<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sections 240.14a-11(c) or 240.14a-12
Pan Pacific Retail Properties, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[Pan Pacific Logo]
April 4, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Pan Pacific Retail Properties, Inc. to be held at 11:00 a.m. (PDT) on Friday May
5, 2000 at the DoubleTree Hotel, in San Diego's Mission Valley, 7450 Hazard
Center Drive, San Diego, California.
At the Annual Meeting, you will be asked to consider and vote upon the
election of two directors to the Board of Directors of the Company and the
approval of the adoption of The 2000 Stock Incentive Plan of Pan Pacific Retail
Properties, Inc.
The election of the members of the Board of Directors of the Company and
the approval of the adoption of The 2000 Stock Incentive Plan of Pan Pacific
Retail Properties, Inc. are more fully described in the accompanying Proxy
Statement. We urge you to carefully review the Proxy Statement.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES TO THE BOARD OF DIRECTORS AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE
ADOPTION OF THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC RETAIL PROPERTIES, INC.
AS DETAILED IN THE ACCOMPANYING PROXY STATEMENT.
YOUR VOTE IS IMPORTANT TO THE COMPANY, WHETHER YOU OWN FEW OR MANY SHARES!
Please complete, date and sign the enclosed proxy card and return it in the
accompanying postage paid envelope, even if you plan to attend the Annual
Meeting. If you attend the Annual Meeting and wish to vote your shares
personally you may do so at anytime before the Proxy is voted.
I hope to see you at the Annual
Meeting,
PAN PACIFIC RETAIL PROPERTIES, INC.
/s/ STUART A. TANZ
Stuart A. Tanz
President and Chief Executive Officer
1631-B South Melrose Drive -- Vista, CA 92083 -- Telephone: (760)
727-1002 -- Facsimile: (760) 727-1430
http://www.pprp.com
<PAGE> 3
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 2000
Notice is hereby given that the Annual Meeting of Stockholders of Pan
Pacific Retail Properties, Inc., a Maryland corporation (the "Company"), will be
held at the DoubleTree Hotel, in San Diego's Mission Valley, 7450 Hazard Center
Drive, San Diego, California, on Friday, May 5, 2000, at 11:00 a.m., local time,
for the following purposes:
1. To elect two directors, to serve terms of three years, as detailed
herein;
2. To approve the adoption of The 2000 Stock Incentive Plan of Pan
Pacific Retail Properties, Inc.; and
3. To transact such other business as may properly come before the
meeting.
The election of the directors and the approval of the adoption of The 2000
Stock Incentive Plan of Pan Pacific Retail Properties, Inc. are more fully
described in the accompanying Proxy Statement, which forms a part of this
Notice.
During the course of the Annual Meeting, management will report on the
current activities of the Company and comment on its future plans. A discussion
period is planned so that stockholders will have an opportunity to ask questions
and present their comments.
The Board of Directors has fixed the close of business on March 23, 2000 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. A list of such stockholders will be available for
inspection at the offices of the Company at 1631-B South Melrose Drive, Vista,
California, at least ten days prior to the Annual Meeting.
If you plan to be present, please notify the undersigned so that
identification can be prepared for you. Whether or not you plan to attend the
Annual Meeting, please execute, date and return promptly the enclosed proxy. A
return envelope is enclosed for your convenience and requires no postage for
mailing in the United States. If you are present at the Annual Meeting you may,
if you wish, withdraw your proxy and vote in person. Thank you for your interest
and consideration.
By order of the Board of Directors,
/s/ JOSEPH B. TYSON
Joseph B. Tyson
Secretary
Dated: April 4, 2000
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED
PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE
<PAGE> 4
PAN PACIFIC RETAIL PROPERTIES, INC.
1631-B SOUTH MELROSE DRIVE
VISTA, CALIFORNIA 92083
PROXY STATEMENT
MAY 5, 2000
ANNUAL MEETING OF THE STOCKHOLDERS
This proxy statement is provided in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting")
of Pan Pacific Retail Properties, Inc., a Maryland corporation (the "Company"),
to be held at the DoubleTree Hotel Mission Valley, 7450 Hazard Center Drive, San
Diego, California, on Friday, May 5, 2000, at 11:00 a.m. local time. This proxy
will first be sent to stockholders by mail on or about April 5, 2000.
At the Annual Meeting, holders of record of shares of the Company's Common
Stock will consider and vote upon (i) the election of two members to the Board
of Directors of the Company, (ii) the approval of the adoption of The 2000 Stock
Incentive Plan of Pan Pacific Retail Properties, Inc. and (iii) such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PERSONS
NOMINATED TO BE ELECTED TO THE BOARD OF DIRECTORS AND RECOMMENDS A VOTE FOR THE
APPROVAL OF THE ADOPTION OF THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC RETAIL
PROPERTIES, INC. See "PROPOSAL ONE: ELECTION OF DIRECTORS" and "PROPOSAL TWO:
APPROVAL OF THE ADOPTION OF THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC RETAIL
PROPERTIES, INC.".
On March 23, 2000, the Record Date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, the Company had
21,252,512 shares of common stock, par value $0.01 per share (the "Common
Stock"), outstanding. Each share of Common Stock is entitled to one vote on all
matters properly brought before the meeting. Stockholders are not permitted to
cumulate their shares of Common Stock for the purpose of electing directors or
otherwise. Presence at the Annual Meeting, in person or by proxy, of a majority
of the outstanding shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting.
Unless contrary instructions are indicated on the proxy, all shares of
Common Stock represented by valid proxies received pursuant to this solicitation
(and not revoked before they are voted) will be cast at the Annual Meeting FOR
the election of the nominees to the Board of Directors and FOR the approval of
the adoption of The 2000 Stock Incentive Plan of Pan Pacific Retail Properties,
Inc. With respect to any other business, which may properly come before the
Annual Meeting and be submitted to a vote of stockholders, proxies received by
the Board of Directors will be cast at the discretion of the designated proxy
holders. A stockholder may revoke his or her proxy at any time before exercise
by delivering to the Secretary of the Company a written notice of such
revocation, by filing with the Secretary of the Company a duly executed proxy
bearing a later date, or by voting in person at the Annual Meeting. Attendance
at the Annual Meeting will not by itself be sufficient to revoke a proxy.
The election inspector will treat shares represented by properly signed and
returned proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum and for
purposes of determining the outcome of any matter submitted to the stockholders
for a vote. Abstentions do not constitute a vote "for" or "against" any matter
and thus will not be counted as votes cast and will have no effect on the result
of the vote.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as these proxies would have been voted at the original convening of
the Annual Meeting (except for any proxies that have effectively been revoked or
withdrawn).
The Company will bear the cost of soliciting proxies from its stockholders.
In addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies by telephone, telegram or
<PAGE> 5
otherwise. Such directors, officers and employees of the Company will not be
additionally compensated for any solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of Common Stock held of record by them will be
reimbursed for their reasonable expenses incurred in forwarding soliciting
material.
No person is authorized to make any representation with respect to the
matters described in this Proxy Statement other than those contained herein and,
if given or made, that information or representation must not be relied upon as
having been authorized by the Company or any other person.
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors currently consists of five directors
divided into three classes, designated as Class I, Class II and Class III. Each
class is elected to a three-year term and the election of directors is
staggered, so that only one class of directors is elected at each annual meeting
of stockholders. Directors who have been elected by the Board of Directors to
fill vacancies must be reelected by the stockholders at the next annual meeting.
During the past year, a vacancy was created when Mr. Melvin S. Adess resigned in
June. This vacancy has not been filled. The Class III directors' terms, of which
there are two directors, Mr. Stuart A. Tanz and Mr. Paul D. Campbell, will
expire at the upcoming 2000 Annual Meeting of Stockholders. As such,
stockholders of record as of the Record Date will be entitled to vote on the
election of the Class III directors.
PROPOSAL ONE
At the Annual Meeting, the Common Stock represented by properly executed
and returned proxies, unless otherwise specified, will be voted for the election
of directors as follows: Mr. Stuart A. Tanz and Mr. Paul D. Campbell to serve
for three years. The elected directors shall serve until the end of their term
and until their respective successors are duly elected and qualify.
If for any reason the nominees are not candidates (which is not expected)
when the election occurs, proxies will be voted for the election of any
substitute nominee designated by the Board of Directors. The following
information is furnished with respect to Messrs. Tanz and Campbell.
BIOGRAPHICAL INFORMATION ON THE NOMINEES
STUART A. TANZ. Age 41. Mr. Tanz has served as the Chairman, Chief
Executive Officer and President and as a director of the Company since its
inception in August 1997. He has been involved in the real estate business for
over 19 years. Mr. Tanz served as Chief Executive Officer of Revenue Properties
(U.S.) Inc. ("RPUS") from May 1996 to August 1997 and as a director and the
President of RPUS from April 1992 to August 1997. From 1992 to August 1997, Mr.
Tanz also served in various executive capacities of RPUS's parent company and
subsidiary entities. From 1985 to 1992, Mr. Tanz served as President of United
Income Properties, Inc. where he developed property in Southern California. He
was responsible for land acquisitions for Bramalea Ltd. from 1982 to 1985. Mr.
Tanz received his B.S. degree in Business Administration from the University of
Southern California.
PAUL D. CAMPBELL. Age 51. Mr. Campbell has been a Director since August
1998. Since April 1998, Mr. Campbell has been the President and Chief Executive
Officer of Revenue Properties Company Limited, a Canadian public real estate and
gaming company ("Revenue Properties"). Mr. Campbell also serves on Revenue
Properties' Board of Directors. From August 1996 to March 1998, he was President
and Chief Executive Officer of Nexacor Realty Management, Inc. From May 1995 to
July 1996, he was President of Aberlour, Inc. From December 1990 to April 1995,
Mr. Campbell worked for Bramalea, Ltd., a Canadian public real estate company
which merged with and into Bramalea, Inc. Bramalea, Inc. filed a petition under
Canadian bankruptcy laws in April 1995. While at Bramalea, he served as
President and Chief Executive
2
<PAGE> 6
Officer of Trilea Centers, Inc., a subsidiary of Bramalea, from January 1991,
and Chief Operating Officer of Bramalea, Inc. from March 1992 to April 1995.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Assuming a quorum is present, the affirmative vote of a plurality of the
votes cast at the Annual Meeting, whether in person or by proxy, is required for
approval of the proposal presented above. Accordingly, abstentions and broker
non-votes will have no effect on the outcome of this vote. In no event will the
proxies be voted for more than one nominee for each board seat.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF MR. STUART A. TANZ
AND MR. PAUL D. CAMPBELL AS DIRECTORS OF THE COMPANY.
INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
NAME AGE TITLE CLASS
- ---- --- ----- -----
<S> <C> <C> <C>
David P. Zimel.............................................. 44 Director I
Bernard M. Feldman.......................................... 50 Director II
Mark J. Riedy............................................... 57 Director II
</TABLE>
DAVID P. ZIMEL. Mr. Zimel has served as a member of the Board of Directors
since November 1998. He currently serves as President and Chief Executive
Officer of Portland Fixture Limited Partnership, a Portland Oregon based
shopping center development and management company. Mr. Zimel has served in
various capacities for the International Council of Shopping Centers including
State Director and Program Committee Chairman. Mr. Zimel received a B.S. degree
from the University of Oregon. He is also a licensed real estate broker and
general contractor.
BERNARD M. FELDMAN. Mr. Feldman has served as a member of the Board of
Directors of the Company since its inception as a public company in August 1997.
He currently serves as the President and Chief Executive Officer of ICW Group of
insurance companies, a position he has held since 1987. Mr. Feldman has also
served as President and Chief Executive Officer of Western Insurance Holdings
since 1991. From 1987 to present, he serves as President and Chief Executive
Officer of Insurance Company of the West.
MARK J. RIEDY. Mr. Riedy has served as a member of the Board of Directors
of the Company since its inception as a public company in August 1997. He has
been a professor of real estate finance at the University of San Diego since
1993. From July 1988 to July 1992, he served as President and Chief Executive
Officer of the National Council of Community Bankers. From July 1987 to July
1988, he served as President and Chief Operating Officer of the J.E. Robert
Companies, a real estate workout firm. From January 1985 to July 1986, he served
as President and Chief Operating Officer and a director of the Federal National
Mortgage Association. Mr. Riedy currently serves on the boards of directors of
Continental Savings Bank, AccuBanc Mortgage Corporation, Neighborhood Bancorp
and American Residential Investment Trust. He received a B.A. degree in
Economics from Loras College, a M.B.A. from Washington University and a Ph.D.
from the University of Michigan.
COMMITTEES OF THE BOARD
Audit Committee. The Board of Directors established an audit committee
(the "Audit Committee") to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the scope and results of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting controls. The Audit
Committee consists of Messrs. Zimel, Feldman and Riedy, who are not employees,
officers or affiliates of the Company or a subsidiary or division thereof, or a
relative of a principal executive officer of the Company, or a member of an
organization acting as advisor, consultant or legal counsel, receiving
compensation on a continuing basis from the Company in addition to director's
fees (the "Independent Directors").
3
<PAGE> 7
Corporate Governance Committee. The Board of Directors established a
corporate governance committee (the "Corporate Governance Committee") which
currently consists of Independent Directors Messrs. Zimel, Feldman and Riedy.
The Corporate Governance Committee is responsible for providing counsel to the
Board of Directors with respect to (i) organization, membership and function of
the Board of Directors, (ii) structure and membership of the committees of the
Board of Directors and (iii) succession planning for the executive management of
the Company.
Compensation Committee. The Board of Directors established an executive
compensation committee (the "Compensation Committee") to establish remuneration
levels for executive officers of the Company and implement the Company's stock
incentive plans (described below) and any other incentive programs. The
Compensation Committee consists of Independent Directors Messrs. Zimel, Feldman
and Riedy.
During the year ended December 31, 1999, the Board of Directors held 17
meetings of the Board and meetings of the committees of the Board. All of the
incumbent members of the Board of Directors attended 75% or more of the total
number of meetings.
COMPENSATION OF DIRECTORS
The Board of Directors is entitled to fix its own remuneration from time to
time. Pursuant to that authority, each director other than Mr. Stuart A. Tanz
and Mr. Paul D. Campbell was remunerated for his service as a director at the
rate of $13,000 per annum. In addition, each director other than Messrs. Tanz
and Campbell, receive a fee of $1,500 for each Board of Directors meeting
attended ($750 for telephonic attendance), a fee of $750 for each committee
meeting attended on a day that does not include a Board of Directors meeting
($500 for telephonic attendance) and an additional fee of $500 for each
committee meeting chaired by that director whether or not a Board of Directors
meeting occurred on the same day. Directors are also reimbursed for reasonable
expenses incurred to attend director and committee meetings. Officers of the
Company who are directors are not paid any director's fees. Messrs. Adess,
Zimel, Feldman and Riedy also received in 1999 options to purchase 6,000 shares
each of Common Stock, of which one-third vested immediately and the remaining
two-thirds vest pro rata in annual installments over two years following the
date of grant. The stock options were issued pursuant to the 1997 Stock Option
and Incentive Plan at an exercise price equal to the fair market value of the
Common Stock at the date of grant.
THE INFORMATION SET FORTH BELOW IS SUBMITTED WITH RESPECT TO EACH OF THE
COMPANY'S EXECUTIVE OFFICERS.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL TITLE AGE
- ------------------ ----- ---
<S> <C> <C>
Stuart A. Tanz....................... Chairman, Chief Executive Officer, and President 41
Jeffrey S. Stauffer.................. Executive Vice President, Chief Operating Officer 38
Joseph B. Tyson...................... Executive Vice President, Chief Financial Officer, 38
Secretary and Treasurer
Laurie A. Sneve...................... Vice President, Controller 37
Michael B. Haines.................... Vice President, Corporate Accounting 38
</TABLE>
Information with respect to Mr. Tanz is set forth above under Biographical
Information on the Nominees.
JEFFREY S. STAUFFER. Mr. Stauffer has served as Executive Vice President
and Chief Operating Officer of the Company since March 1998. From the Company's
formation until March 1998, Mr. Stauffer served as Senior Vice President,
Operations and Development. He served as Senior Vice President of Operations for
RPUS from January 1993 to August 1997. Mr. Stauffer has been involved in the
shopping center industry for 16 years. From 1985 to 1990 he was the Director of
Commercial Property Management for Realty Holding Group in Las Vegas, Nevada. He
was State Director for the International Council of Shopping Centers from 1990
to 1993 and is also a Certified Shopping Center Manager.
JOSEPH B. TYSON. Mr. Tyson has served as Executive Vice President, Chief
Financial Officer, Treasurer and Secretary since joining the Company in October
1999. Prior to joining the Company, Mr. Tyson was Chief Financial Officer of The
Allen Group, a San Diego based real estate company. Prior to The Allen Group,
Mr. Tyson was with Heitman Financial Ltd. for 11 years serving in various
capacities including Senior Vice President and as a member of the Executive
Committee. Mr. Tyson became licensed as a Certified Public Accountant during his
tenure with PricewaterhouseCoopers from 1984 to 1987 where he practiced in New
York.
4
<PAGE> 8
LAURIE A. SNEVE. Ms. Sneve has served as Vice President and Controller of
the Company since its formation. Ms. Sneve is responsible for all corporate and
property accounting, financial and tax reporting and management controls. From
March 1995 to August 1997, Ms. Sneve served as the Vice President and Controller
of RPUS. Prior to joining RPUS, Ms. Sneve was Controller and Director of
Accounting for The Hahn Company, where she worked for over six years. Ms. Sneve
became licensed as a Certified Public Accountant during her tenure with Arthur
Andersen & Company from 1985 to 1988 where she practiced in both the
Philadelphia and San Diego offices.
MICHAEL B. HAINES. Mr. Haines has served as Vice President, Corporate
Accounting of the Company since September 1997. Prior to September 1997 he
served as Corporate Assistant Controller of the Company and held the same
position at RPUS from March 1995 to August 1997. Mr. Haines is responsible for
corporate financial reporting and management controls. Prior to joining RPUS,
Mr. Haines was Director of Internal Audit for The Hahn Company from 1990 to
1995. Mr. Haines became licensed as a Certified Public Accountant after his
tenure with Deloitte & Touche LLP in San Diego from 1989 to 1990.
EXECUTIVE COMPENSATION
The table below sets forth the base salary and other compensation paid from
the Company's inception as a public company in August 1997 through December 31,
1999 to the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers whose annualized compensation
during 1999 exceeded $100,000 (the "Named Executive Officers"). The Company has
entered into employment agreements with certain of its executive officers as
described below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ------------------------------------------
OTHER RESTRICTED SECURITIES
FISCAL ANNUAL STOCK UNDERLYING OTHER
NAME/PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3) AWARDS OPTIONS COMPENSATION(7)
- ----------------------- ------ -------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stuart A. Tanz.............. 1999 $375,000 $361,503 $22,095 $1,162,500(5) 75,000 $3,250
President and Chief 1998 $325,000 $200,000 $29,186 -- 75,000 $1,688
Executive Officer 1997(1) $108,750 -- $ 5,250 $1,950,000(4) 225,000 $1,763
Jeffrey S. Stauffer......... 1999 $165,000 $ 80,000 $ 4,800 $ 193,750(5) 30,000 $1,650
Executive Vice President, 1998 $150,000 $ 75,000 $ 4,800 -- 30,000 $1,477
Chief Operations Officer 1997(1) $ 52,178 -- $ 1,400 $ 195,000(4) 100,000 $2,371
Joseph B. Tyson............. 1999(2) $ 42,043 -- $ 1,875 $ 176,250(6) 50,000 --
Executive Vice President,
Chief Financial Officer
Laurie A. Sneve............. 1999 $104,245 $ 20,000 $ 2,400 $ 24,219(5) 8,000 $1,042
Vice President, 1998 $101,290 $ 20,000 $ 2,200 -- 12,500 $1,012
Controller 1997(1) $ 36,937 -- -- -- 80,000 $1,679
Michael B. Haines........... 1999 $ 75,458 $ 28,000 $ 1,200 $ 19,375(5) 6,000 $ 755
Vice President, Corporate 1998 $ 68,958 $ 18,800 $ 1,100 -- 10,000 $ 698
Accounting 1997(1) $ 25,125 -- -- -- 60,000 $ 907
</TABLE>
- ---------------
(1) Represents amounts earned during 1997 by Messrs. Tanz, Stauffer and Haines
and Ms. Sneve at annual salaries of $290,000, $139,140, $67,000 and $98,500,
respectively. Their employment by the Company began on or about August 13,
1997 with the completion of the Company's initial public offering.
(2) Based on an annual salary of $175,000. Mr. Tyson's employment with the
Company began on October 11, 1999.
(3) Represents car allowance compensation for Messrs. Stauffer, Tyson and Haines
and Ms. Sneve. Represents car allowance and medical reimbursements for Mr.
Tanz.
(4) For 1997, represents the value of restricted stock awarded at the completion
of the Company's initial public offering based on the initial public
offering price of $19.50 per share. Messrs. Tanz and Stauffer were awarded
100,000 and 10,000 shares of restricted stock, respectively. The restricted
stock vests 33 1/3% per year over a three-year period from the date of
grant. Distributions are paid on the restricted stock awards. Based on the
closing price of the Company's Common Stock of $16.3125 at December 31,
1999, the value of the stock awards was $1,631,250 and $163,125,
respectively.
(5) For 1999, represents the value of restricted stock awarded on August 9, 1999
based on the closing price of the Company's Common Stock of $19.375 on
August 6, 1999. Messrs. Tanz, Stauffer and Haines and Ms. Sneve were awarded
60,000, 10,000, 1,000 and 1,250 shares of restricted stock, respectively.
The restricted stock vests 20% per year over a five-year period from the
date of grant. Distributions are paid on the restricted stock awards. Based
on the closing price of the Company's Common Stock of $16.3125 at December
31, 1999, the value of the stock awards was $978,750, $163,125, $16,313 and
$20,391 respectively.
(6) For 1999, represents the value of 10,000 shares of restricted stock awarded
to Mr. Tyson on October 11, 1999 based on the closing price of the Company's
Common Stock of $17.625 on October 8, 1999. The restricted stock vests 20%
per year over a five-year period from the date of grant. Distributions are
paid on the restricted stock awards. Based on the closing price of the
Company's Common Stock of $16.3125 at December 31, 1999, the value of the
stock award was $163,125.
(7) Represents 401(k) contributions by the Company.
5
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the awarding of
stock options in 1999 to the Named Executive Officers included in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS(1) FISCAL YEAR PRICE DATE PRESENT VALUE(2)
- ---- ---------- ------------------ -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Stuart A. Tanz.......... 75,000 26.50% $17.625 March 19, 2006 $123,000
Jeffrey S. Stauffer..... 30,000 10.60% $17.625 March 19, 2006 $ 49,200
Joseph B. Tyson......... 50,000 17.67% $18.900 October 11, 2006 $ 82,000
Laurie A. Sneve......... 8,000 2.83% $17.625 March 19, 2006 $ 13,120
Michael B. Haines....... 6,000 2.12% $17.625 March 19, 2006 $ 9,840
</TABLE>
- ---------------
(1) All options granted in 1999 become exercisable in three equal installments
beginning on the first anniversary of the date of grant and have a term of 7
years subject to earlier termination in certain events related to
termination of employment.
(2) Based on the Black-Scholes options pricing model adapted for use in valuing
stock options. The following assumptions were used in determining the values
set forth in the table: (i) expected volatility of 23.90% calculated in
accordance with the provisions of SFAS No. 123; (ii) a risk-free rate of
return of 5.0% (which percentage represents the assumed yield on a United
States Government Zero Coupon bond with a 5-year maturity prevailing on or
about the date on which the respective options were granted); (iii) a
dividend yield of 8.5%; and (iv) an expected life of 6.5 years. No
adjustments were made for nontransferability or risk of forfeiture of the
options. The calculations were made using the option exercise prices. The
estimated present values in the table are not intended to provide, nor
should they be interpreted as providing, any indication or assurance
concerning future values of the Common Stock.
AGGREGATE OPTION EXERCISES IN 1999 AND 1999 YEAR-END OPTION VALUES
The following table sets forth information with respect to the value of
options held by the Named Executive Officers, included in the Summary
Compensation Table, on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1999 IN-THE-MONEY OPTIONS
YEAR-END(1) AT 1999 YEAR END(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stuart A. Tanz......... -- -- 175,000 200,000 -- --
Jeffrey S. Stauffer.... -- -- 76,666 83,334 -- --
Joseph B. Tyson........ -- -- -- 50,000 -- --
Laurie A. Sneve........ -- -- 57,499 43,001 -- --
Michael B. Haines...... -- -- 43,333 32,667 -- --
</TABLE>
- ---------------
(1) The options granted in 1999 become exercisable in three equal installments
beginning on the first anniversary of the date of grant and have a term of 7
years subject to earlier termination in certain events related to
termination of employment.
(2) Based on closing price of $16.3125 per share of Common Stock on December 31,
1999, as reported by the New York Stock Exchange. All options granted
through December 31, 1999 have exercise prices greater than the closing
price of $16.3125 at December 31, 1999. Therefore, there were no
"In-The-Money" options at December 31, 1999.
EMPLOYMENT AGREEMENTS
Stuart A. Tanz, Jeffrey S. Stauffer and Joseph B. Tyson have each entered
into employment agreements with the Company. Stuart A. Tanz's employment
agreement has an initial term of three years and Jeffrey S. Stauffer's and
Joseph B. Tyson's employment agreements each have initial terms of two years.
All of these employment agreements provide for automatic one-year extensions
following expiration of the initial term. The employment agreements require each
of these individuals to be employed full time by the Company and prohibit them
from becoming directors, officers or employees of Revenue Properties or RPUS.
Laurie A.
6
<PAGE> 10
Sneve has also agreed that she will not accept employment with Revenue
Properties or RPUS for as long as she is employed by the Company.
For the first year of the initial term, the employment agreements provided
for an initial annual base compensation in the amounts set forth in footnote (1)
to the Summary Compensation table with the amount of any initial bonus
determined by the Compensation Committee. For subsequent years, both the amount
of the base compensation and any bonus have and will be determined by the
Compensation Committee.
The employment agreements entitle the executives to participate in the 1997
Stock Option and Incentive Plan and to receive certain other insurance and
pension benefits. In addition, in the event of a termination by the Company
without "cause", a termination by the executive for "good reason", or a
termination pursuant to a "change in control" of the Company (as such terms are
defined in the employment agreements) (each, a "Permitted Severance Event"),
Stuart A. Tanz will be entitled to a single severance payment equal to the sum
of three times his annual base compensation for the most recent 24 month period
plus an amount equal to three times his highest average annual bonus paid during
the 24 month period. To the extent it is determined that Mr. Tanz receives
benefits under his employment agreement or otherwise which would be subject to
an excise tax under section 4999 of the Internal Revenue Code (relating to a
"golden parachute" payment), Mr. Tanz will receive an additional "gross-up"
payment so that after calculation of all excise and other taxes and penalties,
Mr. Tanz will retain a net amount equal to the amount of benefits to which he is
entitled under his employment agreement or otherwise. Jeffrey S. Stauffer will
be entitled to a single severance payment equal to his highest monthly base
multiplied by twelve; provided, however, that for each full year of service with
the Company, the number of months of base compensation in the severance payment
shall be increased by one month (subject to an overall cap of 18 months). Joseph
B. Tyson will be entitled to a single severance payment equal to two years'
annual base compensation plus bonus compensation, as set forth in his agreement,
subject to adjustment for excise taxes, if any. Each of Messrs. Tanz, Stauffer
and Tyson will be subject to a non-competition covenant if their employment with
the Company ceases for any reason other than a Permitted Severance Event.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The amount of compensation paid by the Company to Stuart A. Tanz, Jeffrey
S. Stauffer, Laurie A. Sneve and Michael B. Haines during the year ended
December 31, 1999, in the case of base salaries, bonuses, and other
compensation, was determined on March 19, 1999. The amount of compensation paid
by the Company to Joseph B. Tyson during the year ended December 31, 1999, in
the case of base salary and other compensation was determined on October 11,
1999. Employment agreements were entered into with Messrs. Tanz, and Stauffer on
August 13, 1997 and with Mr. Tyson on October 11, 1999. In 1999, executive
compensation consisted solely of base salary, bonuses and other compensation,
and grants of stock options and restricted stock awards under the Company's
Stock Option and Incentive Plan that vest over time.
Executive Compensation Philosophy. The Compensation Committee believes
that a fundamental goal of the Company's executive compensation program is to
provide incentives to create value for the Company's stockholders. The primary
objectives of the Committee in determining executive compensation for 1999 were
(i) to provide a competitive total compensation package that enables the Company
to attract and retain qualified executives and align their compensation with the
Company's overall business strategies and (ii) to provide each executive officer
with a significant equity stake in the Company through stock options and stock
ownership. The Compensation Committee will annually consider the appropriate
combination of cash and stock-based compensation and weigh the competitiveness
of the Company's overall compensation arrangements in relation to comparable
real estate investment trusts. From time to time the Compensation Committee has
retained compensation and other management consultants to assist with, among
other things, structuring the Company's various compensation programs and
determining appropriate levels of salary, bonus and other compensatory awards
payable to the Company's executive officers and key employees, as well as to
guide the Company in the development of near-term and long-term individual
performance objectives necessary to achieve long-term profitability.
7
<PAGE> 11
Base Salaries and Other Compensation. Base compensation for 1999 was set
to compensate the officers for the functions they perform. While no specific
formula was used to determine base compensation levels for the Company's
executive officers, the Compensation Committee believes that the base salaries
are generally in line with those of other publicly held real estate investment
trusts the Compensation Committee has reviewed, some of which entities are
included in the National Association of Real Estate Investment Trusts ("NAREIT")
Equity REIT Index. During 1999, the Compensation Committee was advised by an
independent compensation professional consultant. Base salaries will be reviewed
annually and may be changed by the Compensation Committee in accordance with
certain criteria determined primarily on the bases of growth of revenues and
funds from operations per share of Common Stock and on the basis of certain
other factors, which include: (i) individual performance, (ii) the functions
performed by the executive officer, and (iii) changes in the compensation within
the peer group in which the Company competes for executive talent. The weight
given these factors by the Compensation Committee may vary from individual to
individual.
Annual Bonus Compensation. The Company's policy of awarding annual bonuses
is designed to specifically relate executive pay to Company and individual
performance. As a pay-for-performance program, cash bonuses provide financial
rewards for the achievement of substantive Company and personal objectives.
Employee Stock Option Plan. The Company's 1997 Stock Option and Incentive
Plan relates closely to traditional forms of equity-oriented compensation in the
commercial real estate industry. The purpose of option grants is to aid the
Company in attracting and retaining quality employees, thereby advancing the
interests of the Company's stockholders by offering employees an incentive to
maximize their efforts to promote the Company's economic performance. In
addition, to assist the Company in retaining employees and encouraging them to
seek long-term appreciation in the value of the Company's stock, options are
generally not exercisable immediately upon grant, but rather vest over a period
of years. Awards granted under the Company's 1997 Stock Option and Incentive
Plan are based upon a number of factors, including (i) the executive officer's
or key employee's position in the Company, (ii) his or her performance and
responsibilities, (iii) the extent to which he or she already holds an equity
stake in the Company, (iv) equity participation levels of comparable executives
and key employees at other companies in the compensation peer group, and (v)
individual contribution to the success of the Company. The 1997 Stock Option and
Incentive Plan does not provide any formulated method for weighting these
factors, and a decision to grant an award is based primarily upon the
Compensation Committee's evaluation of the past as well as the future
anticipated performance and responsibilities of the individual in question.
During 1999, stock options at an exercise price of $17.625 per share were
granted to Stuart A. Tanz, Jeffrey S. Stauffer, Laurie A. Sneve and Michael B.
Haines. Options granted to these executives totaled 75,000, 30,000, 8,000 and
6,000, respectively. In addition, 50,000 stock options at an exercise price of
$18.90 were granted to Joseph B. Tyson.
401(k) Plan. The Company established a Section 401(k) Savings/Retirement
Plan (the "Section 401(k) Plan") to cover eligible employees of the Company and
any designated affiliate. The Section 401(k) Plan permits eligible employees of
the Company to defer up to 15% of their annual compensation, subject to certain
limitations imposed by the Internal Revenue Code. The employees' elective
deferrals are immediately vested and non-forfeitable upon contribution to the
Section 401(k) Plan. The Company currently makes matching contributions up to 2%
of the eligible employees' annual compensation, which matching contributions
vest based upon the employees' tenure with the Company.
The Section 401(k) Plan is designed to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees or by the Company to
the Section 401(k) Plan, and income earned thereon, are not taxable to employees
until withdrawn from the Section 401(k) Plan, and so that contributions by the
Company, if any, will be deductible by the Company when made.
Chief Executive Officer Compensation. Stuart A. Tanz received a base
salary during 1999 at an annual rate of $375,000. Mr. Tanz also received an
option to purchase 75,000 shares of Common Stock at an exercise price of $17.625
per share and was granted 60,000 shares of restricted stock under the Company's
Stock Option and Incentive Plan. Also, a bonus of $361,503 was paid to Mr. Tanz
by the Company during 1999 and he received $22,095 in other compensation and
$3,250 in contributions under the Company's 401(k) Plan. The Compensation
Committee recognizes Mr. Tanz' contributions to the Company including continued
8
<PAGE> 12
growth in revenue and funds from operations per share for the Company, and the
successful operations of the Company. The Board and its Compensation Committee
feel Mr. Tanz's compensation is commensurate with the compensation of chief
executive officers of competitive real estate investments trusts, and have
deemed Mr. Tanz's salary, stock options, restricted stock awards and total
compensation appropriate in light of Mr. Tanz's substantial contribution to the
Company's growth and success in 1999.
Rule 162(m). The 1993 Omnibus Budget Reconciliation Act ("OBRA") became
law in August 1993. Under the law, income tax deductions of publicly-traded
companies in tax years beginning on or after January 1, 1994 may be limited to
the extent total compensation (including base salary, annual bonus, stock option
exercises, and non-qualified benefits) for certain executive officers exceeds $1
million (less the amount of any "excess parachute-payments" as defined in
Section 280G of the Code) in any one year. Under OBRA, the deduction limit does
not apply to payments, which qualify as "performance-based". To qualify as
"performance-based", compensation payments must be based solely upon the
achievement of objective performance goals and be made under a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by stockholders, and the
compensation committee must certify that the performance goals were achieved
before payments can be made.
The Compensation Committee has designed the Company's compensation to
conform to the OBRA legislation and related regulations so that total
compensation paid to any employee will not exceed $1 million in any one year,
except for compensation payments, which qualify, as "performance-based". The
Company may, however, pay compensation, which is not deductible in limited
circumstances, when sound management of the Company so requires.
Submitted By:
Bernard M. Feldman, Chairman
Mark J. Riedy
David P. Zimel
The above report of the Compensation Committee will not be deemed to be
incorporated by reference into any filing by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates the same by reference.
COMPLIANCE WITH FEDERAL SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities (collectively, "Insiders"),
to file with the Commission initial reports of ownership and reports of changes
in ownership of Pan Pacific Retail Properties, Inc. Common Stock and other
equity securities of the Company. Insiders are required by regulation of the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on the Company's review of copies of Forms 3, 4 and 5, and the
amendments thereto, received by the Company for the year ended December 31,
1999, or written representations from certain reporting persons that no Forms 5
were required to be filed by those persons, the Company believes that during the
year ended December 31, 1999, all filing requirements were complied with by its
executive officers, directors and beneficial owners of more than ten percent of
the Company's stock other than an amended Form 3 and an amended Form 4 for Mr.
David P. Zimel due to administrative oversight.
9
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of December 31, 1999 (except as
otherwise disclosed in the notes below), by (i) the Company's directors, (ii)
each other person who is known by the Company to own beneficially more than 5%
of the outstanding Common Stock, (iii) the Company's Chief Executive Officer and
the Company's executive officers, and (iv) the Company's executive officers and
directors as a group. Except as otherwise described in the notes below, the
Company believes that the following beneficial owners, based solely on
information furnished by those owners, have sole voting power and sole
investment power with respect to all shares of Common Stock set forth opposite
their respective names.
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES PERCENTAGE
BENEFICIALLY OWNED OWNERSHIP
----------------------- ----------
<S> <C> <C>
Revenue Properties (U.S.), Inc. and subsidiaries 10,808,012 50.86%
("RPUS").................................................
131 Bloor Street, Suite 300
Toronto, Ontario M5S 1R1
AXA Financial, Inc.(1)..................................... 1,423,600 6.70%
1290 Avenue of the Americas
New York, New York 10104
LaSalle Advisors Capital Management, Inc.(2)............... 1,318,478 6.20%
100 East Pratt Street
Baltimore, Maryland 21202
Morgan Stanley Dean Witter & Co.(3)........................ 1,257,802 5.92%
1585 Broadway
New York, New York 10036
Stuart A. Tanz.(4)......................................... 335,100 1.56%
1631-B South Melrose Drive
Vista, California 92083
Jeffrey S. Stauffer(4)..................................... 97,667 *
1631-B South Melrose Drive
Vista, California 92083
Joseph B. Tyson(4)......................................... 10,000 *
1631-B South Melrose Drive
Vista, California 92083
Laurie A. Sneve(4)......................................... 58,896 *
1631-B South Melrose Drive
Vista, California 92083
Michael B. Haines(4)....................................... 44,726 *
1631-B South Melrose Drive
Vista, California 92083
Mark J. Riedy(5)........................................... 15,732 *
1631-B South Melrose Drive
Vista, California 92083
Bernard M. Feldman(5)...................................... 14,667 *
1631-B South Melrose Drive
Vista, California 92083
David P. Zimel(6).......................................... 4,000 *
1631-B South Melrose Drive
Vista, California 92083
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES PERCENTAGE
BENEFICIALLY OWNED OWNERSHIP
----------------------- ----------
<S> <C> <C>
Paul D. Campbell........................................... -- *
131 Bloor Street, Suite 300
Toronto, Ontario M5S 1R1
All Executive Officers and Directors as a Group (9 580,788 2.68%
persons).................................................
</TABLE>
- ---------------
* Less than 1%
(1) According to a Schedule 13G filed with the Securities and Exchange
Commission, the person has sole voting power of 589,500 shares, shared
voting power of 659,900 shares, sole dispositive power of 934,200 shares and
shared dispositive power of 489,400 shares with respect to 1,423,600 shares,
as of December 31, 1999.
(2) According to a Schedule 13G filed with the Securities and Exchange
Commission, the person has sole voting power of 223,400 shares, shared
voting power of 1,088,478 shares, sole dispositive power of 223,400 shares
and shared dispositive power of 1,095,078 shares with respect to 1,318,478
shares, as of December 31, 1999. This Schedule 13G includes shares reported
on another Schedule 13G filed by Stichting Pensioenfonds voor de Gezondheid,
Geestelijke en Maatschappelijke Belangen, a Dutch pension fund located at
P.O. Box 4001, 3700 KA Zeist, The Netherlands, which disclosed shared voting
power and shared dispositive power of 1,087,800 shares with respect to
1,087,800 shares, as of December 31, 1999.
(3) According to a Schedule 13G filed with the Securities and Exchange
Commission, the person has shared voting power of 879,702 shares and shared
dispositive power of 1,257,802 shares with respect to 1,257,802 shares, as
of December 31, 1999.
(4) Includes two-thirds of the options granted in 1997 and one-third of the
options granted in 1998, the portions vested in 1998 and 1999.
(5) Includes one-third of the options granted on March 19, 1999, which vested
immediately, two-thirds of the options granted on March 17, 1998 and all of
the options granted upon initial election to the Board of Directors.
(6) Includes one-third of the options granted on March 19, 1999, which vested
immediately.
11
<PAGE> 15
PERFORMANCE GRAPH
As a part of the rules concerning executive compensation disclosure, the
Company is obligated to provide a chart comparing the yearly percentage change
in the cumulative total stockholder return on the Common Stock over a five-year
period. However, since the Common Stock has been publicly traded only since
August 8, 1997 the information is provided from this date through December 31,
1999.
Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in the Common Stock with the cumulative total return of
a hypothetical investment in each of the Standard & Poor's Composite -- 500
Index and the NAREIT Equity REIT Total Return Index based upon the respective
market prices of each investment on the dates shown below, assuming an initial
investment of $100 on August 8, 1997, and as required by the Securities and
Exchange Commission, the reinvestment of distributions.
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
PAN PACIFIC RETAIL NAREIT ALL EQUITY REIT
PROPERTIES, INC. S&P 500 INDEX
------------------ ------- ----------------------
<S> <C> <C> <C>
August 8, 1997 100.00 100.00 100.00
December 31, 1997 108.14 104.69 110.44
June 30, 1998 101.57 123.23 104.88
December 31, 1998 108.83 134.57 91.11
June 30, 1999 110.26 151.23 95.46
December 31, 1999 97.31 162.89 86.90
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A director and executive officer of the Company (or members of his
immediate family) and persons who hold more than 5% of the outstanding shares of
Common Stock have direct or indirect interests in transactions which have been
consummated by the Company, including the transfer of certain shopping center
properties and entities owning shopping center properties to the Company by RPUS
and the repayment of certain indebtedness encumbering the shopping center
properties in connection with the Company's initial public offering of Common
Stock in August 1997 (the "IPO").
Terms of Transfers. The terms of the transfers of the Company's initial
portfolio of properties (or entities owning the properties) to the Company by
RPUS in connection with the IPO were not determined through arm's-length
negotiation. RPUS had substantial economic interest in the entities transferring
the properties and the entities that were merged into the Company.
12
<PAGE> 16
Director Designation. In connection with the IPO, RPUS received the right
to nominate two persons for election to the Board of Directors of the Company so
long as RPUS and its affiliates collectively beneficially own at least 25% of
the outstanding shares of Common Stock.
Registration Rights. In connection with the IPO, RPUS received certain
registration rights with respect to shares of Common Stock issued.
Assignment of Lease. Concurrently with the completion of the IPO, RPUS
assigned the Company all of its interest as a tenant in a lease covering the
space currently serving as the headquarters of the Company at Melrose Village
Plaza in Vista, California.
Preemptive Rights. In connection with the IPO, RPUS has certain
participation rights in connection with future issuance of Common Stock by the
Company, which will enable RPUS to maintain its overall percentage ownership of
the Common Stock of the Company.
Non-Competition Agreement. In connection with the IPO, RPUS and Revenue
Properties agreed that they will not, without the consent of the Company acting
through its Independent Directors, acquire, develop or manage any shopping
centers in the Western United States and will refer all such opportunities to
the Company. These restrictions will lapse when RPUS's Common Stock ownership of
the Company falls below 15%, calculated on a fully diluted basis.
PROPOSAL TWO: APPROVAL OF THE ADOPTION OF THE 2000 STOCK
INCENTIVE PLAN OF PAN PACIFIC RETAIL PROPERTIES, INC.
The Board unanimously recommends that stockholders approve the adoption of
The 2000 Stock Incentive Plan of Pan Pacific Retail Properties, Inc. (the
"Plan"). The Plan was approved in principle by the Board on March 17, 2000. The
purposes of the Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to the
Company's employees, consultants, and directors and to promote the success of
the Company's business.
The Plan authorizes the grant to the Company's employees of options that
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Plan also authorizes the grant to the
Company's employees, consultants, and non-employee directors of non-qualified
stock options, stock purchase rights, stock appreciation rights ("SARs") and
other awards ("Awards").
The principal features of the Plan are summarized below, but the summary is
qualified by reference to the Plan itself which is contained in Appendix "A".
SECURITIES SUBJECT TO THE PLAN
The shares of stock subject to the Plan shall be Company Common Stock.
Under the terms of the Plan, the aggregate number of shares of Common Stock
subject to options, stock purchase rights, SARs and other Awards will be no more
than 489,971. In addition, the maximum number of shares which may be subject to
options, stock purchase rights, SARs and other Awards granted under the Plan to
any individual in any calendar year may not exceed 400,000, with such limitation
only applying subsequent to the fulfillment of certain conditions as defined in
the Plan. The Board or a committee of the Board appointed to administer the Plan
(the "Administrator") shall have the authority in its discretion to
appropriately adjust:
- the aggregate number of shares of Common Stock subject to the Plan;
- the number and kind of shares of Common Stock subject to outstanding
options, stock purchase rights, SARs and other Awards; and
- the price per share of outstanding options, stock purchase rights, SARs
and other Awards;
if there is any stock dividend, stock split, recapitalization, or other
subdivision, combination or reclassification of shares of Common Stock.
13
<PAGE> 17
Shares subject to expired or canceled options will be available for future
grant or sale under the Plan. In addition, shares which are delivered to the
Company by an optionee or withheld by the Company upon the exercise of an Award
in payment of the exercise price may again be optioned, granted or awarded under
the Plan. No shares may be optioned, granted or awarded under the Plan, however,
if such action would cause an incentive stock option to fail to qualify as an
"incentive stock option" under Section 422 of the Code.
AWARDS UNDER THE PLAN
The Plan provides that the Administrator may grant or issue stock options,
SARs, restricted stock, deferred stock, dividend equivalents, performance
awards, stock payments and other stock related benefits, or any combination
thereof. Each Award will be set forth in a separate agreement with the person
receiving the Award and will indicate the type, terms and conditions of the
Award.
Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which, except with respect to NQSOs intended
to qualify as performance-based compensation under Section 162(m) of the Code,
may be less than fair market value on the date of grant (but not less than the
lesser of par value or 85% of the fair market value on the date of grant), and
usually will become exercisable (in the discretion of the Administrator) in one
or more installments after the grant date, subject to the satisfaction of
individual or Company performance criteria established by the Administrator.
NQSOs may be granted for any term specified by the Administrator.
Director Options are NQSOs granted to non-employee directors of the Company
pursuant to a formula. During the term of the Plan and subject to the stock
ownership limit, each person who is a non-employee director shall automatically
be granted (i) an option to purchase six thousand (6,000) shares of Common Stock
(subject to adjustment as provided in the Plan) on the date of his or her
initial election to the Board and (ii) an option to purchase six thousand
(6,000) shares of Common Stock (subject to adjustment as provided in the Plan)
on the date of the March meeting of the Compensation Committee of the Board,
during which the compensation levels for directors, senior executives and other
employees are determined, after such initial election to the Board. Members of
the Board who are employees of the Company who subsequently terminate their
employment with the Company and remain on the Board will not receive an initial
option grant pursuant to clause (i) of the preceding sentence, but to the extent
that they are otherwise eligible, will receive, after termination of employment
with the Company, options as described in clause (ii) of the preceding sentence.
The exercise price of the Director Options shall be 100% of the fair market
value of a share of Common Stock on the date of grant. The period during which
the right to exercise a Director Option in whole or in part vests in the
optionee will be set by the Board.
No such grants of options will be made to a non-employee director under the
Plan in the same calendar year that this director received a grant of options
under the 1997 Stock Option and Incentive Plan of the Company.
Incentive Stock Options ("ISOs") will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Common Stock on the date of grant, may
only be granted to employees, must expire within a specified period of time
following the optionee's termination of employment, and must be exercised within
ten years after the date of grant; but may be subsequently modified to
disqualify them from treatment as ISOs. In the case of an ISO granted to an
individual who owns (or is deemed to own) at least 10% of the total combined
voting power of all classes of stock of the Company, the Plan provides that the
exercise price must be at least 110% of the fair market value of a share of
Common Stock on the date of grant and the ISO must expire no later than the
fifth anniversary of the date of its grant.
Restricted Stock may be sold to participants at various prices and made
subject to such restrictions as may be determined by the Administrator.
Restricted stock, typically, may be repurchased by the Company at the original
purchase price if the conditions or restrictions are not met. In general,
restricted stock may not be sold, or otherwise hypothecated or transferred
except to certain permitted transferees as set forth in the Plan, until
restrictions are removed or expire. Purchasers of restricted stock, unlike
recipients of options, will have voting rights and will receive dividends prior
to the time when the restrictions lapse.
14
<PAGE> 18
Deferred Stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on performance criteria
established by the Administrator. Like restricted stock, deferred stock may not
be sold, or otherwise hypothecated or transferred except to certain permitted
transferees as set forth in the Plan, until vesting conditions are removed or
expire. Unlike restricted stock, deferred stock will not be issued until the
deferred stock Award has vested, and recipients of deferred stock generally will
have no voting or dividend rights prior to the time when vesting conditions are
satisfied.
Stock Appreciation Rights may be granted in connection with stock options
or other Awards, or separately. SARs granted by the Administrator in connection
with stock options or other Awards typically will provide for payments to the
holder based upon increases in the price of the Company's Common Stock over the
exercise price of the related option or other Awards, but alternatively may be
based upon criteria such as book value. Except as required by Section 162(m) of
the Code with respect to an SAR intended to qualify as performance-based
compensation as described in Section 162(m) of the Code, there are no
restrictions specified in the Plan on the exercise of SARs or the amount of gain
realizable therefrom, although restrictions may be imposed by the Administrator
in the SAR agreements. The Administrator may elect to pay SARs in cash or in
Common Stock or in a combination of both.
Dividend Equivalents represent the value of the dividends per share paid by
the Company, calculated with reference to the number of shares covered by the
stock options, SARs or other Awards held by the participant.
Performance Awards may be granted by the Administrator to employees or
consultants based upon, among other things, the contributions, responsibilities
and other compensation of the particular employee or consultant. Generally,
these Awards will be based upon specific performance criteria and may be paid in
cash or in Common Stock or in a combination of both. Performance Awards may
include "phantom" stock awards that provide for payments based upon increases in
the price of the Company's Common Stock over a predetermined period. Performance
Awards may also include bonuses granted by the Administrator and which may be
payable in cash or in Common Stock or in a combination of both.
Stock Payments may be authorized by the Administrator in the form of shares
of Common Stock or an option or other right to purchase Common Stock as part of
a deferred compensation arrangement in lieu of all or any part of compensation,
including bonuses, that would otherwise be payable in cash to the key employee
or consultant.
The Administrator may designate key employees as "Section 162(m)
Participants," whose compensation for a given fiscal year may be subject to the
limit on deductible compensation imposed by Section 162(m) of the Code. The
Administrator may grant to Section 162(m) Participants restricted stock,
deferred stock, SARs, dividend equivalents, performance awards and stock
payments that vest or become exercisable upon the attainment of performance
criteria for the Company which are related to one or more of the following
performance goals: (i) pre-tax income; (ii) operating income; (iii) cash flow;
(iv) earnings per share; (v) earnings before interest, taxes, depreciation and
amortization, (vi) return on equity, (vii) return on invested capital or assets,
(viii) cost reductions or savings and (ix) the market price of a share of the
Company's Common Stock.
GRANT AND TERMS OF OPTIONS
The Administrator shall have the authority under the Plan to determine:
- the number of shares subject to option grants to employees, consultants,
and directors;
- whether the option grants are ISOs or NQSOs; and
- the terms and conditions of the option grants.
The Administrator may not grant an ISO under the Plan to any person who
owns more than 10% of the total combined voting power of all classes of the
Company's stock (a "10% Owner") unless the stock option conforms to the
applicable provisions of Section 422 of the Code. Only the Company's employees
may be granted ISOs under the Plan. Employees, consultants, and directors may
receive NQSOs and stock purchase
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rights under the Plan. Options for directors are discussed in more detail in
"Director Options" above. Each option will be evidenced by a written option
agreement.
The exercise price for the shares of Common Stock subject to each option
will be specified in each option agreement. The Administrator shall set the
exercise price at the time the option is granted. In certain instances, the
exercise price is also subject to additional rules as follows:
- In the case of options intended to qualify as performance-based
compensation, or as ISOs, the exercise price may not be less than the
fair market value for the shares of Common Stock subject to such option
on the date the option is granted.
- In the case of ISOs granted to a 10% Owner, the exercise price may not be
less than 110% of the fair market value of the shares of Common Stock
subject to such option on the date the option is granted.
- In the case of NQSOs, the exercise price may not be less than 85% of the
fair market value for the shares of Common Stock subject to such option
on the date the option is granted.
- In the case of NQSOs granted to a 10% Owner, the exercise price may not
be less than 100% of the fair market value of the shares of Common Stock
subject to such option on the date the option is granted.
- In the case of options granted to directors, the exercise price will
equal the fair market value of the shares of Common Stock subject to such
option on the date the option is granted.
For purposes of the Plan, the fair market value of a share of Common Stock
as of a given date shall be (a) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, if any
(or as reported on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the fair market value of a share of
Common Stock as established by the Administrator acting in good faith.
TERM AND VESTING OF OPTIONS
The term of an option shall be set by the Administrator. In the case of an
ISO, the term of the option may not be longer than 10 years from the date the
ISO is granted, or if granted to a 10% Owner, five years from the date of the
grant. Except as limited by the requirements of Section 422 of the Code, the
Administrator may extend the term of any outstanding option in connection with
any termination of employment or the consulting relationship with an optionee,
or amend any other term or condition of the outstanding option relating to the
termination of an optionee.
An option is exercisable when it "vests." Each option agreement will
contain the period during which the right to exercise the option in whole or in
part vests in the optionee. In no event will an option vest at a rate of less
than 20% per year over five years from the date the option is granted. At any
time after the grant of an option, the Administrator may accelerate the period
during which an option vests. No portion of an option which is unexercisable at
an optionee's termination of employment, termination of consulting relationship
or termination of directorship will subsequently become exercisable, except as
may be otherwise provided by the Administrator either in the agreement relating
to the stock option or by action following the grant of the option.
EXERCISE OF OPTIONS
An option may be exercised for any vested portion of the shares subject to
the option until the option expires. Only whole shares of Common Stock may be
purchased. An option may be exercised by delivering to the Secretary of the
Company a written or electronic notice of exercise on a form provided by the
Company,
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together with full cash payment for the shares in the form of cash or a check
payable to the Company in the amount of the aggregate option exercise price.
However, the Administrator may in its discretion:
- allow payment through the delivery of shares of Common Stock already
owned by the optionee;
- subject to certain timing requirements, allow payment through the
surrender of shares of Common Stock which would otherwise be issuable on
exercise of the option;
- allow payment through the delivery of property of any kind which
constitutes good and valuable consideration;
- allow payment by use of a full recourse loan from the Company;
- allow payment through the delivery of a notice that the optionee has
placed a market sell order with a broker with respect to shares of Common
Stock then issuable on exercise of the option, and that the broker has
been directed to pay a sufficient portion of the net proceeds of the sale
to the Company in satisfaction of the option exercise price; or
- allow payment through any combination of the foregoing.
ELIGIBILITY
The Company's employees and consultants are eligible to receive Awards
under the Plan. The Administrator determines which of the Company's employees
will be granted options, stock purchase rights, SARs and other Awards. No person
is entitled to participate in the Plan as a matter of right. Only those
employees and consultants who are selected to receive grants by the
Administrator may participate in the Plan. Independent non-employee directors
are also eligible to receive grants under the Plan, as described above.
ADMINISTRATION OF THE PLAN
All decisions, determinations and interpretations of the Administrator
shall be final and binding on all holders. The Administrator has the power to:
- construe and interpret the terms of the Plan and Awards granted pursuant
to the Plan;
- adopt rules for the administration, interpretation and application of the
Plan that are consistent with the Plan; and
- interpret, amend or revoke any of the newly adopted rules of the Plan.
AWARDS NOT TRANSFERABLE
Awards may not be sold, pledged, transferred, or disposed of in any manner
other than to certain permitted transferees as provided for in the Plan and by
will or by the laws of descent and distribution and may be exercised, during the
lifetime of the holder, only by the holder or such permitted transferees.
CERTAIN RESTRICTIONS ON RESALE
Employees, officers and directors who are "affiliates" of the Company as
defined by the rules and regulations under the Securities Act of 1933 may offer
or sell the shares of Common Stock they acquire upon exercise of their options
under the Plan only if they make such offers and sales:
- pursuant to an effective registration statement under the Securities Act
of 1933;
- pursuant to an appropriate exemption from the registration requirements
of the Securities Act of 1933; or
- within the limitations and subject to the conditions set forth in Rule
144 under the Securities Act of 1933.
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AMENDMENT AND TERMINATION OF THE PLAN
The Board may not, without prior stockholder approval:
- amend the Plan so as to increase the number of shares of stock that may
be issued under the Plan; or
- extend the term of the Plan.
The Plan will be in effect for 10 years after the date the Plan is approved
by the stockholders, unless the Board terminates the Plan at an earlier date.
The Board may terminate the Plan at any time with respect to any shares not then
subject to an option under the Plan. Except as indicated above, the Board may
also modify the Plan from time to time.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE PLAN
The following is a general summary under current law of the material
federal income tax consequences to participants in the Plan. This summary deals
with the general tax principles that apply and is provided only for general
information. Some kinds of taxes, such as state and local income taxes, are not
discussed. Tax laws are complex and subject to change and may vary depending on
individual circumstances and from locality to locality. The summary does not
discuss all aspects of income taxation that may be relevant in light of a
holder's personal investment circumstances. This summarized tax information is
not tax advice.
NON-QUALIFIED STOCK OPTIONS
For federal income tax purposes, if an optionee is granted NQSOs under the
Plan, the optionee will not have taxable income on the grant of the option, nor
will the Company be entitled to any deduction. Generally, on exercise of NQSOs
the optionee will recognize ordinary income, and the Company will be entitled to
a deduction, in an amount equal to the difference between the option exercise
price and the fair market value of the Common Stock on the date of exercise. The
optionee's basis for the stock for purposes of determining gain or loss on
subsequent disposition of such shares generally, will be the fair market value
of the Common Stock on the date the optionee exercises the option. Any
subsequent gain or loss will be generally taxable as capital gains or losses.
INCENTIVE STOCK OPTIONS
There is no taxable income to an optionee when an optionee is granted an
ISO or when that option is exercised. However, the amount by which the fair
market value of the shares at the time of exercise exceeds the option price will
be an "item of adjustment" for the optionee for purposes of the alternative
minimum tax. Gain realized by the optionee on the sale of an ISO is taxable at
capital gains rates, and no tax deduction is available to the Company, unless
the optionee disposes of the shares within (1) two years after the date of grant
of the option or (2) within one year of the date the shares were transferred to
the optionee. If the shares of Common Stock are sold or otherwise disposed of
before the end of the one-year and two-year periods specified above, the
difference between the option exercise price and the fair market value of the
shares on the date of the option's exercise will be taxed at ordinary income
rates, and the Company will be entitled to a deduction to the extent the
optionee must recognize ordinary income. If such a sale or disposition takes
place in the year in which the optionee exercise the option, the income the
optionee recognizes upon sale or disposition of the shares will not be
considered income for alternative minimum tax purposes. Otherwise, if the
optionee sells or otherwise disposes the shares before the end of the one-year
and two-year periods specified above, the maximum amount that will be included
as alternative minimum tax income is the gain, if any, the optionee recognizes
on the disposition of the shares.
An ISO exercised more than three months after an optionee terminates
employment, other than by reason of death or disability, will be taxed as a
NQSO, and the optionee will have been deemed to have received income on the
exercise taxable at ordinary income rates. The Company will be entitled to a tax
deduction equal to the ordinary income, if any, realized by the optionee.
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STOCK APPRECIATION RIGHTS
No taxable income is generally recognized upon the receipt of an SAR, but
upon exercise of the SAR the fair market value of the shares (or cash in lieu of
shares) received generally will be taxable as ordinary income to the recipient
in the year of such exercise. The Company generally will be entitled to a
compensation deduction for the same amount which the recipient recognizes as
ordinary income.
RESTRICTED STOCK AND DEFERRED STOCK
An employee to whom restricted or deferred stock is issued generally will
not recognize taxable income upon such issuance and the Company generally will
not then be entitled to a deduction. However, when restrictions on shares of
restricted stock lapse, such that the shares are no longer subject to a
substantial risk of forfeiture, the employee generally will recognize ordinary
income and the Company generally will be entitled to a deduction for an amount
equal to the excess of the fair market value of the shares at the date such
restrictions lapse over the purchase price therefore. Similarly, when deferred
stock vests and is issued to the employee, the employee generally will recognize
ordinary income and the Company generally will be entitled to a deduction for
the amount equal to the fair market value of the shares at the date of issuance.
DIVIDEND EQUIVALENTS
A recipient of a dividend equivalent award generally will not recognize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. When a dividend equivalent is paid, the participant
generally will recognize ordinary income, and the Company will be entitled to a
corresponding deduction.
PERFORMANCE AWARDS
A participant who has been granted a performance award generally will not
recognize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When an award is paid, whether in cash or
Common Stock, the participant generally will recognize ordinary income, and the
Company will be entitled to a corresponding deduction.
STOCK PAYMENTS
A participant who receives a stock payment in lieu of a cash payment that
would otherwise have been made will generally be taxed as if the cash payment
has been received, and the Company generally will be entitled to a deduction for
the same amount.
DEFERRED COMPENSATION
Participants who defer compensation generally will recognize no income,
gain or loss for federal income tax purposes when NQSOs are granted in lieu of
amounts otherwise payable, and the Company will not be entitled to a deduction
at that time. When and to the extent such NQSOs are exercised, the rules
regarding NQSOs outlined above will generally apply.
SECTION 162(m) OF THE CODE
In general, under Section 162(m), income tax deductions of publicly-held
corporations may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non-qualified benefits paid)
for certain executive officers exceeds $1 million (less the amount of any
"excess parachute payments" as defined in Section 280G of the Code) in any one
year. However, under Section 162(m), the deduction limit does not apply to
certain "performance-based compensation" established by an independent
compensation committee which is adequately disclosed to, and approved by,
stockholders. In particular, stock options and SARs will satisfy the
"performance-based compensation" exception if the awards are made by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any person within a specified period and the compensation
is based solely on an increase in the stock price after the
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grant date (i.e. the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date). Performance
or incentive awards granted under the Plan may qualify as "qualified
performance-based compensation" for purposes of Section 162(m) if such awards
are granted or vest upon the preestablished objective performance goals
described above.
The Company has attempted to structure the Plan in such a manner that the
Committee can determine the terms and conditions of stock options, SARs and
performance and incentive awards granted thereunder such that remuneration
attributable to such awards will not be subject to the $1,000,000 limitation.
The Company has not, however, requested a ruling from the Internal Revenue
Service or an opinion of counsel regarding this issue. This discussion will
neither bind the Internal Revenue Service nor preclude the Internal Revenue
Service from adopting a contrary position.
REQUIRED VOTE
The affirmative vote of a majority of votes cast on this proposal to adopt
the Plan is required to approve this proposal, provided that a quorum is
present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC RETAIL PROPERTIES, INC.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP served as independent public accountants to the Company during
1999 and is expected to do so in 2000. A representative of KPMG LLP is expected
to be present at the Annual Meeting and will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order for stockholder proposals otherwise satisfying the eligibility
requirements of Securities and Exchange Commission Regulation 14a-8 to be
considered for inclusion in our Proxy Statement, they must be received by us at
our principal office at 1631-B South Melrose Drive, Vista, California, 92083 on
or before November 20, 2000.
In addition, if a stockholder desires to bring business (including director
nominations) before our 2001 Annual Meeting that is or is not the subject of a
proposal timely submitted for inclusion in the Proxy Statement, written notice
of such business, as prescribed in our Bylaws, must be received by our Secretary
between December 6, 2000 and January 4, 2001. For additional requirements, a
stockholder may refer to our Bylaws, Section 12 "Nominations and Proposals by
Stockholders," a copy of which may be obtained from our Secretary. If we do not
receive timely notice pursuant to our Bylaws, such business will be excluded
from consideration at the meeting, regardless of any earlier notice provided in
accord with Securities and Exchange Commission Regulation 14a-8.
OTHER MATTERS
The Board of Directors knows of no other business, which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof and in the direction of the proxy holders.
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APPENDIX A
THE 2000 STOCK INCENTIVE PLAN
OF
PAN PACIFIC RETAIL PROPERTIES, INC.
Pan Pacific Retail Properties, Inc., a Maryland corporation (the
"Company"), has adopted The 2000 Stock Incentive Plan of Pan Pacific Retail
Properties, Inc. (the "Plan"), effective March 17, 2000, for the benefit of its
eligible employees, consultants and directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and Consultants (as such terms are defined below) to further the growth,
development and financial success of the Company by personally benefiting
through the ownership of Company stock and/or rights which recognize such
growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and Consultants considered essential to the long
range success of the Company by offering them an opportunity to own stock
in the Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I.
DEFINITIONS
1.1 General. Wherever the following terms are used in the Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.
1.2 Administrator. "Administrator" shall mean the entity that conducts the
general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Options granted to Independent
Directors, the term "Administrator" shall refer to the Board. With reference to
the administration of the Plan with respect to any other Award, the term
"Administrator" shall refer to the Committee unless the Board has assumed the
authority for administration of the Plan generally as provided in Section 10.1.
1.3 Award. "Award" shall mean an Option, a Restricted Stock award, a
Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Stock
Payment award or a Stock Appreciation Right which may be awarded or granted
under the Plan (collectively, "Awards").
1.4 Award Agreement. "Award Agreement" shall mean a written agreement
executed by an authorized officer of the Company and the Holder which shall
contain such terms and conditions with respect to an Award as the Administrator
shall determine, consistent with the Plan.
1.5 Award Limit. "Award Limit" shall mean four-hundred thousand (400,000)
shares of Common Stock, as adjusted pursuant to Section 11.3 of the Plan.
1.6 Board. "Board" shall mean the Board of Directors of the Company.
1.7 Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:
(a) any person or related group of persons (other than the Company or
a person that, prior to such transaction, directly or indirectly controls,
is controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of securities possessing more than fifty percent
(50%) of the total combined voting
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power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which the Board
does not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
1.8 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.9 Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided
in Section 10.1.
1.10 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock.
1.11 Company. "Company" shall mean Pan Pacific Retail Properties, Inc., a
Maryland corporation.
1.12 Consultant. "Consultant" shall mean any consultant or adviser if:
(a) the consultant or adviser renders bona fide services to the
Company;
(b) the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market
for the Company's securities; and
(c) the consultant or adviser is a natural person who has contracted
directly with the Company to render such services.
1.13 Deferred Stock. "Deferred Stock" shall mean Common Stock awarded
under Article VIII of the Plan.
1.14 Director. "Director" shall mean a member of the Board.
1.15 Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VIII of the Plan.
1.16 DRO. "DRO" shall mean a domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
1.17 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
1.18 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.19 Fair Market Value. "Fair Market Value" of a share of Common Stock as
of a given date shall be (a) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by NASDAQ or such successor quotation system;
or (c) if Common Stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Administrator acting in good faith.
1.20 Holder. "Holder" shall mean a person who has been granted or awarded
an Award.
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1.21 Incentive Stock Option. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Administrator.
1.22 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee, officer or affiliate of the Company or a
subsidiary or division thereof, or a relative of a principal executive officer
of the Company, or a member of an organization acting as advisor, consultant or
legal counsel, receiving compensation on a continuing basis from the Company in
addition to director's fees.
1.23 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the
Administrator.
1.24 Option. "Option" shall mean a stock option granted under Article IV
of the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.
1.25 Performance Award. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article VIII of the Plan.
1.26 Performance Criteria. "Performance Criteria" shall mean the following
business criteria with respect to the Company, any Subsidiary or any division or
operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d)
cash flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the fair market value of Common Stock and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization.
1.27 Plan. "Plan" shall mean The 2000 Stock Incentive Plan of Pan Pacific
Retail Properties, Inc.
1.28 Restricted Stock. "Restricted Stock" shall mean Common Stock awarded
under Article VII of the Plan.
1.29 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.30 Section 162(m) Participant. "Section 162(m) Participant" shall mean
any key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.31 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.32 Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article IX of the Plan.
1.33 Stock Ownership Limit. "Stock Ownership Limit" shall mean (i) the
restrictions on ownership and transfer of Common Stock provided in Article VIII
of the Company's Articles of Amendment and Restatement (the "Restated
Articles"); and (ii) any other restrictions on ownership or transfer set forth
in the Restated Articles.
1.34 Stock Payment. "Stock Payment" shall mean (a) a payment in the form
of shares of Common Stock, or (b) an option or other right to purchase shares of
Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become payable to a key Employee
or Consultant in cash, awarded under Article VIII of the Plan.
1.35 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain
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then owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
1.36 Substitute Award. "Substitute Award" shall mean an Option granted
under this Plan upon the assumption of, or in substitution for, outstanding
Stock awards previously granted by a company or other entity in connection with
a corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock; provided, however, that in no event shall the
term "Substitute Award" be construed to refer to an award made in connection
with the cancellation and repricing of an Option.
1.37 Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of a Holder as a Consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Consultancy. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a Consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.
1.38 Termination of Directorship. "Termination of Directorship" shall mean
the time when a Holder who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole
and absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship with respect to Independent Directors.
1.39 Termination of Employment. "Termination of Employment" shall mean the
time when the employee-employer relationship between a Holder and the Company or
any Subsidiary is terminated for any reason, with or without cause, including,
but not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, (b) at the discretion of the Administrator, terminations which
result in a temporary severance of the employee-employer relationship, and (c)
at the discretion of the Administrator, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the question
of whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether a particular leave of absence constitutes a
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, unless otherwise determined by the Administrator in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Awards shall be the Common Stock,
par value $.01 per share. The aggregate number of such shares which may be
issued upon exercise of such Options or rights or upon any such awards
under the Plan shall not exceed four hundred eighty-nine thousand nine
hundred seventy-one (489,971). The shares of Common Stock issuable upon
exercise of such Options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.
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(b) The maximum number of shares which may be subject to Awards,
granted under the Plan to any individual in any fiscal calendar year shall
not exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares subject to Options which are canceled continue to be counted
against the Award Limit.
2.2 Add-back of Options and Other Rights. If any Option, or other right to
acquire shares of Common Stock under any other Award under the Plan, expires or
is canceled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by the Plan, the number of shares subject to such
Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to
Section 11.3 and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof
or tax withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. If any shares of Restricted Stock are
surrendered by the Holder or repurchased by the Company pursuant to Section 7.4
or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Notwithstanding the provisions of
this Section 2.2, no shares of Common Stock may again be optioned, granted or
awarded if such action would cause an Incentive Stock Option to fail to qualify
as an incentive stock option under Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1 Award Agreement. Each Award shall be evidenced by an Award Agreement.
Award Agreements evidencing Awards intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
3.2 Provisions Applicable to Section 162(m) Participants.
(a) The Committee, in its discretion, may determine whether an Award
is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the
attainment of performance goals which are related to one or more of the
Performance Criteria and any performance or incentive award described in
Article VIII that vests or becomes exercisable or payable upon the
attainment of performance goals which are related to one or more of the
Performance Criteria.
(c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to any Award granted under Articles VII and VIII which may be granted to
one or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall,
in writing, (i) designate one or more Section 162(m) Participants, (ii)
select the Performance Criteria applicable to the fiscal year or other
designated fiscal period or period of service, (iii) establish the various
performance targets, in terms of an objective formula or standard, and
amounts of such Awards, as applicable, which may be earned for such fiscal
year or other designated fiscal period or period of service and (iv)
specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant
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for such fiscal year or other designated fiscal period or period of
service. Following the completion of each fiscal year or other designated
fiscal period or period of service, the Committee shall certify in writing
whether the applicable performance targets have been achieved for such
fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the
Committee shall have the right to reduce (but not to increase) the amount
payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the fiscal year or other designated
fiscal period or period of service.
(d) Furthermore, notwithstanding any other provision of the Plan or
any Award which is granted to a Section 162(m) Participant and is intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that
are requirements for qualification as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.
3.3 Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
3.4 Consideration. In consideration of the granting of an Award under the
Plan, the Holder shall agree, in the Award Agreement, to remain in the employ of
(or to consult for or to serve as an Independent Director of, as applicable) the
Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Award Agreement or by action of the Administrator
following grant of the Award) after the Award is granted (or, in the case of an
Independent Director, until the next annual meeting of stockholders of the
Company).
3.5 At-Will Employment. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or as a director of the
Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Holder at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in a written employment agreement
between the Holder and the Company and any Subsidiary.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1 Eligibility. Any Employee or Consultant selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.
4.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.
4.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.
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4.4 Granting of Options to Employees and Consultants.
(a) The Committee shall from time to time, in its absolute discretion,
and subject to applicable limitations of the Plan:
(i) Determine which Employees are key Employees and select from
among the key Employees or Consultants (including Employees or
Consultants who have previously received Awards under the Plan) such of
them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected key Employees or
Consultants;
(iii) Subject to Section 4.3, determine whether such Options are to
be Incentive Stock Options or Non-Qualified Stock Options and whether
such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent
with the Plan; provided, however, that the terms and conditions of
Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be
limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or Consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option
as it deems appropriate.
(c) Any Incentive Stock Option granted under the Plan may be modified
by the Committee, with the consent of the Holder, to disqualify such Option
from treatment as an "incentive stock option" under Section 422 of the
Code.
4.5 Granting of Options to Independent Directors. During the term of the
Plan, a person who is initially elected to the Board and who is an Independent
Director at the time of such initial election automatically shall be granted (i)
an Option to purchase six thousand (6,000) shares of Common Stock (subject to
adjustment as provided in Section 11.3) on the date of such initial election and
(ii) an Option to purchase six thousand (6,000) shares of Common Stock (subject
to adjustment as provided in Section 11.3) on the date of each March meeting of
the Committee, during which the compensation levels for Directors, senior
executives and other Employees are determined, after such initial election to
the Board (the "Automatic Grants"). Members of the Board who are employees of
the Company who subsequently retire from the Company and remain on the Board
will not receive an initial Option grant pursuant to clause (i) of the preceding
sentence, but to the extent that they are otherwise eligible, will receive,
after termination of employment with the Company, Options as described in clause
(ii) of the preceding sentence. All the foregoing Option grants authorized by
this Section 4.5 are subject to stockholder approval of the Plan.
Notwithstanding the above paragraph, no Automatic Grants will be made to
any Independent Director in the same calendar year that such director received
an Award pursuant to Section 3.4(h) of The 1997 Stock Option and Incentive Plan
of Pan Pacific Retail Properties, Inc.
4.6 Options in Lieu of Cash Compensation. Options may be granted under the
Plan to Employees and Consultants in lieu of cash bonuses which would otherwise
be payable to such Employees and Consultants and to Independent Directors in
lieu of directors' fees which would otherwise be payable to such Independent
Directors, pursuant to such policies which may be adopted by the Administrator
from time to time.
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ARTICLE V.
TERMS OF OPTIONS
5.1 Option Price. The price per share of the shares subject to each Option
granted to Employees and Consultants shall be set by the Committee; provided,
however, that such price shall be no less than the par value of a share of
Common Stock, unless otherwise permitted by applicable state law:
(a) in the case of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price
shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted;
(b) in the case of Incentive Stock Options such price shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code);
(c) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning
of Section 422 of the Code), such price shall not be less than 110% of the
Fair Market Value of a share of Common Stock on the date the Option is
granted (or the date the Option is modified, extended or renewed for
purposes of Section 424(h) of the Code).
5.2 Option Term. The term of an Option granted to an Employee or
consultant shall be set by the Committee in its discretion; provided, however,
that, in the case of Incentive Stock Options, the term shall not be more than
ten (10) years from the date the Incentive Stock Option is granted, or five (5)
years from the date the Incentive Stock Option is granted if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Holder, or amend any other term or condition
of such Option relating to such a termination.
5.3 Option Vesting.
(a) The period during which the right to exercise, in whole or in
part, an Option granted to an Employee or a Consultant vests in the Holder
shall be set by the Committee and the Committee may determine that an
Option may not be exercised in whole or in part for a specified period
after it is granted; provided, however, that, unless the Committee
otherwise provides in the terms of the Award Agreement or otherwise, no
Option shall be exercisable by any Holder who is then subject to Section 16
of the Exchange Act within the period ending six months and one day after
the date the Option is granted. At any time after grant of an Option, the
Committee may, in its sole and absolute discretion and subject to whatever
terms and conditions it selects, accelerate the period during which an
Option granted to an Employee or Consultant vests.
(b) No portion of an Option granted to an Employee or Consultant which
is unexercisable at Termination of Employment or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as
may be otherwise provided by the Committee either in the Award Agreement or
by action of the Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Holder during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
parent or subsidiary corporation, within the meaning of Section 422 of the
Code) of the Company, exceeds $100,000, such Options shall be treated as
Non-Qualified Options to the extent required by Section 422 of the Code.
The rule set forth in the preceding sentence shall be applied by taking
Options into account in the order in which they were
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granted. For purposes of this Section 5.3(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such
stock is granted.
5.4 Terms of Options Granted to Independent Directors. The price per share
of the shares subject to each Option granted to an Independent Director shall
equal 100% of the Fair Market Value of a share of Common Stock on the date the
Option is granted. Options granted to Independent Directors shall become
exercisable in cumulative annual installments of 33 1/3%, the first such
installment to be exercisable immediately and the remaining two installments on
each of the first and second anniversaries of the date of Option grant and,
subject to Section 6.6, the term of each Option granted to an Independent
Director shall be set by the Committee in its discretion, except that any Option
granted to an Independent Director may by its terms become immediately
exercisable in full upon the retirement of the Independent Director in
accordance with the Company's retirement policy applicable to directors. No
portion of an Option which is unexercisable at Termination of Directorship shall
thereafter become exercisable.
5.5 Substitute Awards. Notwithstanding the foregoing provisions of this
Article V to the contrary, in the case of an Option that is a Substitute Award,
the price per share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant, provided, that the excess of:
(a) the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares subject to the Substitute Award; over
(b) the aggregate exercise price thereof; does not exceed the excess
of;
(c) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such fair
market value to be determined by the Committee) of the shares of the
predecessor entity that were subject to the grant assumed or substituted
for by the Company; over
(d) the aggregate exercise price of such shares.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.
6.2 Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:
(a) A written notice complying with the applicable rules established
by the Administrator stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Administrator, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Administrator may, in its
absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 11.1 by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.
However, the Administrator, may in its discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion
thereof, is exercised; (ii) allow payment, in whole or in part, through the
delivery of shares of Common Stock which have been owned by the Holder for
at least six months, duly endorsed for transfer to the Company with a Fair
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Market Value on the date of delivery equal to the aggregate exercise price
of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable
upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in part, through
the delivery of property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part, through the delivery
of a full recourse promissory note bearing interest (at no less than such
rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Administrator; (vi)
allow payment, in whole or in part, through the delivery of a notice that
the Holder has placed a market sell order with a broker with respect to
shares of Common Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise
price, provided that payment of such proceeds is then made to the Company
upon settlement of such sale; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs
(ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the
Administrator may also prescribe the form of such note and the security to
be given for such note. The Option may not be exercised, however, by
delivery of a promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law.
6.3 Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Administrator shall, in its absolute discretion,
deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration used by
the Holder to pay for such shares under Section 6.2(d).
6.4 Rights as Stockholders. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.
6.5 Ownership and Transfer Restrictions. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such shares to such
Holder.
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6.6 Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the Holder's
death;
(b) the expiration of twelve (12) months from the date of the Holder's
Termination of Directorship by reason of his permanent and total disability
(within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) months from the date of the Holder's
Termination of Directorship for any reason other than such Holder's death
or his permanent and total disability, unless the Holder dies within said
three-month period; or
(d) The expiration of ten (10) years from the date the Option was
granted.
6.7 Additional Limitations on Exercise of Options. Holders may be required
to comply with any timing or other restrictions with respect to the settlement
or exercise of an Option, including a window-period limitation, as may be
imposed in the discretion of the Administrator.
ARTICLE VII.
AWARD OF RESTRICTED STOCK
7.1 Eligibility. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee who the Committee determines is a key Employee or any
Consultant who the Committee determines should receive such an Award.
7.2 Award of Restricted Stock.
(a) The Committee may from time to time, in its absolute discretion:
(i) Determine which Employees are key Employees and select from
among the key Employees or Consultants (including Employees or
Consultants who have previously received other awards under the Plan)
such of them as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with the
Plan.
(b) The Committee shall establish the purchase price, if any, and form
of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all
cases, legal consideration shall be required for each issuance of
Restricted Stock.
(c) Upon the selection of a key Employee or Consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company
to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
7.3 Rights as Stockholders. Subject to Section 7.4, upon delivery of the
shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Committee, all the rights of
a stockholder with respect to said shares, subject to the restrictions in his
Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Committee, any extraordinary distributions with respect
to the Common Stock shall be subject to the restrictions set forth in Section
7.4.
7.4 Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to
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a person subject to Section 16 of the Exchange Act shall be sold, assigned or
otherwise transferred until at least six months and one day have elapsed from
the date on which the Restricted Stock was issued, and provided, further, that,
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants, by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was paid by the
Holder upon issuance, a Holder's rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; provided, however, that the
Committee in its sole and absolute discretion may provide that such rights shall
not lapse in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, except with respect to
shares of Restricted Stock granted to Section 162(m) Participants, the Committee
in its sole and absolute discretion may provide that no such lapse or surrender
shall occur in the event of a Termination of Employment, or a Termination of
Consultancy, without cause or following any Change in Control of the Company or
because of the Holder's retirement, or otherwise.
7.5 Repurchase of Restricted Stock. The Committee shall provide in the
terms of each individual Award Agreement that the Company shall have the right
to repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement immediately upon a Termination of Employment or, if
applicable, upon a Termination of Consultancy between the Holder and the
Company, at a cash price per share equal to the price paid by the Holder for
such Restricted Stock; provided, however, that the Committee in its sole and
absolute discretion may provide that no such right of repurchase shall exist in
the event of a Termination of Employment following a "change of ownership or
control" (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or
any successor regulation thereto) of the Company or because of the Holder's
death or disability; provided, further, that, except with respect to shares of
Restricted Stock granted to Section 162(m) Participants, the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment or a Termination of
Consultancy without cause or following any Change in Control of the Company or
because of the Holder's retirement, or otherwise.
7.6 Escrow. The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.
7.7 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.
ARTICLE VIII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
8.1 Eligibility. Subject to the Award Limit, one or more Performance
Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock Payments
may be granted to any Employee whom the Committee determines is a key Employee
or any Consultant whom the Committee determines should receive such an Award.
8.2 Performance Awards. Any key Employee or Consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to any one or more of the Performance Criteria
or other specific performance criteria determined appropriate by the Committee,
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in each case on a specified date or dates or over any period or periods
determined by the Committee. In making such determinations, the Committee shall
consider (among such other factors as it deems relevant in light of the specific
type of award) the contributions, responsibilities and other compensation of the
particular key Employee or Consultant.
8.3 Dividend Equivalents.
(a) Any key Employee or Consultant selected by the Committee may be
granted Dividend Equivalents based on the dividends declared on Common
Stock, to be credited as of dividend payment dates, during the period
between the date a Stock Appreciation Right, Deferred Stock or Performance
Award is granted, and the date such Stock Appreciation Right, Deferred
Stock or Performance Award is exercised, vests or expires, as determined by
the Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.
(b) Any Holder of an Option who is an Employee or Consultant selected
by the Committee may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates,
during the period between the date an Option is granted, and the date such
Option is exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee.
(c) Any Holder of an Option who is an Independent Director selected by
the Board may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates,
during the period between the date an Option is granted, and the date such
Option is exercised, vests or expires, as determined by the Board. Such
Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Board.
(d) Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m)
of the Code shall be payable, with respect to pre-exercise periods,
regardless of whether such Option is subsequently exercised.
8.4 Stock Payments. Any key Employee or Consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.
8.5 Deferred Stock. Any key Employee or Consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the Performance Criteria or
other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Deferred Stock
award will not be issued until the Deferred Stock award has vested, pursuant to
a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Holder of Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such
time as the Award has vested and the Common Stock underlying the Award has been
issued.
8.6 Term. The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.
8.7 Exercise or Purchase Price. The Committee may establish the exercise
or purchase price of a Performance Award, shares of Deferred Stock, or shares
received as a Stock Payment; provided, however, that such price shall not be
less than the par value for a share of Common Stock, unless otherwise permitted
by applicable state law.
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8.8 Exercise Upon Termination of Employment, Termination of Consultancy or
Termination of Directorship. A Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is exercisable or payable only while the
Holder is an Employee, Consultant or Independent Director, as applicable;
provided, however, that the Administrator in its sole and absolute discretion
may provide that the Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment may be exercised or paid subsequent to a Termination
of Employment following a "change of control or ownership" (within the meaning
of Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the
Company; provided, further, that except with respect to Performance Awards
granted to Section 162(m) Participants, the Administrator in its sole and
absolute discretion may provide that Performance Awards may be exercised or paid
following a Termination of Employment or a Termination of Consultancy without
cause, or following a Change in Control of the Company, or because of the
Holder's retirement, death or disability, or otherwise.
8.9 Form of Payment. Payment of the amount determined under Section 8.2 or
8.3 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee. To the extent any payment under this Article VIII
is effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 6.3.
ARTICLE IX.
STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any key Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.
9.2 Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the number
of shares subject to the simultaneously or previously granted Option to
which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the
Company in exchange therefor an amount determined by multiplying the
difference obtained by subtracting the Option exercise price from the Fair
Market Value of a share of Common Stock on the date of exercise of the CSAR
by the number of shares of Common Stock with respect to which the CSAR
shall have been exercised, subject to any limitations the Committee may
impose.
9.3 Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine.
An ISAR shall cover such number of shares of Common Stock as the Committee
may determine; provided, however, that unless the Committee otherwise
provides in the terms of the ISAR or otherwise, no ISAR granted to a person
subject to Section 16 of the Exchange Act shall be exercisable until at
least six months have elapsed from (but excluding) the date on which the
Option was granted. The exercise price per share of Common Stock subject to
each ISAR shall be set by the Committee. An ISAR is exercisable only while
the Grantee is an Employee or Consultant; provided that the Committee may
determine that the ISAR may be exercised subsequent to Termination of
Employment or Termination of Consultancy without cause, or following a
Change in Control of the Company, or because of the Guarantee's retirement,
death or disability, or otherwise.
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(b) An ISAR shall entitle the Holder (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the date of
exercise of the ISAR by the number of shares of Common Stock with respect
to which the ISAR shall have been exercised, subject to any limitations the
Committee may impose.
9.4 Payment and Limitations on Exercise.
(a) Payment of the amounts determined under Section 9.2(c) and 9.3(b)
above shall be in cash, in Common Stock (based on its Fair Market Value as
of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is
effected in Common Stock it shall be made subject to satisfaction of all
provisions of Section 6.3 above pertaining to Options.
(b) Holders of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period
limitation, as may be imposed in the discretion of the Committee.
ARTICLE X.
ADMINISTRATION
10.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under the Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
10.2 Duties and Powers of Committee. It shall be the duty of the Committee
to conduct the general administration of the Plan in accordance with its
provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options and Dividend Equivalents granted to Independent
Directors.
10.3 Majority Rule; Unanimous Written Consent. The Committee shall act by
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
10.4 Compensation; Professional Assistance; Good Faith Actions. Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of the Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the
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Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.
10.5 Delegation of Authority to Grant Awards. The Committee may, but need
not, delegate from time to time some or all of its authority to grant Awards
under the Plan to a committee consisting of one or more members of the Committee
or of one or more officers of the Company; provided, however, that the Committee
may not delegate its authority to grant Awards to individuals (i) who are
subject on the date of the grant to the reporting rules under Section 16(a) of
the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are
officers of the Company who are delegated authority by the Committee hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 10.5 shall serve in such capacity at the pleasure of the
Committee.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
11.1 Not Transferable. No Award under the Plan may be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until such Award has been exercised, or the shares underlying
such Award have been issued, and all restrictions applicable to such shares have
lapsed. No Award or interest or right therein shall be liable for the debts,
contracts or engagements of the Holder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
Notwithstanding the foregoing, an Award may be transferred, by providing
prior notice of such transfer to the Committee, by gift and without the receipt
of any consideration, to any one or more of the Holder's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse, former spouse,
siblings, nieces, nephews, mother-in-law, father-in-law, sons-in-law,
daughters-in-law, brothers-in-law, or sisters-in-law, including adoptive
relationships, or any person sharing the Holder's household (other than a tenant
or employee) or a trust in which such persons have more than fifty percent (50%)
of the beneficial interest (each such person or trust, a "Permitted
Transferee"); provided, however, that in the event of such a transfer, (i) the
Permitted Transferee shall continue to be subject to all of the terms and
conditions of the Award as applicable to the Holder and the Permitted Transferee
shall continue to be subject to all of the terms and conditions of the Award as
applicable to the Holder and the Permitted Transferee shall execute any and all
documents requested by the Committee in connection with the transfer, including
without limitation to evidence the transfer and to satisfy any requirements for
an exemption for the transfer under applicable federal and state securities
laws, and (ii) the Award shall not be transferable by the Permitted Transferee,
except to the extent applicable by will or the laws of descent and distribution.
11.2 Amendment, Suspension or Termination of the Plan. Except as otherwise
provided in this Section 11.2, the Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Administrator. However, without approval of the Company's stockholders given
within twelve months before or after the action by the Administrator, no action
of the Administrator may, except as provided in Section 11.3, increase the
limits imposed in Section 2.1 on the maximum number of shares which may be
issued under the Plan. No amendment, suspension or termination of the Plan
shall, without the consent of the Holder alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be
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granted or awarded during any period of suspension or after termination of the
Plan, and in no event may any Incentive Stock Option be granted under the Plan
after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 11.4.
11.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 11.3 (d), in the event that the Administrator
determines that any dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock
or other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Administrator's sole discretion,
affects the Common Stock such that an adjustment is determined by the
Administrator to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under
the Plan or with respect to an Award, then the Administrator shall, in such
manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Awards may be granted or
awarded (including, but not limited to, adjustments of the limitations
in Section 2.1 on the maximum number and kind of shares which may be
issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award.
(b) Subject to Sections 11.3(b)(vii) and 11.3(d), in the event of any
transaction or event described in Section 11.3(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any affiliate,
or of changes in applicable laws, regulations, or accounting principles,
the Administrator, in its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, either by the terms of the Award or
by action taken prior to the occurrence of such transaction or event and
either automatically or upon the Holder's request, is hereby authorized to
take any one or more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:
(i) To provide for either the purchase of any such Award for an
amount of cash equal to the amount that could have been attained upon
the exercise of such Award or realization of the Holder's rights had
such Award been currently exercisable or payable or fully vested or the
replacement of such Award with other rights or property selected by the
Administrator in its sole discretion;
(ii) To provide that the Award cannot vest, be exercised or become
payable after such event;
(iii) To provide that such Award shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in
Section 5.3 or 5.4 or the provisions of such Award;
(iv) To provide that such Award be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock
of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of
shares and prices; and
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(v) To make adjustments in the number and type of shares of Common
Stock (or other securities or property) subject to outstanding Awards,
and in the number and kind of outstanding Restricted Stock or Deferred
Stock and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may be granted in
the future.
(vi) To provide that, for a specified period of time prior to such
event, the restrictions imposed under an Award Agreement upon some or
all shares of Restricted Stock or Deferred Stock may be terminated, and,
in the case of Restricted Stock, some or all shares of such Restricted
Stock may cease to be subject to repurchase under Section 7.5 or
forfeiture under Section 7.4 after such event.
(vii) None of the foregoing discretionary actions taken under this
Section 11.3(b) shall be permitted with respect to Options granted under
Section 4.5 to Independent Directors to the extent that such discretion
would be inconsistent with the applicable exemptive conditions of Rule
16b-3. In the event of a Change in Control or a Corporate Transaction,
to the extent that the Board does not have the ability under Rule 16b-3
to take or to refrain from taking the discretionary actions set forth in
Section 11.3(b)(iii) above, each Option granted to an Independent
Director shall be exercisable as to all shares covered thereby upon such
Change in Control or during the five days immediately preceding the
consummation of such Corporate Transaction and subject to such
consummation, notwithstanding anything to the contrary in Section 5.4 or
the vesting schedule of such Options. In the event of a Corporate
Transaction, to the extent that the Board does not have the ability
under Rule 16b-3 to take or to refrain from taking the discretionary
actions set forth in Section 11.3(b)(ii) above, no Option granted to an
Independent Director may be exercised following such Corporate
Transaction unless such Option is, in connection with such Corporate
Transaction, either assumed by the successor or survivor corporation (or
parent or subsidiary thereof) or replaced with a comparable right with
respect to shares of the capital stock of the successor or survivor
corporation (or parent or subsidiary thereof).
(c) Subject to Sections 11.3(d), 3.2 and 3.3, the Administrator may,
in its discretion, include such further provisions and limitations in any
Award, agreement or certificate, as it may deem equitable and in the best
interests of the Company.
(d) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation
under Section 162(m)(4)(C), no adjustment or action described in this
Section 11.3 or in any other provision of the Plan shall be authorized to
the extent that such adjustment or action would cause such Award to fail to
so qualify under Section 162(m)(4)(C), or any successor provisions thereto.
No adjustment or action described in this Section 11.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of
the Code. Furthermore, no such adjustment or action shall be authorized to
the extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Administrator determines that the Award is not to comply
with such exemptive conditions. The number of shares of Common Stock
subject to any Award shall always be rounded to the next whole number.
(e) Notwithstanding the foregoing, in the event that the Company
becomes a party to a transaction that is intended to qualify for "pooling
of interests" accounting treatment and, but for one or more of the
provisions of this Plan or any Award Agreement would so qualify, then this
Plan and any Award Agreement shall be interpreted so as to preserve such
accounting treatment, and to the extent that any provision of the Plan or
any Award Agreement would disqualify the transaction from pooling of
interests accounting treatment (including, if applicable, an entire Award
Agreement), then such provision shall be null and void. All determinations
to be made in connection with the preceding sentence shall be made by the
independent accounting firm whose opinion with respect to "pooling of
interests" treatment is required as a condition to the Company's
consummation of such transaction.
(f) The existence of the Plan, the Award Agreement and the Awards
granted hereunder shall not affect or restrict in any way the right or
power of the Company or the shareholders of the Company to
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make or authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the Common Stock
or the rights thereof or which are convertible into or exchangeable for
Common Stock, or the dissolution or liquidation of the company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
11.4 Approval of Plan by Stockholders. The Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of the Plan. Awards may be granted or awarded prior
to such stockholder approval, provided that such Awards shall not be exercisable
nor shall such Awards vest prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Awards previously granted or awarded
under the Plan shall thereupon be canceled and become null and void. In
addition, if the Board determines that Awards other than Options or Stock
Appreciation Rights which may be granted to Section 162(m) Participants should
continue to be eligible to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to
and approved by the Company's stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the Company's
stockholders previously approved the Performance Criteria.
11.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Award. The Administrator may in
its discretion and in satisfaction of the foregoing requirement allow such
Holder to elect to have the Company withhold shares of Common Stock otherwise
issuable under such Award (or allow the return of shares of Common Stock) having
a Fair Market Value equal to the sums required to be withheld. Notwithstanding
any other provision of the Plan, the number of shares of Common Stock which may
be withheld with respect to the issuance, vesting, exercise or payment of any
Award (or which may be repurchased from the Holder of such Award within six
months after such shares of Common Stock were acquired by the Holder from the
Company) in order to satisfy the Holder's federal and state income and payroll
tax liabilities with respect to the issuance, vesting, exercise or payment of
the Award shall be limited to the number of shares which have a Fair Market
Value on the date of withholding or repurchase equal to the aggregate amount of
such liabilities based on the minimum statutory withholding rates for federal
and state tax income and payroll tax purposes that are applicable to such
supplemental taxable income.
11.6 Loans. The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Award granted
or awarded under the Plan, or the issuance of Restricted Stock or Deferred Stock
awarded under the Plan. The terms and conditions of any such loan shall be set
by the Committee.
11.7 Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to Awards under the Plan, the Administrator
shall have the right to provide, in the terms of Awards made under the Plan, or
to require a Holder to agree by separate written instrument, that (a)(i) any
proceeds, gains or other economic benefit actually or constructively received by
the Holder upon any receipt or exercise of the Award, or upon the receipt or
resale of any Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised portion of the Award
(whether or not vested) shall be forfeited, if (b)(i) a Termination of
Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the Award, or (ii) the Holder at any time, or during a specified
time period, engages in any activity in competition with the Company, or which
is inimical, contrary or harmful to the interests of the Company, as further
defined by the Administrator or (iii) the Holder incurs a Termination of
Employment, Termination of Consultancy or Termination of Directorship for cause.
11.8 Effect of Plan Upon Options and Compensation Plans. The adoption of
the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan
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shall be construed to limit the right of the Company (a) to establish any other
forms of incentives or compensation for Employees, Directors or Consultants of
the Company or any Subsidiary or (b) to grant or assume options or other rights
or awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
11.9 Section 83(b) Election Prohibited. No Grantee, Optionee or Restricted
Stockholder may make an election under Section 83(b) of the Code with respect to
any award or grant under this Plan.
11.10 Compliance with Laws. The Plan, the granting and vesting of Awards
under the Plan and the issuance and delivery of shares of Common Stock and the
payment of money under the Plan or under Awards granted or awarded hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
11.11 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
11.12 Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Maryland without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Pan Pacific Retail Properties, Inc. on March 17, 2000.
Executed on this 17(th) day of March, 2000.
/s/ JOSEPH B. TYSON
--------------------------------------
Joseph B. Tyson, Secretary
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IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY AND THAT YOUR SHARES BE
REPRESENTED. STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
By order of the Board of Directors,
/s/ Joseph B. Tyson
Joseph B. Tyson
Secretary
Dated: April 4, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PAN PACIFIC RETAIL PROPERTIES, INC.
1631-B SOUTH MELROSE DRIVE
VISTA, CALIFORNIA 92083
The undersigned, a stockholder of Pan Pacific Retail Properties, Inc.,
a Maryland corporation, hereby appoints Stuart A. Tanz and Mark J. Riedy and
each or either of them as proxies, with full power of substitution and
resubstitution, to represent the undersigned and to vote all shares of Common
Stock of Pan Pacific Retail Properties, Inc. which the undersigned is entitled
to vote at the Annual Meeting of the Company to be held on Friday May 5, 2000,
and any and all adjournments thereof, in the manner specified.
Proposal One: Election of Directors
The Board of Directors recommends a vote FOR Election of Directors.
FOR the nominees WITHHOLD AUTHORITY to vote
listed below for the nominees listed below
[ ] [ ]
Nominees: Stuart A. Tanz Paul D. Campbell
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
through that nominee's name above.)
Proposal Two: Approval of the Adoption of The 2000 Stock Incentive Plan
The Board of Directors recommends a vote FOR approval of the adoption of The
2000 Stock Incentive Plan
<TABLE>
<S> <C> <C>
FOR Approval of the Adoption of the AGAINST Approval of the Adoption of the ABSTAIN
2000 Stock Incentive Plan 2000 Stock Incentive Plan
[ ] [ ] [ ]
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" PROPOSAL ONE AND "FOR" PROPOSAL TWO.
Should any other matters requiring a vote of the stockholders arise, the above
named proxies are authorized to vote the same in accordance with their best
judgement in the interest of the Company. The Board of Directors is not aware of
any matter which is to be presented for action at the meeting other than the
matter set forth herein.
Dated: __________________________________________________________, 2000
__________________________________________________________(SEAL)
__________________________________________________________(SEAL)
(Please sign exactly as name or names appear hereon. Executors, administrators,
trustees or other representatives should so indicate when signing.)
