<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ALEXANDRIA REAL ESTATE EQUITIES, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
135 NORTH LOS ROBLES AVENUE
SUITE 250
PASADENA, CALIFORNIA 91101
Dear Stockholder:
On behalf of our Board of Directors, I cordially invite you to attend
Alexandria's 1998 Annual Meeting of Stockholders to be held on Friday, May 15,
1998, at the Doubletree Hotel, Fountain Room IV, 191 North Los Robles Avenue,
Pasadena, California, 91101, at 9:00 a.m. local time.
The attached Proxy Statement describes in detail the matters expected to be
acted upon at the meeting, including electing eight directors, seven of whom are
present directors of the Company, ratifying the selection of Ernst & Young LLP
as the Company's independent public accountants, and considering an amendment to
the Company's 1997 Stock Award and Incentive Plan. We will also report on the
Company's progress and respond to questions you may have about the Company's
business.
We sincerely hope that you will be able to attend and participate in the
meeting. Whether or not you plan to attend, it is important that your shares be
represented and voted at the meeting. PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON EVEN IF YOU PREVIOUSLY HAVE MAILED YOUR PROXY CARD. YOUR
PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROXY
STATEMENT.
Sincerely,
[LOGO]
JERRY M. SUDARSKY
Chairman of the Board
Pasadena, California
April 15, 1998
<PAGE>
[LOGO]
ALEXANDRIA REAL ESTATE EQUITIES, INC.
135 NORTH LOS ROBLES AVENUE, SUITE 250
PASADENA, CALIFORNIA 91101
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1998
------------------------
To the Stockholders of Alexandria Real Estate Equities, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Alexandria Real Estate Equities, Inc., a Maryland corporation (the
"Company"), will be held on Friday, May 15, 1998, at 9:00 a.m. local time, at
the Doubletree Hotel, Fountain Room IV, 191 North Los Robles Avenue, Pasadena,
California, 91101, for the following purposes:
1. To elect eight directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualify.
2. To ratify the selection of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1998.
3. To consider and vote upon a proposal to amend the Company's 1997 Stock
Award and Incentive Plan to increase the number of shares of Common Stock
available for issuance thereunder.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors of the Company has fixed the close of business on
March 31, 1998 as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Stockholders of record as of the record date will be admitted to the
Annual Meeting upon presentation of identification. Stockholders who own shares
of Common Stock beneficially through a bank, broker or other nominee will be
admitted to the Annual Meeting upon presentation of identification and proof of
ownership or a valid proxy signed by the record holder. A recent brokerage
statement or a letter from a bank or broker are examples of proof of ownership.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY,
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING. PLEASE NOTE,
HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
By Order of the Board of Directors
[LOGO]
PETER J. NELSON
Chief Financial Officer and
Secretary
Pasadena, California
April 15, 1998
<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
135 NORTH LOS ROBLES AVENUE
SUITE 250
PASADENA, CALIFORNIA 91101
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 15, 1998
GENERAL
This Proxy Statement is furnished to stockholders of Alexandria Real Estate
Equities, Inc., a Maryland corporation (the "Company"), in connection with the
solicitation of proxies in the form enclosed herewith for use at the Annual
Meeting of Stockholders of the Company to be held on Friday, May 15, 1998, at
9:00 a.m. local time, at the Doubletree Hotel, Fountain Room IV, located at 191
North Los Robles Avenue, Pasadena, California, 91101, and any and all
adjournments or postponements thereof (the "Annual Meeting"). This Proxy
Statement and the enclosed form of proxy are being first mailed to stockholders
on or about April 15, 1998.
The stockholders of the Company will consider and vote upon the following
proposals: (i) the election of eight directors for a one-year term and until
their successors are duly elected and qualify; (ii) the ratification of the
selection of Ernst & Young LLP as the Company's independent public accountants
for the fiscal year ending December 31, 1998; (iii) an amendment to the
Company's 1997 Stock Award and Incentive Plan (the "1997 Incentive Plan"); and
(iv) such other matters as may properly come before the meeting and any and all
adjournments or postponements thereof, including matters proposed by
stockholders. The Board of Directors knows of no matters to come before the
Annual Meeting other than the matters referred to in this Proxy Statement.
SOLICITATION
This solicitation is made by mail on behalf of the Board of Directors of the
Company. Costs of the solicitation will be borne by the Company. Further
solicitation of proxies may be made by telephone, telegraph, fax or personal
interview by the directors, officers and employees of the Company and its
affiliates, who will not receive additional compensation for the solicitation.
In addition, the Company has engaged Corporate Investor Communications, Inc., a
firm specializing in proxy solicitation, to solicit proxies and to assist in the
distribution and collection of proxy material for an estimated fee of
approximately $4,500. The Company will reimburse banks, brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to their customers or principals who are the
beneficial owners of shares of the Common Stock, par value $.01 per share, of
the Company (the "Common Stock").
VOTING PROCEDURES
Only the holders of record of the Common Stock as of the close of business
on March 31, 1998 (the "Record Date") are entitled to receive notice of, and to
vote at, the Annual Meeting. Each share of Common Stock entitles the holder
thereof to one vote. Stockholders are not permitted to cumulate their shares of
Common Stock for the purpose of electing directors or otherwise. At the close of
business on the Record Date, there were approximately 11,404,631 shares of
Common Stock issued and outstanding.
The presence at the Annual Meeting, in person or by proxy, of stockholders
entitled to cast a majority of all the votes entitled to be cast at the Annual
Meeting will constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes will be counted for purposes of
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determining the presence of a quorum. A "broker non-vote" results on a matter
when a broker or other record holder in "street" or nominee name returns a duly
executed proxy but does not vote on such matter solely because such record
holder does not have discretionary authority to vote on such matter and has not
received voting instructions from the beneficial holder. Under the rules of The
New York Stock Exchange, Inc. (the "NYSE"), however, such record holders have
discretionary authority to vote on routine matters, regardless of whether they
have received voting instructions. Accordingly, no broker non-votes occur when
voting on routine matters.
Shares represented by proxies in the form enclosed, if the proxies are
properly executed and returned and not revoked, will be voted as specified.
Where no specification is made on a properly executed and returned proxy, the
shares will be voted "FOR" the election of each nominee for director, "FOR" the
ratification of the selection of Ernst & Young LLP to serve as independent
public accountants of the Company, and "FOR" the amendment to the 1997 Incentive
Plan. If any other matters properly come before the Annual Meeting, it is the
intention of each of the persons named in the accompanying proxy to vote such
proxies in such person's discretion. To be voted, proxies must be filed with the
Secretary of the Company prior to voting.
Under the Maryland General Corporation Law, holders of shares of the Common
Stock will not be entitled to appraisal rights with respect to such shares in
connection with any of the proposals.
REVOCATION OF PROXIES
Proxies may be revoked at any time before voting by filing a notice of
revocation with the Secretary of the Company, by filing a later dated proxy with
the Secretary of the Company, or by voting in person at the Annual Meeting.
PROPOSAL NUMBER ONE--ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated Bylaws (the "Bylaws"), all of
the directors are elected at each annual meeting of stockholders. The Bylaws
currently authorize a Board of Directors consisting of not less than the minimum
number of members required by the Maryland General Corporation Law (which for
the Company is three), nor more than fifteen members. The Bylaws also authorize
the Board of Directors to establish, increase or decrease the number of
directors, and the number has been so fixed at eight directors, with one current
vacancy. Each director will hold office until the next annual meeting of
stockholders and until such director's successor is duly elected and qualifies.
Stockholders may withhold authority from the proxyholders to vote for the
entire slate as nominated or, by writing the name of an individual nominee in
the space provided on the proxy card, withhold the authority to vote for any one
or more individual nominees. Instructions on the accompanying proxy card to
withhold authority to vote for one or more of the nominees will result in any
such nominee receiving fewer votes. Each person nominated for election has
agreed to serve if elected. If any nominee should become unavailable for
election, an event the Company does not anticipate, such shares will be voted
for the election of such substitute nominee as management may propose.
The following eight persons have been selected by the Board of Directors as
nominees for election to the Board of Directors: Messrs. Jerry M. Sudarsky, Joel
S. Marcus, Alan D. Gold, Joseph Elmaleh, Viren Mehta, David M. Petrone, Anthony
M. Solomon and Richard B. Jennings. All of the nominees are incumbent directors,
with the exception of Mr. Jennings.
CERTAIN INFORMATION REGARDING NOMINEES
RICHARD B. JENNINGS, 54, has served as President of Realty Capital
International Inc. ("RCI"), a real estate investment banking firm, since 1991,
and President of Jennings Securities Corporation ("JSC"), a National Association
of Securities Dealers, Inc. ("NASD") member securities firm, since 1995. RCI and
JSC specialize in real estate investment banking assignments for owners,
including acting as advisor or
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agent on behalf of the sponsors on public and private offerings of real estate
investment trusts ("REITs"), sales of real estate portfolios, debt and equity
financings for REITs and other real estate owners, securitized debt financings,
and mergers and acquisitions, particularly with respect to REITs. Since 1991,
RCI and JSC have closed over $6 billion of such transactions nationwide as
advisor, agent or investment banker.
From 1990 to 1991, Mr. Jennings served as Senior Vice President of Landauer
Real Estate Counselors, and from 1986 to 1989, Mr. Jennings served as Managing
Director--Real Estate Finance at Drexel Burnham Lambert. From 1969 to 1986, Mr.
Jennings oversaw the REIT investment banking business at Goldman, Sachs & Co.
During his tenure at Goldman, Sachs & Co., Mr. Jennings founded and managed the
Mortgage Finance Group from 1979 to 1986. Mr. Jennings serves as an outside
Director of MBO Properties, Inc. (formerly Mutual Benefit Overseas Limited). He
is a licensed NASD Principal and a New York Real Estate Broker. Mr. Jennings has
a Bachelor of Arts Degree in Economics, Phi Beta Kappa and Magna Cum Laude, from
Yale University, and a Master of Business Administration Degree from Harvard
Business School.
See "Board of Directors, Executive Officers and Senior Management" for the
experience and background of each of the other nominees.
VOTE REQUIRED
The affirmative vote of a plurality of all of the votes cast at the Annual
Meeting is required for the election of a director. For purposes of the election
of directors, abstentions will have no effect on the outcome of the vote. The
election of directors is a routine matter on which a broker or other nominee is
empowered to vote. Accordingly, no broker non-votes will result from this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE-NAMED NOMINEES.
BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
The following table sets forth certain information concerning the directors,
executive officers and senior management of the Company as of the Record Date:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Jerry M. Sudarsky.................................... 79 Chairman of the Board
Joel S. Marcus....................................... 50 Chief Executive Officer and Director
Alan D. Gold......................................... 37 President and Director
Peter J. Nelson...................................... 40 Chief Financial Officer, Treasurer and Secretary
James H. Richardson.................................. 38 Executive Vice President
Gary A. Kreitzer..................................... 43 Senior Vice President and In-House Counsel
Steven A. Stone...................................... 36 Corporate Vice President
Vincent R. Ciruzzi................................... 35 Vice President
Joseph Elmaleh....................................... 59 Director
Viren Mehta.......................................... 48 Director
David M. Petrone..................................... 53 Director
Anthony M. Solomon................................... 78 Director
</TABLE>
3
<PAGE>
JERRY M. SUDARSKY has served as the Company's Chairman of the Board of
Directors since its inception, as Chairman of the Board of Directors of ARE-QRS
Corp. ("QRS"), a wholly owned subsidiary of the Company, since its inception in
September 1996 and as Chairman of the Board of Directors of Health Science
Properties Holding Corporation ("Holdings"), the sole stockholder of the Company
prior to the Company's initial public offering, since its inception in 1993. Mr.
Sudarsky also has served as Treasurer of Holdings since June 1997 and previously
served as Chief Executive Officer of the Company, QRS and Holdings from
inception of each until March 1997. Mr. Sudarsky served as Vice Chairman of
Jacobs Engineering Group, Inc., an engineering and construction firm, from 1986
to 1994. Mr. Sudarsky has had extensive experience in the design, engineering,
construction and operation of commercial properties. In 1967, Mr. Sudarsky
founded and became Chairman of Israel Chemicals, where he served until 1972, and
in 1946, he founded Bioferm Corp., a pioneer in the production of Vitamin B12
and the first commercial bio-insecticide products, where he served until 1965.
JOEL S. MARCUS has served as Chief Executive Officer of the Company, QRS and
Holdings since March 1997 and has served as a director of each since inception.
Mr. Marcus also has served as Secretary of Holdings since June 1997 and as the
sole director, Chief Executive Officer and President of ARE-GP Holdings QRS
Corp. ("ARE-GP"), a wholly-owned subsidiary of the Company, since December 1997.
Mr. Marcus previously served as Vice Chairman of the Board and Chief Operating
Officer of the Company, QRS and Holdings from inception until his appointment as
Chief Executive Officer of each in March 1997 and as Secretary of each from
inception until Mr. Nelson's appointment as Secretary of each in April 1997. Mr.
Marcus was a partner in the law firm of Brobeck, Phleger & Harrison, and a
predecessor firm, from 1986 to 1994, specializing in corporate finance and
acquisitions. From 1984 to 1994, he also served as General Counsel and Secretary
of Kirin-Amgen, Inc., a joint venture that financed the development of two
genetically engineered pharmaceuticals. Mr. Marcus has served on the Board of
Directors of Ariad Pharmaceuticals, a publicly traded biotechnology company,
since 1995. Mr. Marcus was formerly a practicing Certified Public Accountant
specializing in the financing and taxation of real estate. Mr. Marcus has a
broad-based network of working relationships in the real estate and life science
industries. He received his undergraduate and Juris Doctor Degrees from the
University of California at Los Angeles and is a member of the National
Association of Real Estate Investment Trusts ("NAREIT").
ALAN D. GOLD has served as President and as a director of the Company and
Holdings since inception of each and as President of QRS since its inception.
Mr. Gold also has served as Assistant Secretary of Holdings since June 1997. Mr.
Gold previously served as Treasurer of the Company, QRS and Holdings from
inception until Mr. Nelson's appointment as Treasurer of each in April 1997. Mr.
Gold has served as managing partner of GoldStone Real Estate Finance and
Investments, a partnership engaged in the real estate and mortgage business,
since 1989. The partnership ceased active operations in January 1994. He also
served as Assistant Vice President of Commercial Real Estate for Northland
Financial Company, a full service commercial property mortgage banker, from 1989
to 1990 and as Real Estate Investment Officer--Commercial Real Estate for John
Burnham Company, a regional full service real estate company, from 1985 to 1989.
Mr. Gold received his Bachelor of Science Degree in Business Administration and
his Master of Business Administration with an emphasis in real estate finance
from San Diego State University.
PETER J. NELSON has served as the Chief Financial Officer, Treasurer and
Secretary of the Company and QRS since April 1997 and as Chief Financial
Officer, Vice President, Treasurer and Secretary of ARE-GP since December 1997.
Mr. Nelson previously served as Chief Financial Officer, Treasurer and Secretary
of Holdings from April 1997 until June 1997. Prior to joining the Company, from
1995 to 1997, Mr. Nelson served as Chief Financial Officer of Lennar Partners,
Inc., a diversified real estate company, where he was responsible for the
financial management of the firm's real estate portfolio. From 1990 to 1995, Mr.
Nelson was Chief Financial Officer of Westrec Properties, Inc., a national owner
and operator of boat marinas and resort properties. Mr. Nelson also served as
Vice President, Corporate Financial Planning at Public Storage, Inc. from 1986
to 1990, and as an Audit Manager at Ernst & Young LLP from 1979 to 1986. Mr.
Nelson is a Certified Public Accountant and a member of the American Institute
of CPAs and the
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California Society of CPAs, where he has served on the Real Estate Committee.
Mr. Nelson received his Bachelor of Science Degree from California State
University.
JAMES H. RICHARDSON has served as Executive Vice President of the Company
since January 1998 and as Executive Vice President of QRS since February 1998.
Mr. Richardson previously served as Senior Vice President of the Company from
August 1, 1997 to December 31, 1997. Prior to joining the Company, Mr.
Richardson held management and brokerage positions at CB Commercial Real Estate
Services Group, Inc. ("CB Commercial"), a full-service provider of commercial
real estate services, for nearly 15 years. Most recently, from March 1996 until
August 1997, Mr. Richardson served as Senior Vice President, Area Manager, for
the San Francisco peninsula and San Jose offices of CB Commercial, and from
December 1982 until March 1996, he was a top producing professional within the
brokerage operations group. During his tenure at CB Commercial, Mr. Richardson
was instrumental in the creation and development of the biosciences and
corporate services practice groups. Mr. Richardson received his Bachelor of
Science degree in Economics from Claremont McKenna College.
GARY A. KREITZER has served as Senior Vice President and In-House Counsel of
the Company and QRS since inception of each. Mr. Kreitzer previously served as
Senior Vice President and In-House Counsel of Holdings from its inception until
June 1997. From 1990 to 1994, Mr. Kreitzer was In-House Counsel and Vice
President for Seawest Energy Corporation, an alternative energy facilities
development company. Mr. Kreitzer also served as In-House Counsel, Secretary and
Vice President for The Christiana Companies, Inc., a publicly traded investment
and real estate development company from 1982 to 1989. Mr. Kreitzer received his
Juris Doctor Degree, with honors, from the University of San Francisco and a
Bachelor of Arts Degree in Economics from the University of California, San
Diego. Mr. Kreitzer is a member of the California State Bar, the American Bar
Association and the American Corporate Counsel Association.
STEVEN A. STONE has served as Corporate Vice President of the Company and
QRS since inception of each and previously served as Corporate Vice President of
Holdings from its inception until June 1997. Since 1989, Mr. Stone has served as
a partner in GoldStone Real Estate Finance and Investments, which ceased active
operations in January 1994. Mr. Stone served as Asset Manager for Baldwin
Industrial Properties, Ltd., a commercial real estate developer, from 1986 to
1989, Assistant to Vice President-- Business and Real Estate Development at
Grant General Contractors from 1986 to 1989, and Appraiser for the Bank of
America from 1983 to 1984. Mr. Stone holds a Bachelor of Science Degree in
Business Administration from San Diego State University.
VINCENT R. CIRUZZI has served as a Vice President of the Company and QRS
since September 1996 and previously served as Vice President of Holdings from
September 1996 to June 1997. In 1993, Mr. Ciruzzi founded a real estate
consulting business, which provided consulting services to the Company from
September 1995 until his appointment as Vice President of the Company. From 1986
to 1993, Mr. Ciruzzi served as Project Manager for Home Capital Development
Group, a real estate development company, where he specialized in project
management of master planned communities as well as real estate development. Mr.
Ciruzzi received his Bachelor of Science Degree in Finance and Real Estate from
the University of Southern California.
JOSEPH ELMALEH has served as a director of the Company and Holdings since
inception of each. Dr. Elmaleh is a chemical engineer and international
financier, with businesses in the United States, Europe and the Middle East. He
served as Chairman and Chief Executive Officer of Passport Ltd., an oil and gas
and real estate company, from 1989 to 1995 and of J.O.E.L. Ltd., an oil and gas
and real estate company, from 1981 to 1995. Dr. Elmaleh also served as Chairman,
Chief Executive Officer and a director of Isramco, Inc., a publicly traded oil
and gas exploration company, from 1981 to 1996. Dr. Elmaleh received his
Bachelor of Science Degree in chemical engineering from the Technion-Israel
Institute of Technology and his Doctorate in Operations Research from the
Imperial College of Science and Technology, London.
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VIREN MEHTA has served as a director of the Company since January 1995. In
January 1998, Mr. Mehta founded Mehta Partners LLC, a pharmaceutical and
biotechnology industry advisory and investment firm. From 1989 to 1998, Mr.
Mehta was a partner of Mehta and Isaly, also a pharmaceutical and biotechnology
industry advisory and investment firm. Mr. Mehta served as a Vice President at
S.G. Warburg & Co., Inc., a merchant banking firm, from 1987 to 1989. In 1986,
he established the pharmaceutical investment research division in Wood MacKenzie
& Company Inc., New York, of which he became a Vice President and served until
1987. Mr. Mehta also worked with the international division of Merck & Co., a
pharmaceutical manufacturer, from 1983 to 1986. Mr. Mehta received his Doctor of
Pharmacy Degree from the University of Southern California and his Master of
Business Administration from the University of California at Los Angeles.
DAVID M. PETRONE has served as a director of the Company since its
inception. Mr. Petrone has been Chairman of the Board of Housing Capital
Corporation, a real estate finance company, since 1994. From 1986 until 1992,
Mr. Petrone was Vice Chairman of the Board of Wells Fargo and Company. Mr.
Petrone also served as Chief Executive Officer and President of Wells Fargo
Realty Advisors from 1978 to 1981 and of Wells Fargo Mortgage and Equity Trust,
a publicly held REIT, from 1981 to 1988. Mr. Petrone has served as a director of
Jacobs Engineering Group, Inc. since 1986 and of Spieker Properties, a publicly
held REIT, since 1993. He received his Bachelor of Science and Master of
Business Administration Degrees from the University of Oregon.
ANTHONY M. SOLOMON has served as a director of the Company since October
1994. Mr. Solomon is an economist and banker and has served as Chairman of The
Blackstone Alternate Asset Management Advisory Board since 1994. Mr. Solomon
also has served as Chairman of The Europe Fund, a closed end fund investing in
Europe, since 1990 and of The United Kingdom Fund, a closed end fund investing
in the United Kingdom, since 1987. Mr. Solomon has served as an economic advisor
to the Banca Comerciale Italiana since 1985. Mr. Solomon was a director of S.G.
Warburg p.l.c. London from 1985 until 1991 and Chairman of S.G. Warburg USA from
1985 until 1989. Mr. Solomon also served as President and Chief Executive
Officer of the Federal Reserve Bank of New York from 1980 to 1985 and was Under
Secretary of the Treasury from 1977 to 1980. Mr. Solomon received his Bachelor
of Arts Degree in Economics from the University of Chicago and his Masters
Degree in Economics and Public Administration from Harvard University.
INFORMATION REGARDING MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regular meetings and nine special meetings
during the fiscal year ended December 31, 1997 (the "1997 Fiscal Year") and took
certain actions by unanimous written consent. During the 1997 Fiscal Year, each
member of the Board of Directors attended at least 75% of the aggregate number
of meetings of the Board of Directors and of the Board committees of which he
was a member. The Company has standing Audit and Compensation Committees. The
Company does not have a standing Nominating Committee.
AUDIT COMMITTEE. Messrs. Elmaleh, Mehta and Solomon (all non-employee
directors) currently serve on the Audit Committee of the Board of Directors. The
Audit Committee held two meetings during the 1997 Fiscal Year. Among other
things, the Audit Committee recommends the firm to be appointed as independent
public accountants to audit the Company's financial statements, discusses the
scope and results of the audit with the independent public accountants, reviews
with management and the independent public accountants the Company's interim and
year-end operating results, considers the adequacy of the internal accounting
controls and audit procedures of the Company and reviews the non-audit services
to be performed by the independent public accountants.
COMPENSATION COMMITTEE. The Compensation Committee, which currently consists
of Messrs. Elmaleh, Mehta and Petrone (all non-employee directors), held three
meetings during the 1997 Fiscal Year and took certain actions by unanimous
written consent. The Compensation Committee has authority to, among other
things, renew and approve salary arrangements, including annual incentive
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awards, for directors, officers and other employees of the Company, adopt and
amend employment agreements for officers and other employees of the Company, and
administer the Company's option and other incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Sudarsky, Elmaleh, Mehta and Petrone served on the
Compensation Committee, as did Mr. Thomas Nolan, who resigned from the Board of
Directors and all committees thereof in March 1997. Mr. Sudarsky also served as
Chief Executive Officer of the Company from January 1, 1997 to March 14, 1997.
For the full 1997 calendar year, Mr. Sudarsky also served as an officer and
director of QRS and as an officer, director and member of the Compensation
Committee of Holdings.
In addition, during the full 1997 calendar year, Messrs. Sudarsky, Marcus,
Gold, Elmaleh, Mehta, Petrone and Solomon served as members of the Board of
Directors of the Company and Holdings, with the exception of Messrs. Mehta,
Petrone and Solomon, each of whom resigned from the Board of Directors of
Holdings in June 1997. Messrs. Kreitzer and Stone, executive officers of the
Company, serve on the Board of Directors of Bernardo Capital, Inc. Mr. Gold, a
director and executive officer of Bernardo Capital, Inc., serves as a director
and executive officer of the Company and Holdings, and as an executive officer
of QRS. Bernardo Capital, Inc. has no compensation committee and has had no
active operations since January 1994.
COMPENSATION OF THE BOARD OF DIRECTORS
The Company currently pays each of its non-employee directors annual
compensation of $12,000 for their services to the Company. In addition, each
non-employee director receives fees of $1,000 for each meeting of the Board of
Directors attended in person and $500 for attendance at each telephonic meeting
of the Board of Directors, and is reimbursed for reasonable expenses incurred to
attend director and committee meetings. Non-employee directors also are eligible
to receive options to purchase Common Stock under the 1997 Incentive Plan as
compensation for their services as directors. Officers of the Company who are
also directors are not paid any fees for their services as directors. Prior to
the Company's initial public offering of Common Stock on June 2, 1997 (the
"IPO"), non-employee directors received no annual compensation for their
services, but were eligible to receive stock options under the Company's Amended
& Restated 1996 Stock Option Plan (the "1996 Plan") and were reimbursed for
reasonable expenses incurred to attend director and committee meetings. In
connection with the IPO, each of Messrs. Elmaleh, Mehta, Petrone and Solomon was
granted 3,703 shares of Common Stock and options to purchase 1,190 shares of
Common Stock under the 1996 Plan and 5,000 shares of Common Stock under the 1997
Incentive Plan. Mr. Sudarsky, who became a non-employee director commensurate
with the IPO, was granted 5,555 shares of Common Stock and options to purchase
4,164 shares of Common Stock under the 1996 Plan and 10,000 shares of Common
Stock under the 1997 Incentive Plan.
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, the compensation paid by
the Company to each individual who served as its Chief Executive Officer and the
four other most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered to the Company in all capacities for
the year ended December 31, 1997.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
--------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITIONS(1) YEAR SALARY($) BONUS($) COMPENSATION(2) ($) OPTIONS(#) COMPENSATION(3)($)
- ---------------------------- --------- ----------- ----------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Sudarsky .......... 1997 118,724(4) -- 111,100 14,164 78,101(5)
Chairman of the Board
Joel S. Marcus ............. 1997 235,000 352,500(6) 1,088,659 169,140 6,750
Chief Executive Officer
and Director
Alan D. Gold ............... 1997 190,912 190,000(7) 668,407 107,619 10,800
President and Director
James H. Richardson ........ 1997 71,346 25,000(8) -- 80,000 --
Executive Vice President
Peter J. Nelson ............ 1997 121,846 -- 61,940 60,000 --
Chief Financial Officer,
Treasurer and Secretary
Gary A. Kreitzer ........... 1997 140,000 -- 279,616 63,822 6,010
Senior Vice President and
In-House Counsel
</TABLE>
- ------------------------------
(1) Mr. Sudarsky served as Chief Executive Officer of the Company from its
inception until his resignation from such position on March 14, 1997, at
which time Mr. Marcus was elected Chief Executive Officer. Prior to March
14, 1997, Mr. Marcus served as Vice Chairman of the Board and Chief
Operating Officer of the Company. In addition, Mr. Marcus served as
Secretary of the Company and Mr. Gold served as Treasurer until April 1997,
at which time Mr. Nelson was elected to such positions. Mr. Richardson
served as Senior Vice President of the Company during 1997. Effective
January 1, 1998, Mr. Richardson was named Executive Vice President of the
Company.
(2) Other Annual Compensation includes grants of Common Stock, valued at $20 per
share, effective June 2, 1997 in connection with the IPO. Mr. Sudarsky was
granted 5,555 shares; Mr. Marcus, 54,160 shares; Mr. Gold, 33,329 shares;
Mr. Nelson, 3,097 shares; and Mr. Kreitzer, 13,887 shares.
(3) All Other Compensation includes the following contributions made by the
Company to employee accounts under the Company's 401(k) plan: on behalf of
Mr. Sudarsky, $3,101; Mr. Marcus, $4,750; Mr. Gold, $4,750; and Mr.
Kreitzer, $4,750. In addition, All Other Compensation also includes the
following term life insurance premiums paid by the Company: Mr. Marcus,
$2,000; Mr. Gold, $6,050; and Mr. Kreitzer, $1,260.
(4) Mr. Sudarsky was paid an annual salary of $240,000 until his retirement from
the Company on June 2, 1997.
(5) Includes $75,000 paid pursuant to Mr. Sudarsky's post-retirement benefit in
accordance with his employment agreement with the Company.
(6) Paid in consideration for past services and for amending Mr. Marcus'
employment agreement with the Company.
(7) Paid in consideration for past services and for amending Mr. Gold's
employment agreement with the Company.
(8) Paid upon commencement of his employment in accordance with his employment
agreement with the Company.
8
<PAGE>
The following tables set forth certain information regarding stock options
granted to and exercised by the Named Executive Officers during 1997 and the
stock options held by them as of December 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR(%) ($/SH) DATE 5%($) 10%($)
- -------------------------------- ------------ ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Sudarsky............... 10,000(1) 1.3 20.00(3) 05/20/07 125,800 318,700
4,164(2) .5 .54(4) 06/02/97 0 0
Joel S. Marcus.................. 140,000(1) 18.4 20.00(3) 05/20/07 1,761,200 4,461,800
29,140(2) 3.8 .54(4) 06/02/97 0 0
Alan D. Gold.................... 100,000(1) 13.2 20.00(3) 05/20/07 1,258,000 3,187,000
7,619(2) 1.0 .54(4) 06/02/97 0 0
James H. Richardson............. 80,000(1) 10.5 24.81(3) 08/01/07 1,248,000 3,163,200
Peter J. Nelson................. 60,000(1) 7.9 20.00(3) 05/20/07 754,800 1,912,200
Gary A. Kreitzer................ 60,000(1) 7.9 20.00(3) 05/20/07 754,800 1,912,200
3,822(2) .5 .54(4) 06/02/97 0 0
</TABLE>
- ------------------------------
(1) During 1997, each of the Named Executive Officers received options
constituting Incentive Stock Options to the extent permitted under
applicable law to purchase shares of Common Stock under the 1997 Incentive
Plan. With the exception of Mr. Sudarsky, whose options vested immediately
upon grant, the options are subject to a three-year vesting period such that
one-third of such options vest on each of the first three anniversaries
after the respective date of grant. In addition, the vesting and
exercisability of the options will be accelerated in the event of a Change
in Control (as defined in the 1997 Incentive Plan). The options were granted
for terms of 10 years. In connection with the IPO, the Named Executive
Officers agreed not to offer, sell, contract to sell, pledge or otherwise
dispose of any shares of Common Stock (or any securities convertible into,
or exercisable, exchangeable or redeemable for, shares of Common Stock)
prior to May 27, 1999 without the prior written consent of the managing
underwriter of the IPO.
(2) Certain Named Executive Officers who were also executive officers of
Holdings held options ("Holdings Options") granted under Holdings 1994 stock
option plans (the "1994 Plans"). Under the 1994 Plans, holders of options
were eligible to receive substitute stock options under the Company's 1996
Plan under certain circumstances, including an initial public offering of
the Common Stock of the Company. Such grant of substitute stock options was
subject to the prior cancellation and surrender of the corresponding
Holdings Options. Grants were conditioned on the Named Executive Officers
exercising the substitute stock options on or prior to consummation of the
IPO.
(3) The exercise price is equal to the Fair Market Value (as defined in the 1997
Incentive Plan) of the Common Stock on the date of grant.
(4) Each substitute stock option entitled the holder of such option to purchase
that number of shares of the Company's Common Stock equal to the product of
(i)(a) the fair market value of a share of Holdings common stock divided by
(b) the fair market value of a share of the Company's Common Stock (the
"Conversion Ratio") and (ii) the number of shares of Holdings common stock
subject to such option. The exercise price of the substitute stock option
equaled the per share exercise price of the Holdings Option divided by the
Conversion Ratio.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR-END YEAR-END ($)
SHARES ACQUIRED VALUE REALIZED (#) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------------------- --------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Jerry M. Sudarsky................ 4,164 85,195 10,000/0 115,600/0
Joel S. Marcus................... 29,140 596,204 0/140,000 0/1,618,400
Alan D. Gold..................... 7,619 155,884 0/100,000 0/1,156,000
James H. Richardson.............. -- -- 0/80,000 0/540,000
Peter J. Nelson.................. -- -- 0/60,000 0/693,600
Gary A. Kreitzer................. 3,822 78,198 0/60,000 0/693,600
</TABLE>
- ------------------------------
(1) Represents the product of (A) the difference between (i) the closing price
of the Common Stock on the NYSE on the exercise date and (ii) the option
exercise price and (B) the number of securities underlying such options.
(2) The value of unexercised in-the-money options is calculated by multiplying
(A) the number of securities underlying such options by (B) the difference
between (i) the closing price of the Common Stock on the NYSE at December
31, 1997 and (ii) the option exercise price.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of Messrs. Sudarsky, Marcus,
Gold, Nelson, Richardson and Kreitzer. Mr. Sudarsky's employment agreement sets
forth the terms of his retirement arrangements with the Company, which became
effective upon consummation of the IPO. The employment agreement provides that
Mr. Sudarsky will serve as non-executive Chairman of the Board with no annual
salary (other than the payment of directors' fees) for a term that ends upon the
next annual election of officers following the IPO. The agreement also provides
a retirement benefit of $150,000 per year for the first three years following
consummation of the IPO, at which time the benefit will be reduced to $90,000
per year, plus an annual cost of living increase of 2% per year for the
remainder of Mr. Sudarsky's life and Mr. Sudarsky's current spouse's life.
Effective March 28, 1997, each of Messrs. Marcus and Gold entered into an
amended and restated employment agreement with the Company. Mr. Marcus'
employment agreement provides that he will serve as the Company's Chief
Executive Officer through December 31, 2000, with a base salary of $235,000 per
year, or such higher amount as may from time to time be determined by the
Company. Mr. Marcus' employment agreement also provides for automatic one-year
extensions until either Mr. Marcus or the Company notifies the other that such
party does not wish to extend the agreement.
The employment agreements with each of Messrs. Gold, Richardson and Kreitzer
provide for a term ending on December 31, 1998, and, with Mr. Nelson, on April
1, 1998, in each case with provision for automatic one-year extensions until
either the executive or the Company notifies the other that such party does not
wish to extend the agreement. In connection with the expiration of Mr. Gold's
employment agreement, the Company and Mr. Gold are currently negotiating with
respect to the terms of Mr. Gold's continuing affiliation with the Company.
Among other things, the Company and Mr. Gold have been negotiating with respect
to the possibility that Mr. Gold may leave full-time employment with the Company
and subsequently enter into a consulting arrangement with the Company. As these
negotiations are ongoing, there can be no assurance that the Company and Mr.
Gold will enter into any such arrangement or any other arrangement pursuant to
which Mr. Gold would continue to provide services to
10
<PAGE>
the Company. In the event that Mr. Gold ceases to be a full-time employee of the
Company, the Company expects that other current executives of the Company will
assume Mr. Gold's responsibilities.
Pursuant to their respective employment agreements, Messrs. Gold,
Richardson, Nelson and Kreitzer are paid base salaries of $190,000, $175,000,
$165,000 and $140,000 per year, respectively, or such higher amount as may from
time to time be determined by the Company. In addition, such agreements provide
for discretionary annual bonuses. Mr. Richardson's employment agreement also
provides for a minimum performance bonus for the period ending on December 31,
1997.
The employment agreements with each of Messrs. Marcus, Gold, Nelson,
Richardson and Kreitzer also provide for standard employee benefits, including,
without limitation, participation in the Company's pension, welfare and stock
incentive plans, to the extent the Company maintains any such plans. In
addition, the employment agreements with each of Messrs. Marcus, Gold,
Richardson and Kreitzer provide that the Company will maintain term life
insurance on the life of each executive in the aggregate amount of $1 million.
Each of the employment agreements with Messrs. Marcus, Gold, Richardson and
Kreitzer provides that if the Company terminates the executive's employment
without "cause" or if the executive terminates his employment for "good reason"
(each as defined in the employment agreements), then such executive shall be
entitled to receive a severance payment ("Severance Payment"), payable in
monthly installments (except that portion of the Severance Payment that
represents the executive's bonus will be payable on the dates such amounts would
have been paid had such executive continued in the Company's employment), equal
to the sum of his base salary plus bonus otherwise payable during the remainder
of the term of his agreement (the "Severance Period"); PROVIDED, HOWEVER, that
if any of Messrs. Marcus, Gold, Richardson or Kreitzer terminates his employment
for "good reason" following a "change in control" (as defined in the respective
agreement), then such executive shall be entitled to receive a lump sum
Severance Payment equal to three times the sum of his base salary plus bonus
otherwise payable during the remaining term of the agreement. Upon termination
by reason of death or disability, Mr. Marcus will receive a Severance Payment
equal to the sum of his base salary and bonus otherwise payable during the
remaining term of his agreement. In the event that any such executive is
entitled to any Severance Payment, he will also be entitled to full and
immediate vesting of all awards granted under any of the Company's stock option
or incentive compensation plans and continued participation throughout the
Severance Period in all employee welfare and pension benefits plans. In
addition, in the event that amounts payable to any such executive are subject to
the excise tax imposed under Section 4999 of the Code, the Company will provide
such executive with a tax "gross up" payment in an amount sufficient to offset
the effects of such excise tax. Mr. Nelson's agreement provides that if he is
terminated for any reason other than "cause" (as defined in the agreement), he
will receive a Severance Payment, payable in monthly installments, equal to
seven and one-half months of his base salary.
The employment agreements with each of Messrs. Sudarsky, Marcus, Gold,
Nelson, Richardson and Kreitzer also provide that during the term of employment,
and the period, if any, during which such executive is entitled to receive
Severance Payments, such executive will not engage in any activity competitive
with the business of the Company.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the compensation
paid to executive officers. The following is the report of the Compensation
Committee to the Board of Directors describing compensation policies and
rationales applicable to the Company's executive officers with respect to
compensation paid to such executive officers for the 1997 fiscal year.
COMPENSATION PHILOSOPHY:
The Company's compensation program is designed to offer executive officers
competitive compensation based both on the Company's performance and on the
individual's contribution, performance and leadership. The Company's
compensation policies are intended to motivate, reward and retain highly
qualified executives for long-term strategic management and the enhancement of
stockholder value, to support a performance-oriented environment that rewards
achievement of specific internal Company goals, and to attract and retain
executives whose abilities are critical to the long-term success and
competitiveness of the Company.
The three main components in the Company's executive compensation program
are:
- Base Salary
- Incentive Bonus
- Stock Incentives
Base Salary. The salaries of Messrs. Marcus, Gold, Richardson, Nelson and
Kreitzer are fixed pursuant to the terms of their respective employment
agreements with the Company, and Mr. Sudarsky's retirement benefits are fixed
pursuant to the terms of his employment agreement with the Company. The salaries
of the other executive officers are determined annually by the Compensation
Committee with reference to surveys of salaries paid to executives with similar
responsibilities at comparable companies. The peer group for each executive
officer is composed of executives whose responsibilities are similar in scope
and content. In general, the Company seeks to set executive compensation levels
that are competitive with the average levels of peer group compensation.
Incentive Bonus. Annual incentive bonuses for executive officers, if any,
are intended to reflect the Compensation Committee's belief that a portion of
the annual compensation of each executive officer should be contingent upon the
performance of the Company, as well as the individual contribution of each
officer.
Stock Incentives. From time to time, the Company uses stock options as
long-term incentives to reward and retain executive officers. The Compensation
Committee, which has responsibility for making option grants under the 1997
Incentive Plan, believes that stock option grants provide an incentive that
focuses the executives' attention on the Company from the perspective of an
owner with an equity stake in the business. Because options are typically
granted with an exercise price equal to the fair market value of the Common
Stock on the date of grant, the Company's stock will provide value to the
recipient only when the price of the Company's stock increases above the
exercise price, that is, only to the extent that stockholders as a whole have
benefitted. Generally, stock options granted to executive officers vest ratably
over a three-year period and optionees must be employed by the Company at the
time of vesting in order to exercise the options.
EMPLOYMENT CONTRACTS
The Company offers employment contracts to key executives only when it is in
the best interest of the Company and its stockholders to attract and retain such
key executives and to ensure continuity and stability of management. In
connection with the IPO, the employment agreements with Messrs. Marcus and Gold
were amended to eliminate the stated minimums with respect to such officers'
annual bonus. In consideration of such amendments and for past services, the
Company paid bonuses to Messrs. Marcus and Gold in the amount of $352,500 and
$190,000, respectively, in 1997.
12
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES
The Compensation Committee increased Mr. Marcus' salary in 1997 by 9.9%. The
increase reflected the Compensation Committee's assessment of his performance in
light of the Company's performance in the prior fiscal year and Mr. Marcus'
service to the Company. Salary increases for other senior executives effected
during 1997 ranged from 6.6% to 10.5% and were based on similar considerations,
including individual performance, position, tenure, experience, leadership and
competitive data in compensation surveys of comparable companies.
In May 1997, the Compensation Committee reviewed and approved stock option
awards under the 1997 Incentive Plan. The Committee granted Mr. Marcus an option
to purchase 140,000 shares of Common Stock. Senior executives in the Company
also participate in the 1997 Incentive Plan, and the Compensation Committee
granted such executives options to purchase shares of Common Stock during 1997.
In determining the number of shares to award to Mr. Marcus and the other
executives, the Compensation Committee considered several factors, including
primarily Mr. Marcus' and such other executives' actual and potential
contributions to the Company's long term success, and the size of awards
provided to other executives holding similar positions in comparable companies.
Pursuant to their employment agreements with the Company, Mr. Marcus and the
other Named Executive Officers (other than Mr. Sudarksy) may receive a
discretionary annual bonus as determined by the Compensation Committee. In
determining the amounts of such bonuses, the Compensation Committee considers
the individual performance of each executive and the performance of the Company.
As of the Record Date, the Committee had not yet determined discretionary bonus
amounts, if any, based upon fiscal 1997 performance.
Effective March 28, 1997, the Company entered into amended and restated
employment agreements with each of Messrs. Marcus and Gold. Such officers'
original employment agreements were amended to eliminate the stated minimum with
respect to their respective annual bonus. Specifically, each of Messrs. Marcus'
and Gold's original employment agreement provided for a minimum bonus based upon
the annual percentage increase in funds from operations, as computed by the
Company's auditors. The Compensation Committee determined that Messrs. Marcus'
and Gold's bonuses should reflect the bonus structure available to senior
executives of other comparable companies. Accordingly, each of Messrs. Marcus'
and Gold's employment agreement was amended to provide that the officer is
entitled to a discretionary annual bonus as determined by the Compensation
Committee. The Compensation Committee approved the payment of $352,500 and
$190,000 to Messrs. Marcus and Gold, respectively, in consideration for each
officer's past services to the Company and for amending his employment
agreement. These amounts principally represented payments for amounts of bonus
compensation to which Messrs. Marcus and Gold would have been entitled to
receive had their original employment agreements not been amended.
SECTION 162(m) POLICY:
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
provides that publicly held companies may not deduct compensation paid to
certain of its top executive officers to the extent such compensation exceeds $1
million per officer in any year. However, pursuant to regulations issued by the
Treasury Department, certain limited exemptions to Section 162(m) apply with
respect to "qualified performance-based compensation" and to compensation paid
in certain circumstances by companies in the first few years following their
initial public offering of stock. Awards granted under the 1997 Incentive Plan
constitute qualified performance-based compensation, and the Company will
continue to monitor the applicability of Section 162(m) to its ongoing
compensation arrangements. Accordingly, the Company does not expect that amounts
of compensation paid to its executive officers will fail to be deductible on
account of Section 162(m).
13
<PAGE>
THE COMPENSATION COMMITTEE REPORT WILL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
Respectfully submitted,
COMPENSATION COMMITTEE
Joseph Elmaleh
Viren Mehta
David M. Petrone
14
<PAGE>
PERFORMANCE GRAPH:
The following graph compares the cumulative total stockholder return on the
Common Stock from May 28, 1997, the first day the Common Stock traded on the
NYSE, through December 31, 1997 to the cumulative total return on the Standard &
Poor's 500 Stock Index ("S&P 500 Index") and the Equity REIT Total Return Index
prepared by NAREIT ("NAREIT Index"). The graph assumes an investment of $100 in
the Common Stock and each of the indices on May 28, 1997, and that all dividends
were reinvested. The NAREIT Index for May was prorated to adjust for the partial
month. The return shown on the graph is not necessarily indicative of future
performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ALEXANDRIA REAL ESTATE EQUITIES,
INC. S&P 500 INDEX NAREIT INDEX
<S> <C> <C> <C>
May 28, 1997 $100.0 $100.0 $100.0
December 31, 1997 $158.7 $115.7 $119.6
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------
INDEX MAY 28, 1997 DECEMBER 31, 1997
- -------------------------------------------------------------------------------- --------------- -------------------
<S> <C> <C>
Alexandria Real Estate Equities, Inc............................................ 100 158.7
S&P 500 Index................................................................... 100 115.7
NAREIT Index.................................................................... 100 119.6
</TABLE>
THE STOCK PRICE PERFORMANCE GRAPH WILL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE
EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
15
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each of the Company's
directors, (ii) each of the Company's executive officers named in the Summary
Compensation Table under "Executive Compensation," (iii) all directors and
officers as a group, and (iv) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock. This
table is based on information provided to the Company or filed with the
Securities and Exchange Commission by the Company's directors, executive
officers and principal stockholders. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Jerry M. Sudarsky(2)........................................................................ 19,719 *
Joel S. Marcus(3)........................................................................... 130,367 1.1
Alan D. Gold(4)............................................................................. 74,281 *
James H. Richardson(5)...................................................................... 0 --
Peter J. Nelson(6).......................................................................... 23,097 *
Gary A. Kreitzer(7)......................................................................... 37,709 *
Joseph Elmaleh(8)........................................................................... 9,893 *
Viren Mehta(9).............................................................................. 9,893 *
David M. Petrone(10)........................................................................ 12,959 *
Anthony M. Solomon(11)...................................................................... 10,893 *
Executive officers and directors as a group (10 persons)(12)................................ 328,811 2.8
Health Science Properties Holding Corporation ("Holdings")(13).............................. 1,765,923 15.5
AEW Partners II, L.P.(14)................................................................... 1,659,239 14.5
FMR Corp.(15)............................................................................... 1,482,600 13.0
Southeastern Asset Management, Inc.(16)..................................................... 892,400 7.8
</TABLE>
- ------------------------------
* less than 1%.
(1) Unless otherwise indicated, the business address of each beneficial owner is
c/o Alexandria Real Estate Equities, Inc., 135 N. Los Robles Avenue, Suite
250, Pasadena, CA 91101.
(2) Includes 9,719 shares held by the Jerry M. and Mildred Sudarsky 1979
Revocable Trust, of which Mr. Sudarsky is the trustee, and 10,000 shares
subject to currently exercisable stock options. Excludes 1,765,923 shares
owned by Holdings, which may be deemed to be beneficially owned by Mr.
Sudarsky. Mr. Sudarsky disclaims beneficial ownership of the shares of
Common Stock owned by Holdings.
(3) Includes 83,700 shares held by the Joel and Barbara Marcus Family Trust, of
which Mr. Marcus is the trustee, and 46,667 shares subject to options that
will become exercisable within 60 days of March 31, 1998. Excludes 1,765,923
shares owned by Holdings, which may be deemed to be beneficially owned by
Mr. Marcus, and 93,333 shares subject to stock options that are not
currently exercisable and will not become exercisable within 60 days of
March 31, 1998. Mr. Marcus disclaims beneficial ownership of the shares of
Common Stock owned by Holdings.
(4) Includes 33,333 shares subject to options that will become exercisable
within 60 days of March 31, 1998. Excludes 1,765,923 shares owned by
Holdings, which may be deemed to be beneficially owned by Mr. Gold, and
66,667 shares subject to stock options that are not currently exercisable
and will not become exercisable within 60 days of March 31, 1998. Mr. Gold
disclaims beneficial ownership of the shares of Common Stock owned by
Holdings.
(5) Excludes 80,000 shares subject to stock options that are not currently
exercisable and will not become exercisable within 60 days of March 31,
1998.
16
<PAGE>
(6) Includes 20,000 shares subject to options that will become exercisable
within 60 days of March 31, 1998. Excludes 40,000 shares subject to stock
options that are not currently exercisable and will not become exercisable
within 60 days of March 31, 1998.
(7) Includes 20,000 shares subject to options that will be come exercisable
within 60 days of March 31, 1998. Excludes 40,000 shares subject to stock
options that are not currently exercisable and will not become exercisable
within 60 days of March 31, 1998.
(8) Includes 5,000 shares subject to currently exercisable stock options.
Excludes 1,765,923 shares owned by Holdings, which may be deemed to be
beneficially owned by Mr. Elmaleh. Mr. Elmaleh disclaims beneficial
ownership of the shares of Common Stock owned by Holdings.
(9) Includes 5,000 shares subject to currently exercisable stock options.
(10) Includes 33 shares held by Nancy Petrone (Mr. Petrone's spouse), which may
be deemed to be beneficially owned by Mr. Petrone, and 5,000 shares subject
to currently exercisable stock options.
(11) Includes 5,000 shares subject to currently exercisable stock options.
(12) See notes (2) through (8) above.
(13) Each of Messrs. Sudarsky, Marcus, Gold and Elmaleh is a member of the board
of directors and is a stockholder of Holdings. As a result, each such
individual may be deemed to be the beneficial owner of the shares of Common
Stock owned by Holdings.
(14) Share amount as reported on Schedule 13D filed with the Securities and
Exchange Commission on June 9, 1997. Address: 225 Franklin Street, Boston,
Massachusetts, 02110. According to such Schedule 13D, AEW Partners II, L.P.
has sole voting and dispositive power with respect to 1,257,039 shares and
shared voting and dispositive power with respect to 402,200 shares.
(15) Share amount as reported on Schedule 13G filed with the Securities and
Exchange Commission on January 12, 1998. Address: 82 Devonshire Street,
Boston, Massachusetts, 02109. According to such Schedule 13G, FMR Corp. has
sole voting power with respect to 193,100 shares, and sole dispositive power
with respect to all 1,482,600 shares.
(16) Share amount as reported on Schedule 13G filed with the Securities and
Exchange Commission on February 13, 1998. Address: 6410 Poplar Avenue, Suite
900, Memphis, Tennessee, 38119. According to such Schedule 13G, Southeastern
Asset Management, Inc. has shared voting and dispositive power with respect
to all 892,400 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of the Company's Common Stock, to file reports of beneficial ownership of
the Company's Common Stock and changes in such ownership with the Securities and
Exchange Commission, the NYSE and the Company. Specific due dates for these
reports have been established, and the Company is required to disclose in this
Proxy Statement any failure to file these reports on a timely basis. Based
solely on its review of the copies of these reports received or written
representations from these reporting persons that no Forms 5 or other reports
were required for such persons, the Company believes that, during the 1997
Fiscal Year, all of such filing requirements under Section 16(a) were timely
met, except that the filing by Mr. Richardson of one report on Form 3 relating
to a single transaction was late.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Holdings, a stockholder of the Company, received $2.5 million from the
proceeds of the IPO as repayment of an advance made to the Company for general
working capital purposes. Holdings used such proceeds to repay loans from
certain stockholders of Holdings. In addition, in connection with the IPO, the
Company granted to Holdings customary transferable registration rights with
respect to the shares of Common Stock held by it. Holdings also has entered into
a Reimbursement Agreement with the Company pursuant to which Holdings has agreed
to reimburse the Company for certain costs and expenses incurred by it on behalf
of Holdings. During 1997, Holdings paid the Company $18,000 pursuant to such
agreement.
In connection with the IPO, Bernardo Capital, Inc. (a corporation of which
Messrs. Gold, Kreitzer and Stone are stockholders) received from Holdings
approximately $517,000 as reimbursement for certain expenses, including accrued
salaries and benefits paid to each of Messrs. Gold, Kreitzer and Stone, incurred
in connection with the formation of Holdings in 1993. These funds were paid by
Holdings.
In connection with the IPO, AEW Partners II, L.P. (together with certain of
its affiliates, "AEW") received 1,659,239 shares of Common Stock upon conversion
of the outstanding shares of Series V Preferred Stock, all of which were held by
AEW. In addition, in connection with the issuance of the Series V Preferred
Stock, the Company granted to AEW certain registration rights with respect to
the shares of Common Stock received by it in exchange for its shares of Series V
Preferred Stock.
In March 1998, the Company purchased certain real property in Columbia,
Maryland from an affiliate of AEW for a purchase price of $6,375,000. The terms
of such acquisition were determined through arm's-length negotiations.
The Company paid Realty Capital International Inc. ("RCI") approximately
$137,500 in 1996 in connection with advisory services provided to the Company in
connection with the issuance of the Series V Preferred Stock and approximately
$776,250 in 1997 in connection with the provision of such services in connection
with the IPO. Mr. Jennings, a nominee to the Board of Directors, serves as
President of RCI. RCI is not currently providing advisory services to the
Company.
18
<PAGE>
PROPOSAL NUMBER TWO--RATIFICATION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
The Audit Committee has selected, and the Board of Directors has approved,
Ernst & Young LLP as the Company's independent auditors for the Company's fiscal
year ended December 31, 1998 (the "1998 Fiscal Year"). The Board of Directors
also has directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's consolidated financial statements since 1994.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire, and
will be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Bylaws or otherwise.
However, the Board of Directors is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board of Directors will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different auditing firm at any time during the 1998 Fiscal Year if the
Board of Directors determines that such a change would be in the best interests
of the Company and its stockholders.
VOTE REQUIRED
The affirmative vote of a majority of all of the votes cast at the Annual
Meeting is required to ratify the selection of Ernst & Young LLP as the
Company's independent accountants for the 1998 Fiscal Year. Abstentions as to
this proposal will have no effect on the outcome of the vote. The ratification
of the Company's independent accountants is a routine matter on which a broker
or other nominee is empowered to vote. Accordingly, no broker non-votes will
result from this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NUMBER TWO.
PROPOSAL NUMBER THREE--APPROVAL OF THE AMENDMENT TO
THE 1997 INCENTIVE PLAN
The Board of Directors is proposing an amendment to the 1997 Incentive Plan
to increase the number of shares of Common Stock available for issuance
thereunder from 900,000 shares to that number of shares equal to 10% of the
number of shares of Common Stock outstanding at any time, PROVIDED that in no
event shall the number of shares available for issuance under the plan exceed
3,000,000 shares of Common Stock. The 1997 Incentive Plan was adopted by the
Board of Directors and approved by the Company's sole stockholder prior to the
Company's initial public offering in June 1997.
The Board of Directors believes that the availability of award grants under
the 1997 Incentive Plan enhances the Company's ability to attract, motivate and
retain the caliber of directors, officers and other employees necessary for the
Company's future growth and success. As a result of prior grants of stock
options under the 1997 Incentive Plan to directors, officers and other employees
of the Company, the number of shares of Common Stock available for future grants
has been reduced to 181,000 shares as of the Record Date. The Board of Directors
has determined that this number is insufficient to maintain the 1997 Incentive
Plan as an incentive device. The Board of Directors also believes that
increasing the number of shares of Common Stock available will help the Company
achieve its goals by keeping its incentive compensation program competitive with
those of comparable companies.
The following paragraphs summarize the more significant features of the 1997
Incentive Plan. The summary is subject, in all respects, to the terms of the
1997 Incentive Plan, the full text of which, as proposed to be amended, is set
forth in Exhibit A attached hereto. In Exhibit A, the materials that would be
deleted from the plan pursuant to the proposed amendment are stricken through,
and the material that would be added by such amendment are double underlined. If
the amendment is not approved by the stockholders, the 1997 Incentive Plan will
continue in effect under the present terms.
19
<PAGE>
SUMMARY OF THE 1997 INCENTIVE PLAN
The 1997 Incentive Plan is administered by the Compensation Committee of the
Board of Directors and provides for the grant of incentive stock options
intended to qualify as such under Section 422 of the Code, non-qualified stock
options, stock appreciation rights and restricted stock to employees, officers,
directors and independent contractors (including non-employee directors) of the
Company currently with respect to 900,000 shares of Common Stock (and, if the
amendment is approved, that number of shares of Common Stock equal to 10% of the
number of shares of Common Stock outstanding at any time, PROVIDED THAT in no
event shall the number of shares available for issuance under the plan exceed
3,000,000 shares of Common Stock); PROVIDED, that incentive stock options may be
granted only to employees of the Company. As of the Record Date the Company had
19 full-time employees and four non-employee directors.
The 1997 Incentive Plan permits the Compensation Committee to select
eligible employees, officers, directors and independent contractors (including
non-employee directors) of the Company to receive awards, to determine the type
and number of awards to be granted and to determine the terms, conditions,
restrictions and performance criteria relating to any award. As of the Record
Date, the Company had granted options to officers, non-employee directors and
certain employees of the Company under the 1997 Incentive Plan with respect to
an aggregate of 719,000 shares of Common Stock. Such options that have been
granted to non-employee directors are exercisable immediately, and those that
have been granted to all others are exercisable ratably over a three-year period
beginning one year after the grant date. None of the options so granted is
exercisable more than ten years after the grant date.
The purchase price for shares issued to an optionee upon exercise of an
option is the price determined by the Compensation Committee at the time of
grant; PROVIDED, that with respect to incentive stock options, such price may
not be less than the Fair Market Value (as defined in the 1997 Incentive Plan)
of the Common Stock on the grant date. The exercise price may be paid in cash
or, subject to approval by the Compensation Committee, by an exchange of Common
Stock previously owned by the optionee, or a combination of both. The
Compensation Committee also has the authority to make loans to grantees under
the 1997 Incentive Plan to enable such grantees to purchase shares of Common
Stock in connection with the realization of awards made thereunder.
Unless otherwise provided in the agreement evidencing an award under the
1997 Incentive Plan, an option granted thereunder may not be exercised unless
the grantee is employed by or maintains an independent contractor relationship
with the Company (including serving on the Board of Directors). In the event of
a Change of Control (as defined in the 1997 Incentive Plan), all awards under
the plan will become fully vested and exercisable, and any loans made thereunder
will be forgiven.
The 1997 Incentive Plan may be altered, amended, suspended or terminated at
any time and from time to time by the Board of Directors. If the Compensation
Committee determines that stockholder approval of an amendment is necessary in
order for the plan to comply or to continue to comply with applicable law, such
amendment shall not become effective until the Company has received the
requisite stockholder vote. No amendment may affect a grantee's outstanding
award under the plan, however, without such grantee's consent.
VOTE REQUIRED
The affirmative vote of a majority of all of the votes cast at the Annual
Meeting is required to approve the proposed amendment to the 1997 Incentive
Plan. Abstentions and broker non-votes as to this proposal will have no effect
on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NUMBER THREE.
20
<PAGE>
STOCKHOLDER PROPOSALS
Subject to Securities and Exchange Commission regulations, proposals of
stockholders that are intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received by the Company no later than December
16, 1998 in order to be included in the proxy statement and proxy relating to
that Annual Meeting.
By Order of the Board of Directors
[LOGO]
Peter J. Nelson
CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY
Pasadena, California
April 15, 1998
21
<PAGE>
EXHIBIT A
ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
<TABLE>
<CAPTION>
SECTION PAGE
- ------------- -----
<S> <C> <C>
1. Purpose; Types of Awards; Construction............................................................ A-1
2. Definitions....................................................................................... A-2
3. Administration.................................................................................... A-4
4. Eligibility....................................................................................... A-4
5. Stock Subject to the Plan......................................................................... A-5
6. Specific Terms of Awards.......................................................................... A-5
7. Change of Control Provisions...................................................................... A-8
8. Loan Provisions................................................................................... A-8
9. General Provisions................................................................................ A-8
</TABLE>
i
<PAGE>
ALEXANDRIA REAL ESTATE EQUITIES, INC.
1997 STOCK AWARD AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the Alexandria Real Estate Equities, Inc. 1997 Stock Award
and Incentive Plan (the "Plan") is to afford an incentive to selected officers,
employees and independent contractors (including non-employee directors) of
Alexandria Real Estate Equities, Inc. (the "Company"), or any Subsidiary or
Affiliate that now exists or hereafter is organized or acquired, to acquire a
proprietary interest in the Company, to continue as employees or independent
contractors (including non-employee directors), as the case may be, to increase
their efforts on behalf of the Company and to promote the success of the
Company's business. Pursuant to Section 6 of the Plan, there may be granted
Options (including "incentive stock options" and "nonqualified stock options"),
Stock Appreciation Rights, Restricted Stock, and Other Stock-Based Awards or
Other Cash-Based Awards. The Plan also provides the authority to make loans to
purchase shares of Stock. From and after the consummation of the Initial Public
Offering, the Plan is designed to comply with the requirements of Regulation G
(12 C.F.R. Section 207) regarding the purchase of shares on margin, the
requirements for "performance-based compensation" under Section 162(m) of the
Code and the conditions for exemption from short-swing profit recovery rules
under Rule 16b-3 of the Exchange Act, and shall be interpreted in a manner
consistent with the requirements thereof.
2. DEFINITIONS.
2.1 For purposes of the Plan, the following terms shall be defined as
set forth below:
(a) "Affiliate" means any entity if, at the time of granting of an
Award or a Loan, (i) the Company, directly or indirectly, owns at least
20% of the combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity or (ii) such
entity, directly or indirectly, owns at least 20% of the combined voting
power of all classes of stock of the Company.
(b) "Award" means any Option, SAR, Restricted Stock, or Other
Stock-Based Award or Other Cash-Based Award granted under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts that
have been designated by a Grantee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under the Plan upon his or her death, or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the
person, persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change of Control" shall mean the occurrence of any of the
following events:
(i) Any Person (as such term is used in section 3(a)(9) of the
Exchange Act, as modified and used in sections 13(d) and 14(d)
thereof, except that such term shall not include (A) the Company or
any of its subsidiaries, (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of
its affiliates, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, (D) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, or (E) a person or group as used in Rule 13d-1(b) under the
Exchange Act) that is or becomes the Beneficial Owner, as such term
is defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such
A-1
<PAGE>
Person any securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by the
Company or its affiliates of a business) representing twenty-five
percent (25%) or more of the combined voting power of the Company's
then outstanding securities; or
(ii) The following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders was approved
or recommended by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of the
Company with any other corporation, other than (A) a merger or
consolidation that would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any
parent thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any subsidiary of the Company, at least seventy-five
percent (75%) of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by the
Company or its affiliates of a business) representing twenty-five
percent (25%) or more of the combined voting power of the Company's
then outstanding securities; or
(iv) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least seventy-five (75%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Committee" means the Board or the committee designated or
established by the Board to administer the Plan from and after the
consummation of the Initial Public Offering, the composition of which
shall at all times satisfy the provisions of Rule 16b-3. With respect to
the period prior to consummation of the Initial Public Offering,
references to the "Committee" shall be deemed to refer to the Board or to
the Compensation Committee of the Board.
(i) "Company" means Alexandria Real Estate Equities, Inc., a
corporation organized under the laws of the State of Maryland, or any
successor corporation.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted
and applied by regulations, rulings and cases.
A-2
<PAGE>
(k) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property
determined by such methods or procedures as shall be established from
time to time by the Committee. Unless otherwise determined by the
Committee in good faith, the per share Fair Market Value of Stock as of a
particular date shall mean (i) the closing sales price per share of Stock
on the national securities exchange on which the Stock is principally
traded for the last preceding date on which there was a sale of such
Stock on such exchange, or (ii) if the shares of Stock are then traded in
an over-the-counter market, the average of the closing bid and ask prices
for the shares of Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Stock in such market, or
(iii) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the
Committee, in its sole discretion, shall determine.
(l) "Grantee" means a person who, as an employee or independent
contractor of the Company, a Subsidiary or an Affiliate, has been granted
an Award or Loan under the Plan.
(m) "Initial Public Offering" shall mean the initial public offering
of shares of Stock of the Company, as more fully described in the
Registration Statement on Form S-11 filed with the Securities and
Exchange Commission on March 18, 1997, as such Registration Statement may
be amended from time to time.
(n) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Section
422 of the Code.
(o) "Loan" means the proceeds from the Company borrowed by a Plan
participant under Section 8 of the Plan.
(p) "Non-Employee Director" means any director who is not an employee
of the Company or any of its subsidiaries or affiliates. For purposes of
this Plan, such non-employee director shall be treated as an independent
contractor.
(q) "Nonqualified Stock Option" or "NQSO" means any Option that is
designated as a nonqualified stock option.
(r) "Option" means a right, granted to a Grantee under Section 6.2,
to purchase shares of Stock. An Option may be either an ISO or an NQSO;
PROVIDED THAT ISOs may be granted only to employees of the Company or of
a Subsidiary.
(s) "Other Cash-Based Award" means cash awarded to a Grantee under
Section 6.6, including cash awarded as a bonus or upon the attainment of
specified performance objectives or otherwise as permitted under the
Plan.
(t) "Other Stock-Based Award" means a right or other interest granted
to a Grantee under Section 6.6 that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or
related to, Stock, including, but not limited to (1) unrestricted Stock
awarded as a bonus or upon the attainment of specified performance
objectives or otherwise as permitted under the Plan and (2) a right
granted to a Grantee to acquire Stock from the Company for cash and/or a
promissory note containing terms and conditions prescribed by the
Committee.
(u) "Plan" means this Alexandria Real Estate Equities, Inc. 1997
Stock Award and Incentive Plan, as amended from time to time.
(v) "Restricted Stock" means an Award of shares of Stock to a Grantee
under Section 6.4 that may be subject to certain restrictions and to a
risk of forfeiture.
A-3
<PAGE>
(w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(x) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by the regulations, rulings and cases.
(y) "Stock" means shares of the common stock, par value $.01 per
share, of the Company.
(z) "Stock Appreciation Right" or "SAR" means the right, granted to a
Grantee under Section 6.3, to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to
the date of exercise of the right, with payment to be made in cash,
Stock, or property as specified in the Award or determined by the
Committee.
(aa) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the
time of granting of an Award, each of the corporations (other than the
last corporation in the unbroken chain) owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in the chain.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan including, without
limitation, the authority to grant Awards and make Loans; to determine the
persons to whom and the time or times at which Awards shall be granted and Loans
shall be made; to determine the type and number of Awards to be granted and the
amount of any Loan, the number of shares of Stock to which an Award may relate
and the terms, conditions, restrictions and performance criteria relating to any
Award or Loan; and to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
criteria and performance objectives (if any) included in, Awards and Loans in
recognition of unusual or non-recurring events affecting the Company or any
Subsidiary or Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles; to designate Affiliates; to construe and
interpret the Plan and any Award or Loan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to determine the terms and provisions of
the Award Agreements and any promissory note or agreement related to any Loan
(which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may appoint a chairperson and a secretary and may make such
rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, and any Subsidiary, Affiliate or Grantee (or any person
claiming any rights under the Plan from or through any Grantee) and any
stockholder.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Award granted
or Loan made hereunder.
A-4
<PAGE>
4. ELIGIBILITY.
Subject to the provisions set forth below, Awards and Loans may be granted
to selected employees, officers and independent contractors (including
Non-Employee Directors) of the Company and its present or future Subsidiaries
and Affiliates, in the discretion of the Committee; PROVIDED THAT ISOs may be
granted only to employees of the Company or of a Subsidiary. In determining the
persons to whom Awards and Loans shall be granted and the type (including the
number of shares to be covered) of any Award or the amount of any Loan, the
Committee shall take into account such factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan.
5. STOCK SUBJECT TO THE PLAN.
The maximum number of shares of Stock reserved for the grant of Awards under
the Plan shall be [900,000], subject to adjustment as provided herein, THAT
NUMBER OF SHARES EQUAL TO 10% OF THE NUMBER OF SHARES OF STOCK OUTSTANDING AT
ANY TIME, PROVIDED THAT IN NO EVENT SHALL THE NUMBER OF SHARES AVAILABLE FOR
ISSUANCE UNDER THE PLAN EXCEED 3,000,000 SHARES OF STOCK AT ANY TIME. No more
than 100% of the total shares available for grant may be awarded to a single
individual in a single year. Such shares may, in whole or in part, be authorized
but unissued shares or shares that shall have been or may be reacquired by the
Company in the open market, in private transactions or otherwise. If any shares
subject to an Award are forfeited, cancelled, exchanged or surrendered, or if an
Award otherwise terminates or expires without a distribution of shares to the
Grantee, the shares of stock with respect to such Award shall, to the extent of
any such forfeiture, cancellation, exchange, surrender, termination or
expiration, again be available for Awards under the Plan; PROVIDED THAT, in the
case of forfeiture, cancellation, exchange or surrender of shares of Restricted
Stock with respect to which dividends have been paid or accrued, the number of
shares with respect to such Awards shall not be available for Awards hereunder
unless, in the case of shares with respect to which dividends were accrued but
unpaid, such dividends are also forfeited, cancelled, exchanged or surrendered.
Upon the exercise of any Award granted in tandem with any other Awards or
awards, such related Awards or awards shall be cancelled to the extent of the
number of shares of Stock as to which the Award is exercised and,
notwithstanding the foregoing, such number of shares shall no longer be
available for Awards under the Plan.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (a)
the number and kind of shares of Stock which may thereafter be issued in
connection with Awards, (b) the number and kind of shares of Stock issued or
issuable in respect of outstanding Awards, and (c) the exercise price, grant
price, or purchase price relating to any Award; PROVIDED THAT, with respect to
ISOs, such adjustment shall be made in accordance with Section 424(h) of the
Code.
6. SPECIFIC TERMS OF AWARDS.
6.1 GENERAL. The term of each Award shall be for such period as may be
determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Stock, or other
property, and may be made in a single payment or transfer, in installments,
or on a deferred basis. The Committee may make rules relating to installment
or deferred payments with respect to Awards, including the rate of interest
to be credited with respect to such payments. In addition to the foregoing,
the Committee may impose on any Award or the exercise thereof, at the date
of grant or thereafter, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall
determine.
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6.2 OPTIONS. The Committee is authorized to grant Options to Grantees
on the following terms and conditions:
(a) TYPE OF AWARD. The Award Agreement evidencing the grant of an
Option under the Plan shall designate the Option as an ISO or an NQSO.
(b) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
PROVIDED THAT, in the case of an ISO, such exercise price shall be not
less than the Fair Market Value of a share on the date of grant of such
Option, and in no event shall the exercise price for the purchase of
shares be less than par value. The exercise price for Stock subject to an
Option may be paid in cash or subject to the approval of the Committee,
by an exchange of Stock previously owned by the Grantee, or a combination
of both, in an amount having a combined value equal to such exercise
price. Subject to the approval of the Committee, a Grantee may pay all or
a portion of the aggregate exercise price by having shares of Stock with
a Fair Market Value on the date of exercise equal to the aggregate
exercise price withheld by the Company or sold by a broker-dealer under
circumstances meeting the requirements of 12 C.F.R. Section 220 or any
successor thereof.
(c) TERM AND EXERCISABILITY OF OPTIONS. The date on which the
Committee adopts a resolution expressly granting an Option shall be
considered the day on which such Option is granted. Options shall be
exercisable over the exercise period (which shall not exceed ten years
from the date of grant), at such times and upon such conditions as the
Committee may determine, as reflected in the Award Agreement; PROVIDED
THAT, the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. An Option
may be exercised to the extent of any or all full shares of Stock as to
which the Option has become exercisable, by giving written notice of such
exercise to the Committee or its designated agent.
(d) TERMINATION OF EMPLOYMENT, ETC. An Option may not be exercised
unless the Grantee is then in the employ of, or then maintains an
independent contractor relationship with, the Company or a Subsidiary or
an Affiliate (or a company or a parent or Subsidiary company of such
company issuing or assuming the Option in a transaction to which Section
424(a) of the Code applies); PROVIDED THAT ISOs may be granted only to
employees of the Company or of a Subsidiary, and may not be exercised
unless the Grantee has remained continuously so employed, or has
continuously maintained such relationship, since the date of grant of the
Option; PROVIDED THAT, the Award Agreement may contain provisions
extending the exercisability of Options, in the event of specified
terminations, to a date not later than the expiration date of such
Option.
(e) OTHER PROVISIONS. Options may be subject to such other
conditions including, but not limited to, restrictions on transferability
of the shares acquired upon exercise of such Options, as the Committee
may prescribe in its discretion or as may be required by applicable law,
including but not limited to the requirements respecting ISOs set forth
in Section 422 of the Code.
6.3 SARS. The Committee is authorized to grant SARs to Grantees on the
following terms and conditions:
(a) IN GENERAL. Unless the Committee determines otherwise, (i) an
SAR granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter or (ii) an SAR granted in
tandem with an ISO may only be granted at the time of grant of the
related ISO. An SAR granted in tandem with an Option shall be exercisable
only to the extent the underlying Option is exercisable.
(b) SARS. An SAR shall confer on the Grantee a right to receive an
amount with respect to each share subject thereto, upon exercise thereof,
equal to the excess of (i) the Fair Market Value of one share of Stock on
the date of exercise over (ii) the grant price of the SAR (which in
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the case of an SAR granted in tandem with an Option shall be equal to the
exercise price of one share of Stock underlying the Option, and which in
the case of any other SAR shall be such price as the Committee may
determine).
6.4 RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock to Grantees on the following terms and conditions:
(a) ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as
the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
may determine. Such restrictions may include factors relating to the
increase in the value of the Stock or to individual or Company
performance such as the attainment of certain specified individual or
Company-wide performance goals or earnings per share. Except to the
extent restricted under the Award Agreement relating to the Restricted
Stock, a Grantee granted Restricted Stock shall have all of the rights of
a stockholder including, without limitation, the right to vote Restricted
Stock and the right to receive dividends thereon.
(b) FORFEITURE. Upon termination of employment with or service to
the Company and any Subsidiary, or upon termination of the independent
contractor relationship, as the case may be, during the applicable
restriction period, Restricted Stock and any accrued but unpaid dividends
that are at that time subject to restrictions shall be forfeited;
PROVIDED THAT, the Committee may provide, by rule or regulation or in any
Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will
be waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or
in part the forfeiture of Restricted Stock.
(c) CERTIFICATES FOR STOCK. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Grantee, such certificates shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock, and the Company shall retain physical possession of the
certificate.
(d) DIVIDENDS. Dividends paid on Restricted Stock shall either be
paid at the dividend payment date, or be deferred for payment to such
date as determined by the Committee, in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends.
Stock distributed in connection with a stock split or stock dividend, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has
been distributed.
6.5 STOCK AWARDS IN LIEU OF CASH AWARDS. The Committee is authorized
to grant Stock to Grantees as a bonus, or to grant other Awards, in lieu of
Company commitments to pay cash under other plans or compensatory
arrangements. Stock or Awards granted hereunder shall have such other terms
as shall be determined by the Committee.
6.6 OTHER STOCK-BASED OR CASH-BASED AWARDS. The Committee is
authorized to grant to Grantees Other Stock-Based Awards or Other Cash-Based
Awards alone or in addition to any other Award under the Plan, as deemed by
the Committee to be consistent with the purposes of the Plan. Such Awards
may be granted with value and payment contingent upon performance of the
Company or any other factors designated by the Committee, or valued by
reference to the performance of specified Subsidiaries or Affiliates.
The Committee shall determine the terms and conditions of such Awards at the
date of grant or thereafter; PROVIDED, THAT performance objectives for each year
shall be established by the Committee not later than the latest date permissible
under Section 162(m) of the Code. Such performance objectives may
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be expressed in terms of one or more financial or other objective goals.
Financial goals may be expressed, for example, in terms of earnings per share,
stock price, return on equity, net earnings growth, net earnings, related return
ratios, cash flow, earnings before interest, taxes, depreciation and
amortization (EBITDA), return on assets or total stockholder return. Other
objective goals may include the attainment of various productivity and long-term
growth objectives. Any criteria may be measured in absolute terms or as compared
to another corporation or corporations. To the extent applicable, any such
performance objective shall be determined (a) in accordance with the Company's
audited financial statements and generally accepted accounting principles and
reported upon by the Company's independent accountants or (b) so that a third
party having knowledge of the relevant facts could determine whether such
performance objective is met. Performance objectives shall include a threshold
level of performance below which no Award payment shall be made, levels of
performance above which specified percentages of target Awards shall be paid,
and a maximum level of performance above which no additional Award shall be
paid. Performance objectives established by the Committee may be (but need not
be) different from year-to-year and different performance objectives may be
applicable to different Grantees.
7. CHANGE OF CONTROL PROVISIONS. The following provisions shall apply in
the event of a Change of Control, unless otherwise determined by the Committee
or the Board in writing at or after grant (including under any individual
agreement), but prior to the occurrence of such Change of Control:
7.1 any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested;
7.2 the restrictions, deferral limitations, payment conditions, and
forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested, and any
performance conditions imposed with respect to Awards shall be deemed to be
fully achieved; and
7.3 any indebtedness incurred pursuant to Section 8 of this Plan shall
be forgiven and the collateral pledged in connection with any such Loan
shall be released.
8. LOAN PROVISIONS. Subject to the provisions of the Plan and all
applicable federal and state laws, rules and regulations (including the
requirements of Regulation G (12 C.F.R. Section 207)), the Committee shall have
the authority to make Loans to Grantees (on such terms and conditions as the
Committee shall determine), to enable such Grantees to purchase shares in
connection with the Initial Public Offering or otherwise in connection with the
realization of Awards under the Plan. Loans shall be evidenced by a promissory
note or other agreement, signed by the borrower, which shall contain provisions
for repayment and such other terms and conditions as the Committee shall
determine.
9. GENERAL PROVISIONS.
9.1 EFFECTIVE DATE; APPROVAL BY STOCKHOLDERS. The Plan shall take
effect upon its adoption by the Board (the "Effective Date"), but the Plan
(and any grants of Awards made prior to the stockholder approval mentioned
herein), shall be subject to the approval of the holder(s) of a majority of
the issued and outstanding shares of voting securities of the Company
entitled to vote, which approval must occur within twelve (12) months of the
date the Plan is adopted by the Board. In the absence of such approval, such
Awards shall be null and void. Notwithstanding the foregoing, the
effectiveness of the Plan is conditioned upon the consummation of the
Initial Public Offering, and shall be of no force and effect if the Initial
Public Offering is not consummated.
9.2 NONTRANSFERABILITY. Awards shall not be transferable by a Grantee
except by will or the laws of descent and distribution or, if then permitted
under Rule 16b-3, pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder, and shall be exercisable
during the lifetime of a Grantee only by such Grantee or his guardian or
legal representative.
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9.3 NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in the Plan or in
any Award or Loan granted or any Award Agreement, promissory note or other
agreement entered into pursuant hereto shall confer upon any Grantee the
right to continue in the employ of or to continue as an independent
contractor of the Company, any Subsidiary or any Affiliate, or to be
entitled to any remuneration or benefits not set forth in the Plan or such
Award Agreement, promissory note, or other agreement or to interfere with or
limit in any way the right of the Company or any such Subsidiary or
Affiliate to terminate such Grantee's employment or independent contractor
relationship.
9.4 TAXES. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any other payment to a
Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority includes the authority to withhold or
receive Stock or other property and to make cash payments in respect thereof
in satisfaction of a Grantee's tax obligations.
9.5 AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time
and from time to time alter, amend, suspend, or terminate the Plan in whole
or in part; PROVIDED THAT, if the Committee determines that stockholder
approval of an amendment is necessary and desirable in order for the Plan to
comply or continue to comply with any applicable law, such amendment shall
not be effective unless the same shall be approved by the requisite vote of
the stockholders of the Company entitled to vote thereon. Notwithstanding
the foregoing, no amendment shall affect adversely any of the rights of any
Grantee, without such Grantee's consent, under any Award or Loan theretofore
granted under the Plan.
9.6 NO RIGHTS TO AWARDS OR LOANS; NO STOCKHOLDER RIGHTS. No Grantee
shall have any claim to be granted any Award or Loan under the Plan, and
there is no obligation for uniformity of treatment of Grantees. Except as
provided specifically herein, a Grantee or a transferee of an Award shall
have no rights as a stockholder with respect to any shares covered by the
Award until the date of the issuance of a stock certificate to him for such
shares.
9.7 UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Grantee pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Grantee any rights that are
greater than those of a general creditor of the Company.
9.8 NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or
paid in lieu of such fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise eliminated.
9.9 REGULATIONS AND OTHER APPROVALS.
(a) The obligation of the Company to sell or deliver Stock with
respect to any Award granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) Each Award is subject to the requirement that, if at any time the
Committee determines, in its absolute discretion, that the listing,
registration or qualification of Stock issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the grant of an
Award or the issuance of Stock, no such Award shall be granted or payment
made or Stock issued, in whole or in part, unless listing,
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registration, qualification, consent or approval has been effected or
obtained free of any conditions not acceptable to the Committee.
(c) In the event that the disposition of Stock acquired pursuant to
the Plan is not covered by a then current registration statement under
the Securities Act and is not otherwise exempt from such registration,
such Stock shall be restricted against transfer to the extent required by
the Securities Act or regulations thereunder, and the Committee may
require a Grantee receiving Stock pursuant to the Plan, as a condition
precedent to receipt of such Stock, to represent to the Company in
writing that the Stock acquired by such Grantee is acquired for
investment only and not with a view to distribution.
9.10 GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Maryland
without giving effect to the conflict of laws principles thereof.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Proxy For Annual Meeting Of Stockholders
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of Alexandria Real Estate Equities, Inc., a
Maryland corporation (the "Company"), hereby appoints Jerry M. Sudarsky and Joel
S. Marcus, and each of them, as proxies for the undersigned, with full power of
substitution in each of them, to attend the Annual Meeting of Stockholders of
the Company to be held on Friday, May 15, 1998 at 9:00 a.m. local time, at the
Doubletree Hotel, Fountain Room IV, 191 North Los Robles Avenue, Pasadena,
California 91101, and at any adjournment(s) or postponement(s) thereof, to cast
on behalf of the undersigned all votes that the undersigned is entitled to cast
at such meeting and otherwise to represent the undersigned at the meeting, with
the same effect as if the undersigned were present. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and the
accompanying Proxy Statement and revokes any proxy previously given with respect
to such shares.
(Continued and to be signed on reverse side)
FOLD AND DETACH HERE
1. Election of Directors
Nominees: Jerry M. Sudarsky, Joel S. Marcus, Alan D. Gold, Joseph
Elmaleh, Viren Mehta, David M. Petrone, Anthony M. Solomon and
Richard B. Jennings
[ ] FOR ALL NOMINEES [ ] WITHHOLD AS TO ALL NOMINEES
FOR ALL NOMINEES(S) (Except as written below)
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2. Ratification of the selection of Ernst & Young LLP to serve as Company's
independent accountants for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment to the Company's 1997 Stock Award and Incentive
Plan to increase the number of shares of the Company's Common Stock, par
value $.01 per share, available for issuance thereunder from 900,000 shares
to that number of shares equal to 10% of the number of shares of Common
Stock outstanding at any time, PROVIDED that in no event shall the number
of shares available for issuance under the Plan exceed 3,000,000 shares of
Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) or postponement(s) thereof and as to which
the undersigned hereby confers discretionary authority.
[ ] CHECK HERE IF YOU PLAN TO ATTEND THE MEETING
<PAGE>
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN ACCORDANCE WITH
THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS
MADE, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST "FOR" THE
FOREGOING PROPOSALS AND OTHERWISE IN THE DISCRETION OF THE PROXIES AT THE ANNUAL
MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Signature __________________ Signature if held jointly __________________ Dated
___________, 1998.
Please sign exactly as your name appears hereon and date. If the shares are
held jointly, each holder should sign. When signing as an attorney, executor,
administrator, trustee, guardian or as an officer, signing for a corporation or
other entity, please give full title under signature.
Fold and Detach Here
