shares Subject to Plan, is
hereby amended in its entirety to read as follows:
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock,
Stock Payments or Stock Appreciation Rights shall be Common Stock,
initially shares of the Company's Common Stock, par value $.01 per
share. The maximum number of such shares which may be issued upon
exercise of such option or rights or upon any such awards under the
Plan shall be six million five hundred thousand (6,500,000). The
shares of Common Stock issuable upon exercise of such options or
rights or upon any such awards may be either previously authorized
but unissued shares or treasury shares.
A-1
<PAGE> 30
The undersigned, David A. Schwartz, Secretary of the Company, hereby
certifies that the Board and the stockholders of the Company adopted the
foregoing Amendment to the 1996 Incentive Plan on January 11, 2000 and May 22,
2000, respectively.
EXECUTED at Los Angeles, California this day of May, 2000.
David A. Swartz, Secretary
A-2
<PAGE> 31
ARDEN REALTY, INC.
11601 WILSHIRE BOULEVARD, FOURTH FLOOR
LOS ANGELES, CALIFORNIA 90025-1740
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Arden Realty, Inc., a Maryland Corporation,
hereby appoints Richard S. Ziman and Victor J. Coleman, and each or either of
them as proxies, with full power of substitution or resubstitution, to represent
the undersigned and to vote all shares of Common Stock of Arden Realty, Inc.
which the undersigned is entitled to vote at the Annual Meeting of the Company
to be held on May 22, 2000 and any and all adjournments thereof in the manner
specified.
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY AND THAT YOUR SHARES
BE REPRESENTED. STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
(Continued and to be dated and signed on the reverse side.)
ARDEN REALTY, INC.
P.O. BOX 11414
NEW YORK, N.Y. 10203-0414
<PAGE> 32
DETACH PROXY CARD HERE
- -------------------------------------------------------------------------------
[ ]
Proposal 1. Election of Directors:
The Board of Directors recommends a vote FOR Election of Directors,
FOR the nominees WITHHOLD AUTHORITY to vote * EXCEPTIONS [X]
listed below [X] for the nominees listed below. [X]
NOMINEES, CARL D. COVITZ, LARRY S. FLAX AND KENNETH B. ROATH
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME ABOVE.)
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE NOMINEES LISTED ABOVE AND PROPOSAL 2 AND "AGAINST" PROPOSAL 3.
Should any other matters requiring the vote of the Stockholders arise, the
named proxies are authorized to vote the same in accordance with their best
judgment in the interest of the Company. The Board of Directors is not aware of
any other matter which is to be presented for action at the meeting other than
the matters set forth herein.
Proposal 2 Amendment to the 1996 Stock Proposal 3 Stockholder proposal
Option and Incentive Plan. The Board regarding stockholder rights
of Directors recommends a vote FOR agreement. The Board of Directors
Amendment to the 1996 Stock Option recommends a vote AGAINST the
and Incentive Plan. stockholder proposal.
FOR [X] AGAINST [X] ABSTAIN [X] FOR [X] AGAINST [X] ABSTAIN [X]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE [X]
Please sign exactly as your name appears
hereon. When signing as attorney, executor,
administrator, trustee, or other represen-
tative please give full title. If more than
one trustee, all should sign. All joint
owners should sign. If a corporation, please
sign in full corporate name by President
or other authorized officer.
Date:_______________________________, 2000
__________________________________________
(Signature)
__________________________________________
(Signature if held jointly)
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.)
- -------------------------------------------------------------------------------
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE
