SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No._______)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ASSET INVESTORS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
|_| (1) Title of each class of securities to which transaction applies:
|_| (2) Aggregate number of securities to which transaction applies:
|_| (3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0- 11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
|_| (4) Proposed maximum aggregate value of transaction:
|_| (5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[AIC LETTERHEAD]
April 30, 1998
To Our Stockholders:
You cordially are invited to the 1998 Annual Meeting of Stockholders
(the "Meeting") of Asset Investors Corporation, a Maryland corporation (the
"Company") to be held at 1873 South Bellaire Street, Suite 1700, Denver,
Colorado on Tuesday, June 30, 1998, at 10:00 a.m., local time.
The formal notice of the Meeting and a proxy statement describing the
matters to be acted upon at the Meeting are contained in the following
pages.
Enclosed is a proxy that enables you to vote your shares on the
matters to be considered at the Meeting even if you are unable to attend
the Meeting. Please mark the proxy to indicate your vote, date and sign the
proxy and return it in the enclosed postage-paid envelope as soon as
possible for receipt prior to the Meeting. Stockholders also are entitled
to vote on any other matter that properly comes before the Meeting.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE BE SURE YOU ARE
REPRESENTED AT THE MEETING BY ATTENDING IN PERSON OR BY RETURNING YOUR
PROXY AS SOON AS POSSIBLE. EVEN IF YOU PLAN TO ATTEND IN PERSON, PLEASE
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD.
SINCERELY,
TERRY CONSIDINE
Chairman of the Board and
Chief Executive Officer
ASSET INVESTORS CORPORATION
3410 SOUTH GALENA STREET, SUITE 210
DENVER, COLORADO 80231
(303) 614-9400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
The 1998 Annual Meeting of Stockholders (the "Meeting") of Asset
Investors Corporation (the "Company") will be held at 1873 South Bellaire
Street, Suite 1700, Denver, Colorado, on Tuesday, June 30, 1998, at 10:00
a.m., local time, to consider and act upon the following matters:
1. election of Messrs. Thomas L. Rhodes and Elliot H. Kline,
two Class III Directors, to terms expiring in 2001;
2. approval of the Asset Investors Corporation 1998 Stock Incentive
Plan (the "1998 Stock Plan"); and
3. such other business as properly may come before the Meeting
and any adjournments or postponements thereof.
Only Stockholders of record at the close of business on May 11, 1998,
the record date for the Meeting, will be entitled to vote at the Meeting.
The Board of Directors of the Company desires to have maximum
representation at the Meeting and requests that you mark, date, sign and
timely return the enclosed proxy in the postage-paid envelope provided
whether or not you expect to attend the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS,
David M. Becker
Secretary
April 30, 1998
ASSET INVESTORS CORPORATION
3410 SOUTH GALENA STREET, SUITE 210
DENVER, COLORADO 80231
(303) 614-9400
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1998
To Our Stockholders:
This proxy statement (the "Proxy Statement") is furnished in
connection with the solicitation by the Board of Directors of Asset
Investors Corporation, a Maryland corporation (the "Company"), of proxies
to be used at the 1998 Annual Meeting of Stockholders of the Company (the
"Meeting") and at any adjournments or postponements thereof. The Meeting
will be held at 1873 South Bellaire Street, Suite 1700, Denver, Colorado,
on Tuesday, June 30, 1998, at 10:00 a.m., local time. The Meeting is being
held for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. This Proxy Statement, the accompanying proxy card
and the Notice of Annual Meeting (the "Proxy Materials") are first being
mailed to Stockholders beginning on or about May 12, 1998.
GENERAL INFORMATION
SOLICITATION
The enclosed proxy is being solicited by the Company. In addition to
solicitations by mail, solicitations may be made by personal interview,
telephone and telegram by Directors and officers of the Company. No
additional compensation will be paid to the Directors and officers of the
Company for the solicitation of proxies. The Company will employ Corporate
Investor Communications, Inc., to assist the Company in the solicitation of
proxies. The Company expects to incur a fee of approximately $10,000, plus
reimbursement of out-of-pocket expenses for this service. All costs of the
solicitation will be paid solely by the Company. The Company will reimburse
banks, brokers and others holding shares in their names or the names of
nominees or otherwise for reasonable out-of-pocket expenses incurred in
sending proxies and proxy materials to the beneficial owners of such
shares.
VOTING RIGHTS AND VOTES REQUIRED
Holders of record of shares of common stock, par value $.01 per share
of the Company (the "Common Stock") at the close of business on May 11,
1998, (the "Record Date") are entitled to notice of, and to vote at, the
Meeting. On the Record Date, ____________ shares of Common Stock were
outstanding. The presence, in person or by proxy, of holders of a majority
of the shares of Common Stock entitled to vote at the Meeting constitutes a
quorum for the transaction of business at the Meeting. Shares represented
by proxies that reflect abstentions or "broker non-votes" (i.e., shares
held by a broker or nominee which are represented at the Meeting, but with
respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
Each share of Common Stock outstanding on the Record Date is entitled
to one vote on each matter presented at the Meeting. If you are voting by
proxy, for your vote to be counted, your properly completed proxy must be
received by the Secretary of the Company prior to the time the vote is
taken at the Meeting. If your shares are held by your broker or other
nominee in "street name," your broker will vote your shares only if you
provide instructions as to how to vote your shares. You should follow the
directions provided by your broker regarding how to instruct your broker to
vote your shares. Without instructions, your shares may not be voted by
that broker.
The affirmative vote of a plurality of all of the votes cast at the
Meeting for the election of directors (assuming a quorum is present) is
necessary for the election of a director. For purposes of the election of
directors, abstentions or "broker non-votes" will not be counted as votes
cast and will have no effect on the result of the vote, although they will
count toward the presence of a quorum.
The affirmative vote of a majority of votes present in person or by
proxy and entitled to vote at the Meeting (assuming a quorum is present) is
required to approve and adopt the 1998 Stock Plan. For purposes of approval
of the 1998 Stock Plan, abstentions or "broker non-votes" will not be
counted as votes cast and will have no effect on the result of the vote,
although they will count toward the presence of a quorum.
VOTING OF PROXIES
Shares of Common Stock represented by all properly executed proxies
received prior to the vote at the Meeting will be voted as specified in the
proxy. Unless contrary instructions are indicated on the proxy, the shares
of Common Stock represented by such proxy will be voted "FOR" the election
of Messrs. Thomas L. Rhodes and Elliot H. Kline as directors of the Company
and "FOR" approval of the 1998 Stock Plan. Management and the Board of
Directors of the Company currently know of no other business to be brought
before the Meeting other than as described herein. If any other matters are
presented properly to the Stockholders for action at the Meeting and any
adjournments or postponements thereof, the proxy holders named in the
enclosed proxy intend to vote in their discretion on all matters on which
the shares of Common Stock represented by such proxy are entitled to vote.
REVOCABILITY OF PROXY
You can change your vote at any time before the vote is taken at the
Meeting. You can do this in one of three ways. First, you can send a
written notice dated later than your proxy card stating that you would like
to revoke your current proxy. Second, you can complete and submit a new
proxy card dated later than your original proxy card. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy card to the Secretary of the Company. The Company must receive the
notice or new proxy card before the vote is taken at the Meeting. Third,
you can attend the Meeting and vote in person. Simply attending the
stockholder meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow the directions
received from your broker as to how to change your vote.
DISSENTER'S RIGHTS OF APPRAISAL
Under applicable state law, stockholders are not entitled to
dissenter's rights of appraisal.
ANNUAL REPORT
The Company's 1997 Annual Report to Stockholders, including a copy of
the Company's 1997 Annual Report on Form 10-K (collectively, the "Annual
Report") contains financial and other information about the activities of
the Company including financial statements for the year ended December 31,
1997. This report is being mailed with this Proxy Statement to all holders
of record on the Record Date. Neither the Company's 1997 Annual Report on
Form 10-K nor the Company's 1997 Annual Report to Stockholders is
incorporated into this Proxy Statement by reference nor is it a part of the
proxy materials.
Upon written request addressed to the Secretary of the Company at the
address listed above, the Company will provide a copy of the Annual Report
to anyone whose proxy is being solicited in connection with this Proxy
Statement.
PROPOSAL 1: ELECTION OF DIRECTORS
The charter of the Company provides for three classes of Directors
with staggered terms of office. Nominees for each class serve for terms of
three years and until the election and qualification of their successors or
until their earlier resignation, death, disqualification or removal from
office. The Board of Directors currently consists of eight members,
including three Class I Directors whose terms expire in 1999, three Class
II Directors whose terms expires in 2000 and two Class III Directors whose
terms expire in 1998.
The By-laws of the Company require the number of Independent
Directors to be not less than four if the number of directors is eight or
greater; not less than three if the number of directors is six or seven;
and not less than two if the number of directors is less than six. An
Independent Director is defined in the Company's By-laws as a person "who
is not affiliated, directly or indirectly, with the person or entity
responsible for directing or performing the day-to-day business affairs of
the corporation (the advisor), including a person or entity to which the
advisor subcontracts substantially all of such functions, whether by
ownership of, ownership interest in, employment by, any material business
or professional relationship with, or by serving as an officer or Director
of, the advisor or an affiliated business entity of the advisor." The
Independent Directors of the Company are Messrs. Kline, Schultz, Robinson,
Benson and White.
Vacancies on the Board of Directors may be filled by a majority of
the remaining members; provided, however, that the Independent Directors
must nominate the replacements for vacancies among the Independent
Directors. Each Director elected by the Board of Directors to fill a
vacancy shall hold office until the next annual meeting of the Stockholders
at which time the Stockholders shall elect a Director to serve the
remaining term of the class into which such Director is elected.
At the Meeting, two Class III Directors will be elected to a term
expiring in 2001. Unless otherwise specified, the enclosed proxy will be
voted "FOR" the election of the Board of Directors' nominees, Messrs.
Rhodes and Kline, as the Class III Directors of the Company. Neither
management nor the Board of Directors of the Company knows of any reason
why Messrs. Rhodes or Kline would be unavailable to serve as a Director.
Discretionary authority may be exercised by the proxy holders named in the
enclosed proxy to vote for a nominee proposed by the Board of Directors if
Messrs. Rhodes or Kline become unavailable for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS.
RHODES AND KLINE TO THE BOARD OF DIRECTORS OF THE COMPANY.
PROPOSAL 2: APPROVAL OF THE ASSET INVESTORS CORPORATION
1998 STOCK INCENTIVE PLAN
The Board has adopted, subject to stockholder approval, the
Asset Investors Corporation 1998 Stock Incentive Plan (the "1998 Stock
Plan"), which provides for the grant of stock options, stock appreciation
rights, restricted stock, deferred stock and performance share awards to
officers, directors, employees, consultants and advisors of the Company and
its subsidiaries. The 1998 Stock Plan provides, in general, that the number
of shares of Common Stock reserved for issuance at any time pursuant to
outstanding awards under the plan will be limited to 15% of the sum of (i)
the number of then outstanding shares of Company Common Stock and (ii) the
number of then outstanding units of limited partnership of the Company's
operating partnership ("OP Units"). However, in no event will the total
number of shares of Common Stock issuable under the 1998 Stock Plan exceed
3 million shares.
The Board has adopted the 1998 Stock Plan as part of its policy
to further the long-term growth in the Company's earnings by providing
incentives to those officers, directors, employees, consultants and
advisors who are or will be responsible for such growth; to facilitate the
ownership of the Company's stock by such individuals, thereby increasing
the identity of their interests with those of the Company's stockholders;
and to assist the Company in attracting and retaining officers, directors,
employees, consultants and advisors with experience and ability. The Board
has determined that the number of shares of Common Stock currently
remaining available for issuance pursuant to future awards under the
Company's existing Stock Option and Incentive Compensation Plan are
insufficient to provide for the continued proper compensation and
incentivization of the Company's officers, directors, employees,
consultants and advisors. In addition, the Board believes that the various
types of awards provided for under the 1998 Stock Plan will permit a more
flexible approach to stock-based incentive compensation. Accordingly, the
Board has adopted the 1998 Stock Plan to address these issues, and the
existing Stock Option and Incentive Compensation Plan will be terminated
upon stockholder approval of the 1998 Stock Plan. The Board believes that
the 1998 Stock Plan reflects the best interests of the Company and
recommends its approval by stockholders.
The full text of the 1998 Stock Plan is attached hereto as
Annex A. The summary that follows is subject to the actual terms of the
1998 Stock Plan.
THE 1998 STOCK PLAN
The 1998 Stock Plan provides for the grant of (i) stock options
(including both "incentive stock options ("ISOs")" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
and options not intended to qualify as ISOs ("nonqualified options" or
"NSOs")), (ii) stock appreciation rights ("SARs") or limited stock
appreciation rights ("LSARs"), or both ("rights") and (iii) restricted
stock, deferred stock and performance share awards ("restricted awards") to
officers, directors, employees, consultants and advisors of the Company and
its subsidiaries. On April 27, 1998, the closing market price of the Common
Stock as reported on the New York Stock Exchange was $17-15/16 per share.
PLAN ADMINISTRATION
The 1998 Stock Plan will be administered by the Board or a
committee thereof consisting solely of two or more non-employee directors
of the Company who qualify as "outside directors" for purposes of Section
162(m) of the Code and "Non-Employee Directors" for purposes of Rule 16b-3
under the Exchange Act (such Board or committee sometimes referred to
herein as the "plan administrator"). The 1998 Stock Plan provides that no
member of the Board or committee will be liable for any action or
determination taken or made in good faith with respect to the 1998 Stock
Plan or any option, right or restricted award granted thereunder.
Subject to the terms of the 1998 Stock Plan, the plan
administrator has the right to grant awards to eligible recipients and to
determine the terms and conditions of the award agreements evidencing the
grant of such awards, including the vesting schedule and exercise price of
such awards, and the effect, if any, of a change in control of the Company
on such awards.
SECURITIES SUBJECT TO THE PLAN
The 1998 Stock Plan provides, in general, that the number of
shares of Common Stock reserved for issuance at any time pursuant to
outstanding awards under the plan will be limited to 15% of the sum of (i)
the number of then outstanding shares of Company Common Stock and (ii) the
number of then outstanding OP Units. However, in no event will the total
number of shares of Common Stock issuable under the 1998 Stock Plan exceed
3 million shares. The aggregate number of shares of Common Stock as to
which options, rights and restricted awards may be granted to any
individual during any calendar year may not, subject to adjustment as set
forth below, exceed 80% of the shares reserved for issuance under the 1998
Stock Plan.
The 1998 Stock Plan provides that, in the event of changes in
the Common Stock by reason of a merger, reorganization, recapitalization,
common stock dividend, stock split or similar change, the plan
administrator will make appropriate adjustments in the aggregate number of
shares available for issuance under the 1998 Stock Plan, the purchase price
to be paid and/or the number of shares issuable upon the exercise
thereafter of any option previously granted and in the purchase price to be
paid and/or the number of shares issuable pursuant to restricted awards.
Similar adjustments will be made to outstanding rights. The plan
administrator will have the discretion to make other appropriate
adjustments. The plan administrator has the authority, in the event of any
such adjustment, to provide for the cancellation of awards granted under
the 1998 Stock Plan in exchange for payment in cash or other property.
ELIGIBILITY
Discretionary grants of options, rights and restricted awards
may be made to any officer (including officers who are directors),
director, employee, consultant or advisor of the Company or its direct and
indirect subsidiaries who is determined by the plan administrator to be in
a position to contribute to the long-term growth in earnings of the
Company.
The 1998 Stock Plan also provides that all non-employee
directors of the Company will receive an automatic annual grant of options
to purchase 2,800 shares of Common Stock (the "Annual Director Options").
This grant will occur concurrently with the election of the directors at
each annual meeting of stockholders. In addition, non-employee directors
will be permitted each year to elect to receive shares of Common Stock in
lieu of Board of Directors and committee meeting fees for such year.
ISO LIMITATION
The aggregate fair market value (determined as of the date of
grant) of the shares granted to any employee under the 1998 Stock Plan or
any other option plan of the Company or its subsidiaries that may become
exercisable for the first time in any calendar year is limited, with
respect to ISOs, to $100,000. This restriction does not apply to NSOs,
rights or restricted awards.
TERMS AND CONDITIONS OF OPTIONS
Options will vest and become exercisable according to a
schedule established by the plan administrator, except that Annual Director
Options will be vested in full as of the date of grant. In the case of
options exercisable by installment, options not exercised during any one
year may be accumulated and exercised at prescribed times during the
remaining years of the option. Options that are not exercised within ten
years from the date of grant will expire without value. Except as otherwise
determined by the plan administrator in accordance with Rule 16b-3, options
are exercisable during the optionee's lifetime only by the optionee.
Subject to the limitations set forth below, the purchase price
of Common Stock pursuant to the exercise of an option will be as determined
by the plan administrator and may be adjusted in accordance with the
antidilution provisions described in "Securities Subject to the 1998 Stock
Plan." The purchase price of NSOs may not be less than the par value of the
Company Common Stock on the date of grant. The purchase price of ISOs may
not be less than 100% of the fair market value of the Common Stock on the
date of grant. The purchase price of Annual Director Options will be equal
to the fair market value of the Common Stock on the date of grant. Upon the
exercise of any option, the purchase price must be fully paid in cash or by
check, or, at the discretion of the plan administrator (except with respect
to Annual Director Options), by delivery of Common Stock equal in market
value to the exercise price, by delivery of restricted awards equal in
market value to the exercise price, by means of a loan from the Company, by
means of any cashless exercise procedure approved by the plan
administrator, or by a combination of cash, Common Stock, restricted
awards, loans, or use of a cashless exercise procedure. If restricted
awards are used to pay the exercise price, certain of the shares acquired
upon exercise will also be subject to restriction.
STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS
SARs and LSARs may be granted either alone ("Free Standing
Rights") or in conjunction with all or part of an option ("Related
Rights"). Upon the exercise of an SAR, a holder is entitled to receive
cash, unrestricted shares of Common Stock or any combination thereof, as
determined by the plan administrator, in an amount equal to the excess of
the fair market value of one share of Common Stock on the date of exercise
over the exercise price per share specified in the related option (or in
the case of a Free Standing Right, the price per share specified in such
right), multiplied by the number of shares in respect of which the SAR is
exercised. Upon the exercise of an LSAR, a holder is entitled to receive an
amount in cash equal in value to the excess of the Change in Control Price
(as defined in the award agreement evidencing such LSAR) of one share of
Common Stock on the date of exercise over the option price per share
specified in the related option (or in the case of an LSAR which is a Free
Standing Right, the price per share specified in such right), multiplied by
the number of shares in respect of which the LSAR is exercised.
With respect to SARs and LSARs that are Related Rights, each
such SAR and LSAR will terminate upon the termination or exercise of the
pertinent portion of the related option, and the pertinent portion of the
related option will terminate upon the exercise of any such SAR or LSAR.
Unless otherwise determined by the plan administrator at grant, if an SAR
or LSAR is granted with respect to less than the full number of shares
covered by a related option, the SAR or LSAR will only be reduced if and to
the extent that the number of shares covered by the exercise or termination
of such option exceeds the number of shares not covered by such SAR or
LSAR. LSARs that are Related Rights can only be exercised within the 30-day
period following a Change in Control (as defined in the award agreement
evidencing such LSAR) and only to the extent that the options to which they
relate are exercisable. SARs that are Related Rights may be exercised at
any time that the underlying option is exercisable or, at the discretion of
the plan administrator, in certain other limited circumstances. With
respect to NSOs, Related Rights may be granted at or after the grant of
such NSOs. In the case of ISOs, Related Rights may be granted only at the
time of grant of the ISOs.
SARs that are Free Standing Rights may be exercised at such
time or times and may be subject to such terms and conditions as may be
determined by the plan administrator at or after grant. LSARs that are Free
Standing Rights can only be exercised within the 30-day period following a
Change in Control. The term of each Free Standing Right will be fixed by
the plan administrator but may not exceed ten years from the date of grant.
The price per share for each Free Standing Right will be set by the plan
administrator but will not be less than 100% of the fair market value of a
share of Common Stock on the date of grant.
RESTRICTED AWARDS
A restricted stock award is an award of Common Stock that may
not be sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of for such period ("restricted period") from the date on which
the award is granted, as may be determined by the plan administrator. The
plan administrator may also impose such other restrictions and conditions
on an award as it deems appropriate. The plan administrator may provide
that the foregoing restrictions will lapse with respect to specified
percentages of the awarded shares on successive anniversaries of the date
of the award. In addition, the plan administrator has the authority to
cancel all or any portion of any outstanding restrictions prior to the
expiration of the restricted period. Deferred stock is the right to receive
Common Stock at the end of a specified deferral period. Performance shares
are shares of the Common Stock subject to restrictions based upon the
attainment of performance objectives.
Upon the award of any restricted stock or performance shares,
the participant will have the rights of a stockholder with respect to the
shares, including dividend rights, subject to the conditions and
restrictions generally applicable to restricted stock or specifically set
forth in the award agreement for the participant's restricted stock or
performance shares. Upon an award of deferred stock, the participant will
not have any rights of a stockholder, other than the right to receive
dividends, during the specified deferral period.
Recipients of restricted stock, deferred stock, or performance
shares will enter into an award agreement with the Company, in such form as
the plan administrator determines, which states the restrictions to which
the shares are subject and the date or dates on which such restrictions
will lapse. The plan administrator may permit such restrictions to lapse in
installments within the restricted period or may accelerate or waive such
restrictions at any time.
The vesting of restricted awards may be made subject to the
achievement of performance goals specified by the plan administrator at the
time of grant. Such goals may be based on funds from operations, adjusted
funds from operations, net income and stock price performance.
DEATH--TERMINATION OF EMPLOYMENT--RESTRICTIONS ON TRANSFER
Upon termination of employment or service for any reason,
including upon death, disability or retirement, outstanding options and
rights will remain exercisable for such period, and outstanding restricted
awards will be treated, in each case as set forth by the plan administrator
in the award agreement governing such award.
In no event may any option or right be exercisable more than
ten years from the date it is granted. Except as determined by the plan
administrator in accordance with Rule 16b-3, options and rights are
transferable.
AMENDMENT; TERMINATION
The Board may amend or terminate the 1998 Stock Plan at any
time, except that stockholder approval is required for any amendment to (i)
increase the maximum number of shares of stock which may be issued under
the 1998 Stock Plan (except for adjustments as described in "Securities
Subject to the Plan"), (ii) change the class of individuals eligible to
participate in the 1998 Stock Plan, or (iii) extend the term of the 1998
Stock Plan or the period during which any option, right or restricted award
may be granted or any option may be exercised, but in each such case only
to the extent required by Section 162(m) of the Code or other applicable
law, rule or regulation with respect to the material amendment of any
employee benefit plan maintained by the Company. Termination or amendment
of the 1998 Stock Plan will not, without the consent of any participant,
adversely affect previously granted options, rights or restricted awards,
which will continue in effect in accordance with their terms.
PAYMENT OF TAXES
Participants are required, no later than the date as of which
the value of an award first becomes includible in the gross income of the
participant for Federal income tax purposes, to pay to the Company, or make
arrangements satisfactory to the plan administrator regarding payment of,
any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the award. The obligations of the Company under
the 1998 Stock Plan are conditional on the making of such payments or
arrangements, and the Company will have the right, to the extent permitted
by law, to deduct any such taxes from any payment of any kind otherwise due
to the participant.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is for general information only and is
based on the Federal income tax law now in effect, which is subject to
change, possibly retroactively. This summary does not discuss all aspects
of Federal income taxation which may be important to particular holders of
options, rights, restricted awards and Common Stock in light of their
individual investment circumstances or to certain types of holders subject
to special tax rules, nor does it address specific state, local or foreign
tax consequences. This summary assumes that the Common Stock acquired upon
exercise of an option or right or vesting of a restricted award will be
held as a "capital asset" (generally property held for investment) under
the Code.
Nonqualified Stock Options
A participant will generally not be subject to Federal income
tax upon the grant of an NSO. Rather, at the time of exercise of such NSO,
the participant will recognize ordinary income for Federal income tax
purposes in an amount equal to the excess of the fair market value of the
shares purchased over the exercise price. The Company will generally be
entitled to claim a deduction for Federal income tax purposes at such time
and in the same amount as the participant recognizes ordinary income.
A participant will recognize capital gain or loss upon a sale
or exchange of stock acquired upon exercise of an NSO in an amount equal to
the difference between the fair market value of such stock on the date it
was acquired and the amount realized in the sale or exchange.
Incentive Stock Options
A participant will not be subject to tax upon the grant of an
ISO or upon its timely exercise. Exercise of an ISO will be timely if made
during its term and if the participant remains an employee of the Company
or a subsidiary at all times during the period beginning on the date of
grant of the ISO and ending on the date three months before the date of
exercise (or one year before the date of exercise in the case of a disabled
employee). Exercise of an ISO will also be timely if made by the legal
representative of a participant who dies (i) while in the employ of the
Company or a subsidiary or (ii) within three months after termination of
employment (or one year in the case of a disabled employee). The tax
consequences of an untimely exercise of an ISO will be determined in
accordance with the rules applicable to NSOs. See "-Nonqualified Stock
Options" above.
If stock acquired pursuant to a timely exercised ISO is later
disposed of, the participant will, except as noted below with respect to a
"disqualifying disposition," recognize capital gain or loss equal to the
difference between the amount realized upon such sale and the option price.
Under these circumstances, the Company will not be entitled to any
deduction for Federal income tax purposes in connection with either the
exercise of the ISO or the sale of such stock by the participant.
If, however, a participant disposes of stock acquired pursuant
to the exercise of an ISO prior to the expiration of two years from the
date of grant of the ISO or within one year from the date such stock is
transferred to him upon exercise (a "disqualifying disposition"), generally
(i) the participant will realize ordinary income at the time of the
disposition in an amount equal to the excess, if any, of the fair market
value of the stock at the time of exercise (or, if less, the amount
realized on such disqualifying disposition) over the option exercise price,
and (ii) any additional gain realized by the participant will be subject to
tax as capital gain. In such case, the Company may claim a deduction for
Federal income tax purposes at the time of such disqualifying disposition
for the amount taxable to the participant as ordinary income.
The amount by which the fair market value of the stock on the
exercise date of an ISO exceeds the option price will be an item of
adjustment for purposes of the "alternative minimum tax" imposed by Section
55 of the Code.
Exercise with Shares
According to a published ruling of the Internal Revenue
Service, a participant who pays the option price upon exercise of an NSO,
in whole or in part, by delivering shares of stock already owned by the
participant will recognize no gain or loss for Federal income tax purposes
on the shares surrendered, but otherwise will be subject to tax according
to the rules described above for NSOs. See "--Nonqualified Stock
Options" above. With respect to shares acquired upon exercise which are
equal in number to the shares surrendered, (i) such shares will be treated
as exchanged for the shares surrendered in a non-taxable transaction, (ii)
the basis of such shares will be equal to the basis of the shares
surrendered, and (iii) the holding period of the shares acquired will
include the holding period of the shares surrendered. With respect to the
additional shares received upon exercise, (a) a participant will recognize
ordinary income in an amount equal to the fair market value of such shares
on the date of receipt, (b) the basis of such additional shares will be
equal to the amount of income recognized, and (c) the holding period for
such additional shares will commence on the date of receipt.
The Treasury Department has issued proposed regulations that,
if adopted in their current form, would appear to provide for the following
rules with respect to the exercise of an ISO by surrender of previously
owned shares of stock. If the shares surrendered in payment of the exercise
price of an ISO are "statutory option stock" (including stock acquired
pursuant to the exercise of an ISO) and if the surrender constitutes a
"disqualifying disposition" (as would be the case, for example, if, in
satisfaction of the option exercise price, the Company withholds shares
which would otherwise be delivered to the participant), any gain realized
on such surrender will be taxable to the optionee at such time, as
discussed above. Otherwise, when shares of stock are surrendered upon
exercise of an ISO, in general, (i) no gain or loss will be recognized as a
result of the exchange, (ii) the number of shares received that is equal in
number to the shares surrendered will have a basis equal to the basis of
the shares surrendered and (except for purposes of determining whether a
disposition will be a disqualifying disposition) will have a holding period
that includes the holding period of the shares exchanged, and (iii) any
additional shares received will have a zero basis and will have a holding
period that begins on the date of the exchange. If any of the shares
received are disposed of within two years of the date of grant of the ISO
or within one year after exercise, the shares with the lowest basis will be
deemed to be disposed of first, and such disposition will be a
disqualifying disposition giving rise to ordinary income at the time of
disposition as discussed above.
Rights
A grant of SARs or LSARs has no Federal income tax consequences
at the time of such grant. Upon the exercise of SARs or LSARs (other than a
Free Standing LSAR), the amount of any cash and the fair market value as of
the date of exercise of any shares of the Company's stock received is
taxable to the participant as ordinary income. With respect to a Free
Standing LSAR, however, a recipient should be required to include as
taxable income on the Change in Control date an amount equal to the amount
of cash that could be received upon the exercise of the LSAR, even if the
LSAR is not exercised until a date subsequent to the Change in Control
date. The Company will generally be entitled to claim a deduction for
Federal income tax purposes at the same time and in an amount equal to the
amount included in the participant's income. Upon the sale of shares
acquired upon the exercise of SARs or LSARs, a participant will recognize
capital gain or loss in an amount equal to the difference between the
amount realized upon such sale and the fair market value of the stock on
the date that governs the determination of his ordinary income.
Restricted Awards
In the case of a restricted award, a participant generally will
not be subject to tax upon the grant of such an award, but, rather, the
participant will recognize ordinary income in an amount equal to (i) the
fair market value of the stock at the time the shares become transferable
or are otherwise no longer subject to a substantial risk of forfeiture (as
defined in the Code), minus (ii) the price, if any, paid by the participant
to purchase such stock. A participant may elect under Section 83(b) of the
Code, however, not later than 30 days after acquiring such shares, to
recognize ordinary income at the time the restricted shares are awarded in
an amount equal to their fair market value at that time, notwithstanding
the fact that such shares are subject to restrictions and a substantial
risk of forfeiture. If such an election is made, no additional taxable
income will be recognized by the participant at the time the restrictions
lapse. The Company will be entitled to claim a deduction for Federal income
tax purposes at the time when, and to the extent that, income is recognized
by the participant. Nevertheless, if shares in respect of which such
election was made are later forfeited, no tax deduction is allowable to the
participant for the forfeited shares, and the Company will be deemed to
recognize ordinary income equal to the amount of the deduction allowed to
the Company at the time of the election in respect of such forfeited
shares.
Maximum Tax Rates Applicable to Capital Gain
Net capital gain (i.e., generally, capital gain in excess of
capital loss) recognized by an individual participant upon a disposition of
stock that has been held for (i) more than 18 months will generally be
subject to tax at a rate not to exceed 20%, (ii) more than 12 months but
not more than 18 months will be subject to tax at a rate not to exceed 28%,
and (iii) 12 months or less will be subject to tax at ordinary income tax
rates.
NEW PLAN BENEFITS
The table below sets forth the grants that have been or will be
made under the 1998 Stock Plan to the Company's most senior executive
officers, all current executive officers as a group (the "Executive
Group"), all current directors who are not executive officers as a group
(the "Non-Executive Director Group") and all employees, including all
current officers who are not executive officers, as a group (the "Employee
Group"). These awards are subject to stockholder approval of the 1998 Stock
Plan.
NAME AND POSITION OPTIONS GRANTED
- ------------------------- ----------------
TERRY CONSIDINE 300,000
Chairman of the Board and
Chief Executive Officer
BRUCE E. MOORE
President and Chief Operating Officer 250,000
THOMAS L. RHODES 100,000
Vice Chairman of the Board
DAVID M. BECKER 0
Chief Financial Officer
EXECUTIVE GROUP 650,000
NON-EXECUTIVE DIRECTOR GROUP 14,000
EMPLOYEE GROUP 0
REASON FOR AUTHORIZATION
The 1998 Stock Plan is being submitted for stockholder approval
pursuant to Sections 162(m) and 422 of the Code and the rules of the New
York Stock Exchange. It is intended that awards granted under the 1998
Stock Plan may constitute "qualified performance based compensation" for
purposes of Section 162(m) of the Code.
VOTE REQUIRED
The affirmative vote of a majority of the votes present in
person or by proxy and entitled to vote at the Meeting (assuming a quorum
is present) is required to approve and adopt the 1998 Stock Plan. If the
stockholders do not approve the 1998 Stock Plan, the Board will consider
whether to adopt some alternative arrangement based on its assessment of
the Company's needs.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE 1998 STOCK PLAN.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Certain information with respect to the nominees for election as
Directors, the continuing Directors and the executive officers of the
Company, as of April 28, 1998, appears below and was furnished in part by
each such person.
Each executive officer of the Company serves for a term of one year
and until his or her successor has been elected and qualified or until his
or her earlier resignation or removal by the Board of Directors. There are
no family relationships among any of the Directors and executive officers
of the Company.
NAME AGE POSITION(S) HELD WITH THE COMPANY
TERRY CONSIDINE 51 CHAIRMAN OF THE BOARD OF DIRECTORS
(CLASS II) AND CHIEF EXECUTIVE OFFICER
THOMAS L. RHODES 58 VICE CHAIRMAN OF THE BOARD OF DIRECTORS
(CLASS III)
BRUCE E. MOORE 56 DIRECTOR (CLASS I), PRESIDENT AND CHIEF
OPERATING OFFICER
DAVID M. BECKER 38 CHIEF FINANCIAL OFFICER AND SECRETARY
ELLIOT H. KLINE 57 INDEPENDENT DIRECTOR (CLASS III), MEMBER
OF THE COMPENSATION COMMITTEE AND
CHAIRMAN OF THE AUDIT COMMITTEE
RICHARD L. ROBINSON 68 INDEPENDENT DIRECTOR (CLASS I) AND MEMBER
OF THE AUDIT AND COMPENSATION COMMITTEES
TIM SCHULTZ 49 INDEPENDENT DIRECTOR (CLASS I) AND MEMBER
OF THE AUDIT AND COMPENSATION COMMITTEES
BRUCE D. BENSON 59 INDEPENDENT DIRECTOR (CLASS II) AND
CHAIRMAN OF THE COMPENSATION COMMITTEE
WILLIAM J. WHITE 60 INDEPENDENT DIRECTOR (CLASS II) AND MEMBER
OF THE AUDIT AND COMPENSATION COMMITTEES
TERRY CONSIDINE has been Chairman of the Board of Directors and Chief
Executive Officer since April 1998. From September 1996 to April 1998, Mr.
Considine served as Co-Chairman of the Board of Directors and Co-Chief
Executive Officer of the Company. Mr. Considine also serves as Chairman of
the Board of Directors and Chief Executive Officer of Commercial Assets,
Inc. ("CAX"). He is the sole owner of Considine Investment Co. and has also
been the Chairman of the Board of Directors and Chief Executive Officer of
Apartment Investment and Management Company ("AIMCO"), one of the largest
apartment REITs in the United States since July 1994. Mr. Considine has
been and remains involved as a principal in a variety of real estate
activities, including the acquisition, renovation, development and
disposition of properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting, gasoline
distribution and environmental laboratories. Mr. Considine received a B.A.
from Harvard College and a J.D. from Harvard Law School and is admitted as
a member of the Massachusetts Bar.
Mr. Considine has had substantial real estate experience. From 1975
through July 1994, partnerships or other entities in which Mr. Considine
had controlling interests invested in approximately 35 multifamily
apartment properties and commercial real estate properties. Six of these
real estate assets (four of which were multifamily apartment properties and
two of which were office properties) did not generate sufficient cash flow
to service their related indebtedness and were foreclosed upon by their
lenders, causing pre-tax losses of approximately $11.9 million to investors
and losses of approximately $2.7 million to Mr. Considine.
THOMAS L. RHODES has been Vice Chairman of the Board of Directors of
the Company since April 1998. From September 1996 to April 1998, Mr. Rhodes
served as Co-Chairman of the Board of Directors and Co-Chief Executive
Officer of the Company. Mr. Rhodes also serves as Vice Chairman of the
Board of Directors of CAX. Mr. Rhodes has also been a Director of AIMCO
since July 1994. Mr. Rhodes has served as the President and a Director of
National Review magazine since 1992. From 1976 to 1992, he held various
positions at Goldman, Sachs & Co. and was elected a General Partner in
1986. He currently serves as a Director of Delphi Financial Group, Inc. and
its subsidiaries, Delphi International, Ltd., Oracle Reinsurance and The
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman of the Empire
Foundation for Policy Research, a Trustee of The Heritage Foundation and a
Trustee of The Manhattan Institute.
BRUCE E. MOORE was appointed as President and Chief Operations
Officer in February 1998. Mr. Moore is the founder and was the Chief
Executive Officer of Brandywine Financial Services Corporation
("Brandywine"), a private real estate firm specializing in various aspects
of the real estate industry including asset management, consulting,
development, property management, brokerage and capital formation. He is a
certified public accountant, holds a Masters in Accounting and a Bachelor
of Science in Economics from the Wharton School of the University of
Pennsylvania. Mr. Moore is a director and past president of the Media Youth
Center, and a past advisory-board member for the Department of Recreation
and Intercollegiate Athletics for the University of Pennsylvania. In
addition, Moore is a member of the National Association of Real Estate
Investment Trusts and the International Council of Shopping Centers.
BRUCE D. BENSON has served as a Director of the Company and CAX since
October 1, 1996 and previously served as a Director of the Company from
February 1992 through November 1993. In February 1998, Mr. Benson became
the Chairman of the Compensation Committee. For the past 32 years, he has
been President and owner of Benson Mineral Group, Inc., a domestic oil and
gas production company located in Denver, Colorado. He is also Chairman,
Chief Executive Officer and President of United States Exploration, Inc.,
and oil and gas exploration company listed on the American Stock Exchange.
He serves on numberous Boards of Trustees and Boards of Directors,
including President, Denver Zoological Foundation; Past Chiarman and Past
President, Boy Scouts of America, Denver Area Council; Trustee and Past
President of the Board of Trustees, Berkshire School, Sheffield,
Massachusetts; Past Trustee, Smith College, Northampton, Massachusetts;
Past Chairman, Colorado Commission on Higheer Education; and past member,
Board of Directors, University of Colorado Foundation and Chairman of the
Major Capital Campaign for the University of Colorado; and Chairman of the
Total Learning Environmental Capital Campaign for the University of
Colorado. In 1994, he was the REpublican nominee for the Governor of
Colorado.
ELLIOT H. KLINE has served as a Director of the Company since
September 1988, as a member of the Compensation Committee since February
1998, as a member of the Audit Committee since December 1988, Chairman of
the Audit Committee since November 1990. Dr. Kline has served as
Executive-in-Residence at Arizona State University-West since August 1993.
Dr. Kline served as President of In The Interim Management Consulting, a
firm specializing in consulting to universities, from 1989 to 1993. Dr.
Kline served as the Dean of the College of Business Administration at the
University of Denver from 1987 to 1989; as the Dean and a Professor of the
School of Business and Public Administration at the University of the
Pacific from 1977 to 1987; and as the Director and an Associate Professor
of the Institute of Public Affairs and Administration at Drake University
from 1970 to 1977.
RICHARD L. ROBINSON has served as a Director of the Company since
1988 and has served as a member of the Audit Committee since August 1993,
and as a member of the Compensation Committee since February 1998. Mr.
Robinson has served as Chairman of the Board of Directors and Chief
Executive Officer of Robinson Dairy, Inc., a Denver-based institutional
dairy products manufacturer and distributor, since 1975 and prior thereto
served in various executive positions with that company for 20 years. Mr.
Robinson also serves as a Director of US Exploration. He is active in
numerous civic and charitable organizations, is past Chairman of the
Greater Denver Chamber of Commerce and a past President of the State Board
of Agriculture, the governing body for the Colorado State University
System.
TIM SCHULTZ has been a Director of the Company since July 1994 and is
a member of the Audit Committee. In February 1998, Mr. Schultz became a
member of the Compensation Committee. He is President and Executive
Director of the Boettcher Foundation, a Colorado not-for- profit,
charitable corporation, and from August 1994 until November 1995, he was
Chairman and President of Colorado Open Lands, a Colorado not-for-profit
corporation. From 1990 until August 1994, he was employed by the law firm
of Arnold & Porter as a Consultant-Corporate/Government Relations with
responsibilities ranging from serving as Chairman of a large land trust to
representing clients' needs in connection with state and local government
issues. From May 1987 to July 1990, Mr. Schultz served as Executive
Director of the State of Colorado Department of Local Affairs and from
November 1983 to May 1987, as Commissioner of Agriculture for the State of
Colorado Department of Agriculture, both cabinet level positions. From 1987
to 1991, he served as Chairman of the Colorado Economic Development
Commission.
BRUCE D. BENSON has served as a Director of the Company and CAX since
October 1, 1996 and previously served as a Director of the Company from
February 1992 through November 1993. In February 1998, Mr. Benson became
the Chairman of the Compensation Committee. For the past 32 years, he has
been President and owner of Benson Mineral Group, Inc., a domestic oil and
gas production company located in Denver, Colorado. He is also Chairman,
Chief Executive Officer and President of United States Exploration, Inc.,
an oil and gas exploration company. He serves on numerous Boards of
Trustees and Boards of Directors, including President, Denver Zoological
Foundation; Chairman and Past President, Boy Scouts of America, Denver Area
Council; Past President of the Board of Trustees, Berkshire School,
Sheffield, Massachusetts; Past Trustee, Smith College, Northampton,
Massachusetts; past Chairman, Colorado Commission on Higher Education; and
past member, Board of Directors, University of Colorado Foundation and
Chairman of the major capital campaign for the University of Colorado. In
1994, he was the Republican nominee for the Governor of Colorado.
WILLIAM J. WHITE has served as Director of the Company and member of
the Audit Committee since December 1996, and became a member of the
Compensation Committee in February 1998. Mr. White has served as Chairman
of Bigelow and Co., an investment-banking firm located in Denver, Colorado
that specializes in municipal and corporate finance, since 1995. From 1992
through 1995, Mr. White was President and owner of First Denver Financial
Corporation and in 1991 and 1992, was President of Affiliated Capital
Markets, a division of Affiliated National Bank. Prior to these positions,
Mr. White served in various positions culminating as Chairman of Kirchner
Moore and Company, a stock brokerage firm. Mr. White serves on the Board of
Directors of Orion Financial Ltd.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 10 meetings in 1997. During 1997, no
Director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and any committee thereof on which he served.
The audit committee of the Board of Directors (the "Audit Committee")
held two meetings in 1997. Messrs. Kline (Chairman), Robinson, Schultz and
White are the current members of this committee. Among other things, the
Audit Committee reviews and approves the scope of the annual audit
undertaken by the Company's independent certified public accountants and
meets with them as necessary to review the progress and results of their
work as well as their recommendations. The Audit Committee also reviews
internal audit procedures and reporting systems of the Company.
During 1997, the Company did not have a Nominating Committee or a
Compensation Committee (or any other committees performing a similar
functions). Procedures for nominating persons to the Board of Directors are
contained in the Company's By-laws, and compensation decisions were made by
the entire Board of Directors. The Company established a Compensation
Committee in February 1998.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company's executive officers and Directors are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership of securities of the Company with the Securities and Exchange
Commission (the "SEC") and the American Stock Exchange, Inc. Copies of
those reports also must be furnished to the Company. Based solely upon a
review of the copies of reports furnished to the Company, the Company
believes that for the year ended December 31, 1997, all filing requirements
were complied with by its executive officers, directors and beneficial
owners of more than ten percent of the Company's stock except as follows:
Messrs. Benson, Considine, Kline, Rhodes Robinson, Schultz and White were
each late in filing reports relating to their receipt of options to
purchase 1,500 shares of the Company's Common Stock, and Messrs. Kline,
Robinson, Schultz and White were each late in filing (or failed to file)
reports relating to their receipt of 3,000, 4,000, 2,000 and 4,000 shares
of Common Stock, respectively. Messrs. Benson, Considine, Kline, Rhodes,
Robinson, Schultz and White were late in filing (or failed to file) 2, 2,
3, 2, 3, 3, and 3 report, respectively.
EXECUTIVE COMPENSATION
In the fiscal year ended December 31, 1997, neither Mr.
Considine nor Mr. Rhodes, who served as the Company's Co-Chief Executive
Officers until April 1998, received any compensation in his capacity as
such. No other executive officer of the Company received total salary and
bonus in 1997 in excess of $100,000.
In their capacity as directors of the Company, each of Messrs.
Considine and Rhodes received options to acquire Common Stock. See
"Director Compensation." Neither Mr. Considine nor Mr. Rhodes, each of whom
is a major stockholder of the Company and CAX, was at any time on or prior
to December 31, 1997 granted options to acquire Common Stock other than in
his capacity as a director.
DIRECTOR COMPENSATION
During 1997, each non-employee director of the Company except Mr.
Benson received $7,500 for the first quarter of 1997 and, at such
director's election, either (i) $15,000 and 1,000 shares of Common Stock or
(ii) 2,000 shares of Common Stock for the remainder of 1997, plus an
additional $300 for each meeting of the Board of Directors or committee
thereof attended. In addition, all Directors are reimbursed for expenses
related to their attendance at Board of Directors and committee meetings.
Pursuant to the existing Stock Option and Incentive Compensation
Plan, on the date of the 1997 annual stockholders meeting, all directors of
the Company received an automatic grant of options to acquire 1,500 shares
of Common Stock with an exercise price equal to the closing price of the
Common Stock on such date. Such options were exercisable as to 50% of the
shares upon grant and will become exercisable as to an additional 25% on
each of the first and second anniversaries of the date of grant. The
options have a term of five years.
If the 1998 Stock Plan is approved, only the non-employee directors
of the Company will be entitled to receive automatic annual grants of
market-price options to acquire 2,800 shares of Common Stock on the date of
each annual stockholders meeting. These options will be immediately
exercisable upon grant and have a term of ten years. If the 1998 Stock Plan
is not approved, directors will continue to receive option grants under the
terms of the existing Stock Option and Incentive Compensation Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Considine and Rhodes each served as Co-Chief
Executive Officer and Co-Chairman of the Board of the Company and CAX. Mr.
Considine is Chairman of the Board and Chief Executive Officer of AIMCO,
and Mr. Rhodes serves on the Compensation Committee of AIMCO.
PERFORMANCE GRAPH
The performance graph below compares the change in the cumulative
total return of the Common Stock from March 31, 1997, which was the date
the Company made its first investment in manufactured housing properties,
through December 31, 1997, with (i) the cumulative total return of the
Standard & Poor's 500 Stock Index and (ii) a peer group consisting of
Chateau Communities ("CPJ"), Sun Communities ("SUI") and Manufactured Home
("MHC", and together with CPJ and SUI, the "Peer Group").
Prior to March 31, 1997, the assets of the Company had been invested
in mortgages, and the peer group index with which the Company has
previously compared its stock-price performance consisted of all Mortgage
REITS as defined by the National Association of Real Estate Investment
Trusts. However, in light of the Company's 1997 decision to divest itself
of all mortgages and instead begin acquiring manufactured housing
properties, the Company believes that comparison with other manufactured
housing REITs since the time of the transition will provide stockholders
with a more appropriate measure of the Company's stock-price performance.
The performance graph was prepared based on the following
assumptions: (a) an initial investment of $100 on March 31, 1997 invested
in (i) the Common Stock; (ii) the shares of the companies in the Standard &
Poor's 500 Index; and (iii) the shares of the companies in the Peer Group
Index; and (b) all dividends received were reinvested. The stock price
performance shown on the graph is not necessarily indicative of future
price performance.
Name 3/31/97 6/30/97 9/30/97 12/31/97
----
Company $100 $105.69 $110.51 $119.62
S&P 500 $100 $116.91 $125.12 $128.17
Peer Group $100 $110.62 $120.03 $124.82
Notwithstanding anything to the contrary contained in any of the
Company's filings with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 or the Securities Exchange
Act of 1934, the foregoing Performance Graph shall not be incorporated into
any future filings with the Commission.
OWNERSHIP OF COMMON STOCK
The table below sets forth, as of April 24, 1998, the number of
shares of Common Stock beneficially owned by (i) each person known to the
Company to be a beneficial owner of more than 5% of its Common Stock; (ii)
all Directors, individually, and each executive officer of the Company,
individually; and (iii) all of the Company's Directors and executive
officers as a group, which information was furnished in part by each such
person.
Amount and
Nature of
Beneficial Percent of
Name of Beneficial Owner(1) Ownership Class (2)
- ----------------------------------------------------------------------------
Terry Considine(3) 201,523 3.9%
Thomas L. Rhodes(4) 26,095 *
Bruce E. Moore(5) 37,791 *
David M. Becker 280 *
Elliot H. Kline(6) 42,418 *
Richard L. Robinson(6) 45,602 *
Tim Schultz(7) 22,636 *
Bruce D. Benson(8) 62,648 1.2%
William J. White(9) 8,100 *
All directors and
executive officers as
a group (9 persons) 447,093 8.5%
- -----------
* Denotes ownership of less than 1% of the outstanding shares of
Common Stock.
(1) Includes, where applicable, shares owned by such person's minor
children and spouse and by other related individuals and entities.
Unless otherwise indicated, such person has sole voting and
investment power as to the shares listed and such person's address is
3410 South Galena Street, Suite 210, Denver, Colorado 80231. Excludes
OP Units that are not redeemable within 60 days.
(2) All shares which a person had the right to acquire within 60 days
after the Record Date, were deemed to be outstanding for the purpose
of computing the "Percent of Class" owned by such person but were not
deemed to be outstanding for the purpose of computing the "Percent of
Class" owned by any other person. At the Record Date, [__________]
shares were outstanding.
(3) Mr. Considine's shares are held by Titahotwo Ltd. and Titahothree
Ltd., limited partnerships in which he is the sole general partner.
Includes 29,382 options exercisable and 146 OP Units redeemable
within 60 days.
(4) Includes 10,605 options exercisable and 146 OP Units redeemable within
60 days.
(5) Includes 8,721 shares of Common Stock owned by Brandywine Real Estate
Management Services Corporation, an entity in which the stockholder
owns a 50% interest.
(6) Includes 24,944 options exercisable within 60 days.
(7) Includes 15,127 options exercisable within 60 days.
(8) Includes 25,589 options exercisable within 60 days.
(9) Includes 4,500 options exercisable within 60 days.
As of April 30, 1998, no person or group was known to the Company to
be a beneficial owner of more than 5% of the Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to November 1997, the Company's daily activities were performed
by Financial Asset Management LLC, ("FAM") pursuant to an annual management
agreement (the "AIC Management Agreement"). In addition, FAM provided
similar services to CAX pursuant to a separate agreement (the "CAX
Management Agreement") (collectively, the "Management Agreements"). In
September 1996, FAM was purchased by a group led by Messrs. Terry Considine
and Thomas L. Rhodes (Co-Chairmen and Co-Chief Executive Officers of both
the Company and CAX) and Mr. Bruce D. Benson (a director of both the
Company and CAX) for a purchase price of $11,692,000. In November 1997, the
Company's stockholders approved the acquisition of FAM's assets and
operations also for a purchase price of $11,692,000, which was paid by
issuing 676,696 units of limited partnership in the Company's operating
partnership. In addition, FAM will be entitled to an additional 240,000 OP
Units if the Company achieves certain performance goals, including
investment and share price targets, by June 1999.
As a result of the purchase of the CAX Management Agreement, the
Company manages CAX's daily activities. The CAX Management Agreement has
been extended through December 31, 1998 and CAX is required to pay the
Company certain fees.
During 1997, the Company paid $555,480 to Brandywine for management
and accounting services, and $207,000 in acquisition fees related to
services performed in connection with the Company's purchase of
manufactured housing communities. In addition, the Company paid Brandywine
$22,900,000, 72,674 shares of Common Stock and 18,352 units of limited
partnership in the Company's operating partnership and the Company assumed
$5,000,000 in debt in exchange for eight manufactured housing communities
and four third-party management contracts owned by Brandywine. Mr. Moore is
Chairman of the Board and Chief Executive Officer of Brandywine.
As previously reported and as a result of a transaction that occurred
during 1997, the Company was not in compliance with certain technical
requirements relating to the maintenance of its status as a REIT. In order
to cure such non-compliance and in an attemp to maintain its REIT status,
during 1997 and the first quarter of 1998, Messrs. Considine and Rhodes
each acquired beneficial ownership from the Company of 50% of the
outstanding voting common stock of AIC Manufactured Housing Corp. ("AMHC")
and AIC Management Corp. ("AIC Management," and, together with AMHC, the
"Decontrolled Subsidiaries"). The voting common stock of AMHC and AIC
Management was acquired in exchange for promissory notes which bear
interest at 7% per annum and had an aggregate original principal amount of
approximately $25,000, in the case of AMHC, and $315,000, in the case of
AIC Management. In addition, the Company acquired all of the non-voting
capital stock of each of the Decontrolled Subsidiaries in exchange for a
cash contribution of $489,485 in the case of AMHC, and a contribution of
assets valued at $5,950,000 in the case of AIC Management. The Company has
also loaned $2,000,000 to AMHC, which loan bears interest at a rate of 10%
per annum.
On December 4, 1997, the Company began leasing certain assets which
the Company would not otherwise have been permitted to operate under the
rules governing REITs, to AIC RV Management Corp. ("AIC RV Management"), an
entity that is beneficially owned equally by Messrs. Considine and Rhodes.
During 1997, AIC RV Management paid aggregate lease payments of $17,000 to
the Company. AIC RV Management has a line of credit from the Company of up
to $80,000, which bears interest at a rate of 10% per annum. To date, AIC
RV Management has drawn $74,000 against this line of credit.
See also "Compensation Committee Interlocks and Insider Participation."
COMPANY'S RELATIONSHIP WITH INDEPENEDENT AUDITORS
The Board of Directors of the Company appointed the firm of Ernst &
Young LLP to audit the financial statements of the Company for the year
ended December 31, 1997. A representative of Ernst & Young LLP is expected
to be present at the Meeting and available to respond to appropriate
questions. Ernst & Young LLP has indicated that it will not make a
statement, although an opportunity for a statement will be provided.
Stockholders are not being requested to ratify this appointment.
OTHER MATTERS
Management and the Board of Directors of the Company know of no
matters to be brought before the Meeting other than as set forth in this
Proxy Statement. However, if any such other matters are properly presented
to the Stockholders for action at the Meeting and any adjournments or
postponements thereof, it is the intention of the proxy holders named in
the enclosed proxy to vote in their discretion on all matters on which the
Shares represented by such proxy are entitled to vote.
STOCKHOLDER PROPOSALS
Any proposal that a Stockholder may desire to present at the 1999
Annual Meeting of Stockholders must be received in writing by the Secretary
of the Company not later than [---------].
BY ORDER OF THE BOARD OF DIRECTORS,
David M. Becker
Secretary
April 30, 1998
ANNEX A
ASSET INVESTORS CORPORATION
1998 STOCK INCENTIVE PLAN
Section 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Asset Investors Corporation 1998 Stock
Incentive Plan (the "Plan"). The Plan was adopted by the Board on [
], 1998, subject to the approval of the stockholders of the Company, which
approval was obtained on [ ], 1998. The purpose of the Plan is to
enable the Company to attract and retain highly qualified personnel who
will contribute to the Company's success by their ability, ingenuity and
industry and to provide incentives to the participating officers,
directors, employees, consultants and advisors that are linked directly to
increases in stockholder value and will therefore inure to the benefit of
all stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as
set forth below:
(1) "Administrator" means the Board, or if and to the extent the
Board does not administer the Plan, the Committee in accordance with
Section 2.
(2) "Annual Non-Employee Director Stock Option" means an annual
grant of stock options to a non-employee director of the Company pursuant
to Section 5A.
(3) "Board" means the Board of Directors of the Company.
(4) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(5) "Committee" means the Compensation Committee of the Board or
any committee the Board may subsequently appoint to administer the Plan.
To the extent applicable, the Committee shall be composed entirely of
individuals who meet the qualifications referred to in Section 162(m) of
the Code and Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. If at any time or to any extent the Board shall not administer
the Plan, then the functions of the Board specified in the Plan shall be
exercised by the Committee.
(6) "Company" means Asset Investors Corporation, a Maryland
corporation (or any successor corporation).
(7) "Deferred Stock" means an award made pursuant to Section 7
below of the right to receive Stock at the end of a specified deferral
period.
(8) "Effective Date" shall mean the date set forth in Section 11.
(9) "Eligible Recipient" means an officer, director, employee,
consultant or advisor of the Company or any Subsidiary.
(10) "Fair Market Value" means, as of any given date, with respect
to any awards granted hereunder, (A) if the Stock is publicly traded, the
closing sale price of the Stock on such date as reported in the Western
Edition of the Wall Street Journal, (B) the fair market value of the Stock
as determined in accordance with a method prescribed in the agreement
evidencing any award hereunder, or (C) the fair market value of the Stock
as otherwise determined by the Administrator in the good faith exercise of
its discretion.
(11) "Incentive Stock Option" means any Stock Option intended to
be designated as an "incentive stock option" within the meaning of Section
422 of the Code.
(12) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a "Change of Control" (as
defined in Section 13 or as otherwise defined in the award agreement
evidencing such Limited Stock Appreciation Right).
(13) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, including any Stock Option that provides (as
of the time such option is granted) that it will not be treated as an
Incentive Stock Option.
(14) "Parent Corporation" means any corporation (other the
Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock
in one of the other corporations in the chain.
(15) "Participant" means any Eligible Recipient selected by the
Administrator, pursuant to the Administrator's authority in Section 2
below, to receive grants of Stock Options, Stock Appreciation Rights,
Limited Stock Appreciation Rights, Restricted Stock awards, Deferred Stock
awards, Performance Shares or any combination of the foregoing.
(16) "Partnership" means any operating partnership of the Company
or which may hereafter be formed by the Company.
(17) "Partnership Units" means units of limited partnership of the
Partnership.
(18) "Performance Share" means an award of shares of Stock
pursuant to Section 7 that is subject to restrictions based upon the
attainment of specified performance objectives.
(19) "Restricted Stock" means an award granted pursuant to Section
7 of shares of Stock subject to certain restrictions.
(20) "Stock" means the Common Stock, par value $.01 per share, of
the Company.
(21) "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 to receive an amount equal to the excess, if
any, of (A) the Fair Market Value, as of the date such Stock Appreciation
Right or portion thereof is surrendered, of the shares of Stock covered by
such right or such portion thereof, over (B) the aggregate exercise price
of such right or such portion thereof.
(22) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 or any Annual Non-Employee Director Stock
Option granted pursuant to Section 5A.
(23) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each of
the corporations (other than the last corporation) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
Section 2. ADMINISTRATION.
The Plan shall be administered in accordance with the requirements
of Section 162(m) of the Code (but only to the extent necessary to maintain
qualification of awards under the Plan under Section 162(m) of the Code)
and, to the extent applicable, Rule 16b-3 under the Securities Exchange Act
of 1934, as amended ("Rule 16b-3"), by the Board or by the Committee which
shall be appointed by the Board and which shall serve at the pleasure of
the Board.
Pursuant to the terms of the Plan, the Administrator shall have the
power and authority to grant to Eligible Recipients pursuant to the terms
of the Plan: (a) Stock Options, (b) Stock Appreciation Rights or Limited
Stock Appreciation Rights, (c) Restricted Stock, (d) Performance Shares,
(e) Deferred Stock or (f) any combination of the foregoing.
In particular, the Administrator shall have the authority:
(a) to select those Eligible Recipients who shall be
Participants;
(b) to determine whether and to what extent Stock Options,
Stock Appreciation Rights, Limited Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Performance Shares or a combination of the
foregoing, are to be granted hereunder to Participants;
(c) to determine the number of shares of Stock to be covered
by each such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, (x) the restrictions applicable to Restricted Stock or
Deferred Stock awards and the conditions under which restrictions
applicable to such Restricted Stock or Deferred Stock shall lapse, and (y)
the performance goals and periods applicable to the award of Performance
Shares); and
(e) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written instruments
evidencing the Stock Options, Stock Appreciation Rights, Limited Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Performance Shares
or any combination of the foregoing granted hereunder to Participants.
The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to
interpret the terms and provisions of the Plan and any award issued under
the Plan (and any agreements relating thereto); and to otherwise supervise
the administration of the Plan.
All decisions made by the Administrator pursuant to the provisions
of the Plan shall be final, conclusive and binding on all persons,
including the Company and the Participants.
Section 3. STOCK SUBJECT TO PLAN.
The number of shares of Stock reserved for issuance at any time
pursuant to outstanding awards under the Plan shall be limited to 15% of
the sum of (i) the number of then outstanding shares of Stock and (ii) the
number of then outstanding Partnership Units; provided, that in no event
shall the total number of shares of Common Stock issuable under the 1998
Stock Plan exceed 3 million shares of Stock. The aggregate number of
shares of Stock as to which Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock and Performance Shares may be granted to
any individual during any calendar year may not, subject to adjustment as
provided in this Section 3, exceed 80% of the shares of Stock reserved for
the purposes of the Plan in accordance with the provisions of this Section
3.
Consistent with the provisions of Section 162(m) of the Code, as
from time to time applicable, to the extent that (i) a Stock Option expires
or is otherwise terminated without being exercised, or (ii) any shares of
Stock subject to any Restricted Stock, Deferred Stock or Performance Share
award granted hereunder are forfeited, such shares shall again be available
for issuance in connection with future awards under the Plan. If any
shares of Stock have been pledged as collateral for indebtedness incurred
by a Participant in connection with the exercise of a Stock Option and such
shares are returned to the Company in satisfaction of such indebtedness,
such shares shall again be available for issuance in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in (i) the
aggregate number of shares reserved for issuance under the Plan, (ii) the
kind, number and option price of shares subject to outstanding Stock
Options granted under the Plan, and (iii) the kind, number and purchase
price of shares issuable pursuant to awards of Restricted Stock, Deferred
Stock and Performance Shares, in each case as may be determined by the
Administrator, in its sole discretion. Such other substitutions or
adjustments shall be made as may be determined by the Administrator, in its
sole discretion. An adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock
Appreciation Right or Limited Stock Appreciation Right related to any Stock
Option. In connection with any event described in this paragraph, the
Administrator may provide, in its discretion, for the cancellation of any
outstanding awards and payment in cash or other property therefor.
Section 4. ELIGIBILITY.
Officers, directors and employees of the Company or any Subsidiary,
and consultants and advisors to the Company or any Subsidiary, who are
responsible for or are in a position to contribute to the management,
growth and/or profitability of the business of the Company shall be
eligible to be granted Stock Options, Stock Appreciation Rights, Limited
Stock Appreciation Rights, Restricted Stock awards, Deferred Stock awards
or Performance Shares hereunder. The Participants under the Plan shall be
selected from time to time by the Administrator, in its sole discretion,
from among the Eligible Recipients recommended by the senior management of
the Company, and the Administrator shall determine, in its sole discretion,
the number of shares of Stock covered by each award.
Section 5. DISCRETIONARY GRANTS OF STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards
granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Administrator may from time to time approve, and the
provisions of Stock Option awards need not be the same with respect to each
optionee. Recipients of Stock Options shall enter into an award agreement
with the Company, in such form as the Administrator shall determine, which
agreement shall set forth, among other things, the exercise price of the
option, the term of the option and provisions regarding exercisability of
the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant any officer or
employee of the Company (including directors who are also officers of the
Company) Incentive Stock Options, Non-Qualified Stock Options, or both
types of Stock Options (in each case with or without Stock Appreciation
Rights or Limited Stock Appreciation Rights). Directors who are not
officers of the Company, consultants and advisors may only be granted Non-
Qualified Stock Options (with or without Stock Appreciation Rights or
Limited Stock Appreciation Rights). To the extent that any Stock Option
does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. More than one option may be granted
to the same optionee and be outstanding concurrently hereunder.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(1) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Administrator in its sole
discretion at the time of grant but shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock on
such date and shall not, in any event, be less than the par value (if any)
of the Stock. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or
any Parent Corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of
the Fair Market Value of the Stock on the date such Incentive Stock Option
is granted.
(2) Option Term. The term of each Stock Option shall be fixed by
the Administrator, but no Stock Option shall be exercisable more than ten
years after the date such Stock Option is granted; provided, however, that
if an employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent Corporation and an
Incentive Stock Option is granted to such employee, the term of such
Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no more than five years from the date of grant.
(3) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant. The Administrator may
provide, in its discretion, that any Stock Option shall be exercisable only
in installments, and the Administrator may waive such installment exercise
provisions at any time in whole or in part based on such factors as the
Administrator may determine, in its sole discretion.
(4) Method of Exercise. Subject to Section 5(3) above, Stock
Options may be exercised in whole or in part at any time during the option
period, by giving written notice of exercise to the Company specifying the
number of shares to be purchased, accompanied by payment in full of the
purchase price in cash or its equivalent, as determined by the
Administrator. As determined by the Administrator, in its sole discretion,
payment in whole or in part may also be made (i) by means of any cashless
exercise procedure approved by the Administrator, (ii) in the form of
unrestricted Stock already owned by the optionee or (iii) in the case of
the exercise of a Non-Qualified Stock Option, in the form of Restricted
Stock or Performance Shares subject to an award hereunder (based, in each
case, on the Fair Market Value of the Stock on the date the option is
exercised); provided, however, that in the case of an Incentive Stock
Option, the right to make payment in the form of already owned shares may
be authorized only at the time of grant. If payment of the option exercise
price of a Non-Qualified Stock Option is made in whole or in part in the
form of Restricted Stock or Performance Shares, the shares received upon
the exercise of such Stock Option shall be restricted in accordance with
the original terms of the Restricted Stock or Performance Share award in
question, except that the Administrator may direct that such restrictions
shall apply only to that number of shares equal to the number of shares
surrendered upon the exercise of such option. An optionee shall generally
have the rights to dividends and any other rights of a stockholder with
respect to the Stock subject to the Stock Option only after the optionee
has given written notice of exercise, has paid in full for such shares,
and, if requested, has given the representation described in paragraph (1)
of Section 10.
The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent
to the grant of a new Stock Option. Subject to the provisions of the Plan,
such new Stock Option shall be exercisable at the price, during such period
and on such other terms and conditions as are specified by the
Administrator at the time the new Stock Option is granted. Consistent with
the provisions of Section 162(m), to the extent applicable, upon their
surrender, Stock Options shall be canceled and the shares previously
subject to such canceled Stock Options shall again be available for grants
of Stock Options and other awards hereunder.
(5) Loans. The Company may make loans available to Stock Option
holders in connection with the exercise of outstanding options granted
under the Plan, as the Administrator, in its discretion, may determine.
Such loans shall (i) be evidenced by promissory notes entered into by the
Stock Option holders in favor of the Company, (ii) be subject to the terms
and conditions set forth in this Section 5(5) and such other terms and
conditions, not inconsistent with the Plan, as the Administrator shall
determine, (iii) bear interest, if any, at such rate as the Administrator
shall determine, and (iv) be subject to Board approval (or to approval by
the Administrator to the extent the Board may delegate such authority). In
no event may the principal amount of any such loan exceed the sum of (x)
the exercise price less the par value (if any) of the shares of Stock
covered by the option, or portion thereof, exercised by the holder, and (y)
any federal, state, and local income tax attributable to such exercise.
The initial term of the loan, the schedule of payments of principal and
interest under the loan, the extent to which the loan is to be with or
without recourse against the holder with respect to principal or interest
and the conditions upon which the loan will become payable in the event of
the holder's termination of employment shall be determined by the
Administrator. Unless the Administrator determines otherwise, when a loan
is made, shares of Stock having a Fair Market Value at least equal to the
principal amount of the loan shall be pledged by the holder to the Company
as security for payment of the unpaid balance of the loan, and such pledge
shall be evidenced by a pledge agreement, the terms of which shall be
determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of
the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
(6) Transferability of Options. Stock Options shall be transferable
by the optionee, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or such transferee; provided,
that the Administrator may, in its sole discretion, provide for the
non-transferability of Stock Options under such terms and conditions as
the Administrator shall determine and set forth in the agreement
evidencing such award. Notwithstanding the foregoing, except to the extent
permitted by Section 422 of the Code, no Stock Option intended to qualify
as an Incentive Stock Option shall be transferable by the optionee.
(7) Termination of Employment or Service. If an optionee's
employment or service as a director, consultant or advisor terminates by
reason of death, disability or for any other reason, the Stock Option may
thereafter be exercised to the extent provided in the applicable award
agreement, or as otherwise determined by the Administrator.
(8) Annual Limit on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of shares of Stock with respect to which Incentive
Stock Options granted to an Optionee under this Plan and all other option
plans of the Company or its Parent Corporation become exercisable for the
first time by the Optionee during any calendar year exceeds $100,000, such
Stock Options shall be treated as Non-Qualified Stock Options.
SECTION 5A. ANNUAL NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
Immediately following each annual meeting of the Company's
stockholders, each then non-employee director of the Company shall
automatically be granted a Non-Qualified Stock Option to purchase 2,800
shares of Stock (an "Annual Non-Employee Director Stock Option"). The
terms and conditions of the Annual Non-Employee Director Stock Options
granted pursuant to this Section 5A shall be as follows:
(1) Option Term. The term of the option shall be ten (10) years
from the date of grant.
(2) Exercise Price. The exercise price per share of Stock subject
to such option shall be 100% of the Fair Market Value of the Stock on the
date of grant.
(3) Vesting and Exercisability. The option shall be 100% vested
and exercisable as of the date of grant.
(4) Transferability. The option shall be transferable as provided
in Section 5(6).
(5) Payment of Exercise Price. The exercise price of the option
shall be paid in cash or its equivalent as determined by the Administrator.
(6) Termination of Service. Following termination of service as a
director for any reason, the option shall be exercisable as determined by
the Administrator at or after grant.
SECTION 5B. STOCK GRANTS TO NON-EMPLOYEE DIRECTORS IN LIEU OF MEETING FEES
Each non-employee director of the Company may elect to receive all
or any portion of any Meeting Fees in shares of Stock. "Meeting Fees"
shall mean all annual retainers and other fees payable for attendance at
each regular or special meeting of the Board or any committees attended by
a non-employee director. If no such election is timely received by the
Company, such director shall receive any Meeting Fees in cash. The number
of shares of Stock issuable pursuant to any such election shall be
determined promptly after the end of each fiscal quarter based on (i) the
amount of Meeting Fees subject to such election and (ii) the Fair Market
Value of the Stock as of the date of grant.
Section 6. Stock Appreciation Rights and Limited Stock Appreciation
Rights.
(1) Grant and Exercise. Stock Appreciation Rights and Limited
Stock Appreciation Rights may be granted either alone ("Free Standing
Rights") or in conjunction with all or part of any Stock Option granted
under the Plan ("Related Rights"). In the case of a Non-Qualified Stock
Option, Related Rights may be granted either at or after the time of the
grant of such Stock Option. In the case of an Incentive Stock Option,
Related Rights may be granted only at the time of the grant of the
Incentive Stock Option.
A Related Right or applicable portion thereof granted in
conjunction with a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
except that, unless otherwise provided by the Administrator at the time of
grant, a Related Right granted with respect to less than the full number of
shares covered by a related Stock Option shall only be reduced if and to
the extent that the number of shares covered by the exercise or termination
of the related Stock Option exceeds the number of shares not covered by the
Related Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (2) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee
shall be entitled to receive an amount determined in the manner prescribed
in paragraph (2) of this Section 6. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the Related Rights have been so exercised.
(2) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions
of the Plan, as shall be determined from time to time by the Administrator,
including the following:
(a) Stock Appreciation Rights that are Related Rights
("Related Stock Appreciation Rights") shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5 and
this Section 6 of the Plan.
(b) Upon the exercise of a Related Stock Appreciation Right,
an optionee shall be entitled to receive up to, but not more than, an
amount in cash or that number of shares of Stock (or in some combination of
cash and shares of Stock) equal in value to the excess of the Fair Market
Value of one share of Stock as of the date of exercise over the option
price per share specified in the related Stock Option multiplied by the
number of shares of Stock in respect of which the Related Stock
Appreciation Right is being exercised, with the Administrator having the
right to determine the form of payment.
(c) Related Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option would be
transferable under paragraph (6) of Section 5 of the Plan.
(d) Upon the exercise of a Related Stock Appreciation Right,
the Stock Option or part thereof to which such Related Stock Appreciation
Right is related shall be deemed to have been exercised for the purpose of
the limitation set forth in Section 3 of the Plan on the number of shares
of Stock to be issued under the Plan, but only to the extent of the number
of shares issued under the Related Stock Appreciation Right.
(e) A Related Stock Appreciation Right granted in connection
with an Incentive Stock Option may be exercised only if and when the Fair
Market Value of the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights
("Free Standing Stock Appreciation Rights") shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant.
(g) The term of each Free Standing Stock Appreciation Right
shall be fixed by the Administrator, but no Free Standing Stock
Appreciation Right shall be exercisable more than ten years after the date
such right is granted.
(h) Upon the exercise of a Free Standing Stock Appreciation
Right, a recipient shall be entitled to receive up to, but not more than,
an amount in cash or that number of shares of Stock (or any combination of
cash or shares of Stock) equal in value to the excess of the Fair Market
Value of one share of Stock as of the date of exercise over the price per
share specified in the Free Standing Stock Appreciation Right (which price
shall be no less than 100% of the Fair Market Value of the Stock on the
date of grant) multiplied by the number of shares of Stock in respect of
which the right is being exercised, with the Administrator having the right
to determine the form of payment.
(i) Free Standing Stock Appreciation Rights shall be
transferable only when and to the extent that a Stock Option would be
transferable under paragraph (6) of Section 5 of the Plan.
(j) In the event of the termination of employment or service
of a Participant who has been granted one or more Free Standing Stock
Appreciation Rights, such rights shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Administrator at or after grant.
(k) Limited Stock Appreciation Rights may only be exercised
within the 30-day period following a "Change of Control" (as defined in
Section 13 or as otherwise defined by the Administrator in the award
agreement evidencing such Limited Stock Appreciation Right) and, with
respect to Limited Stock Appreciation Rights that are Related Rights
("Related Limited Stock Appreciation Rights"), only to the extent that the
Stock Options to which they relate shall be exercisable in accordance with
the provisions of Section 5 and this Section 6 of the Plan.
(l) Upon the exercise of a Limited Stock Appreciation Right,
the recipient shall be entitled to receive an amount in cash equal in value
to the excess of the "Change of Control Price" (as defined in the agreement
evidencing such Limited Stock Appreciation Right) of one share of Stock as
of the date of exercise over (A) the option price per share specified in
the related Stock Option, or (B) in the case of a Limited Stock
Appreciation Right which is a Free Standing Stock Appreciation Right, the
price per share specified in the Free Standing Stock Appreciation Right,
such excess to be multiplied by the number of shares in respect of which
the Limited Stock Appreciation Right shall have been exercised.
Section 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(1) General. Restricted Stock, Deferred Stock or Performance
Share awards may be issued either alone or in addition to other awards
granted under the Plan. The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, grants of Restricted
Stock, Deferred Stock or Performance Share awards shall be made; the number
of shares to be awarded; the price, if any, to be paid by the recipient of
Restricted Stock, Deferred Stock or Performance Share awards; the
Restricted Period (as defined in paragraph (3) of this Section 7)
applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Restricted Stock, Performance Share or Deferred
Stock awards; the date or dates on which restrictions applicable to such
Restricted Stock or Deferred Stock awards shall lapse during such
Restricted Period; and all other conditions of the Restricted Stock,
Deferred Stock and Performance Share awards. Subject to the requirements
of Section 162(m) of the Code, as applicable, the Administrator may also
condition the grant of Restricted Stock, Deferred Stock awards or
Performance Shares upon the exercise of Stock Options, or upon such other
criteria as the Administrator may determine, in its sole discretion. The
provisions of Restricted Stock, Deferred Stock or Performance Share awards
need not be the same with respect to each recipient. In the discretion of
the Administrator, loans may be made to Participants in connection with the
purchase of Restricted Stock under substantially the same terms and
conditions as provided in Section 5(5) with respect to the exercise of
stock options.
(2) Awards and Certificates. The prospective recipient of a
Restricted Stock, Deferred Stock or Performance Share award shall not have
any rights with respect to such award, unless and until such recipient has
executed an agreement evidencing the award (a "Restricted Stock Award
Agreement," "Deferred Stock Award Agreement" or "Performance Share Award
Agreement," as appropriate) and delivered a fully executed copy thereof to
the Company, within a period of sixty days (or such other period as the
Administrator may specify) after the award date. Except as otherwise
provided below in this Section 7(2), (i) each Participant who is awarded
Restricted Stock or Performance Shares shall be issued a stock certificate
in respect of such shares of Restricted Stock or Performance Shares; and
(ii) such certificate shall be registered in the name of the Participant,
and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award.
The Company may require that the stock certificates evidencing
Restricted Stock or Performance Share awards hereunder be held in the
custody of the Company until the restrictions thereon shall have lapsed,
and that, as a condition of any Restricted Stock award or Performance Share
award, the Participant shall have delivered a stock power, endorsed in
blank, relating to the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the
Restricted Period, stock certificates in respect of such shares of Deferred
Stock shall be delivered to the participant, or his legal representative,
in a number equal to the number of shares of Stock covered by the Deferred
Stock award.
(3) Restrictions and Conditions. The Restricted Stock, Deferred
Stock and Performance Share awards granted pursuant to this Section 7 shall
be subject to the following restrictions and conditions:
(a) Subject to the provisions of the Plan, and the Restricted
Stock Award Agreement, Deferred Stock Award Agreement or Performance Share
Award Agreement, as appropriate, governing such award, during such period
as may be set by the Administrator commencing on the grant date (the
"Restricted Period"), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock, Performance Shares
or Deferred Stock awarded under the Plan; provided, however, that the
Administrator may, in its sole discretion, provide for the lapse of such
restrictions (other than those pursuant to any stockholders agreement) in
installments and may accelerate or waive such restrictions in whole or in
part based on such factors and such circumstances as the Administrator may
determine, in its sole discretion, including, but not limited to, the
attainment of certain performance related goals or the Participant's
termination of employment or service, death or disability.
(b) Except as provided in paragraph (3)(a) of this Section 7,
the Participant shall generally have, with respect to the shares of
Restricted Stock or Performance Shares, all of the rights of a stockholder
with respect to such stock during the Restricted Period. The Participant
shall generally not have the rights of a stockholder with respect to stock
subject to Deferred Stock awards during the Restricted Period; provided,
however, that dividends declared during the Restricted Period with respect
to the number of shares covered by a Deferred Stock award shall be paid to
the Participant. Certificates for shares of unrestricted Stock shall be
delivered to the Participant promptly after, and only after, the Restricted
Period shall expire without forfeiture in respect of such shares of
Restricted Stock, Performance Shares or Deferred Stock, except as the
Administrator, in its sole discretion, shall otherwise determine.
(c) The rights of holders of Restricted Stock, Deferred Stock
and Performance Share awards upon termination of employment or service for
any reason during the Restricted Period shall be set forth in the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or
Performance Share Award Agreement, as appropriate, governing such awards.
(d) With respect to awards intended to constitute "qualified
performance based compensation for purposes of Section 162(m) of the Code,
the applicable performance goals shall be based on funds from operations,
adjusted funds from operations, net income and stock price performance.
Section 8. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair
the rights of a Participant under any award theretofore granted without
such Participant's consent, or that, without the approval of the
stockholders (as described below), would:
(1) except as provided in Section 3, increase the total number of
shares of Stock reserved for the purpose of the Plan;
(2) change the class of directors, officers, employees,
consultants and advisors eligible to participate in the Plan; or
(3) extend the maximum option period under paragraph (2) of
Section 5 of the Plan.
Notwithstanding the foregoing, stockholder approval under this
Section 8 shall only be required at such time and under such circumstances
as stockholder approval would be required under Section 162(m) of the Code
or other applicable law, rule or regulation with respect to any material
amendment to any employee benefit plan of the Company.
The Administrator may amend the terms of any award theretofore
granted, prospectively or retroactively, but, subject to Section 3 above,
no such amendment shall impair the rights of any holder without his or her
consent.
Section 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant
by the Company, nothing contained herein shall give any such Participant
any rights that are greater than those of a general creditor of the
Company.
Section 10. GENERAL PROVISIONS.
(1) The Administrator may require each person purchasing shares
pursuant to a Stock Option or otherwise acquiring shares under the Plan to
represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall
be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, and any applicable federal or state
securities law, and the Administrator may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions.
(2) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval, if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
The adoption of the Plan shall not confer upon any officer, director,
employee, consultant or advisor of the Company any right to continued
employment or service with the Company, as the case may be, nor shall it
interfere in any way with the right of the Company to terminate the
employment or service of any of its officers, directors, employees,
consultants or advisors at any time.
(3) Each Participant shall, no later than the date as of which the
value of an award first becomes includible in the gross income of the
Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld
with respect to the award. The obligations of the Company under the Plan
shall be conditional on the making of such payments or arrangements, and
the Company shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the
Participant.
(4) No member of the Board or the Administrator, nor any officer
or employee of the Company acting on behalf of the Board or the
Administrator, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and
all members of the Board or the Administrator and each and any officer or
employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
Section 11. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on [ ], 1998,
the date the Company's stockholders formally approved the Plan.
Section 12. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock
Appreciation Right, Restricted Stock, Deferred Stock or Performance Share
award shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date, but awards theretofore granted may
extend beyond that date.
SECTION 13. CHANGE OF CONTROL.
Except as otherwise determined by the Administrator in its sole
discretion, the exercisability and vesting of all awards granted under the
Plan shall be accelerated upon the occurrence of a Change of Control.
For purposes of the Plan, except as otherwise determined by the
Administrator in its sole discretion, "Change of Control" shall mean the
occurrence of any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any "person"
(as used for purposes of Section 13(d) or Section 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
immediately after which such person has "beneficial ownership" (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
("Beneficial Ownership") of 20% or more of the combined voting power of
the Company's then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, the acquisition of
Voting Securities in a Non-Control Acquisition (as hereinafter defined)
shall not constitute a Change in Control. "Non-Control Acquisition"
shall mean an acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the Company or (ii) any
corporation, partnership or other person of which a majority of its
voting power or its equity securities or other equity interests is owned
directly or indirectly by the Company or of which the Company serves as
a general partner or manager (a "Subsidiary"), (B) the Company or any
Subsidiary, or (C) any person in connection with a Non-Control
Transaction (as hereinafter defined); or
(2) The individuals who constitute the Board as of the Effective
Date (the "Incumbent Board") cease for any reason to constitute at least
two-thirds (2/3) of the Board; provided, however, that if the election,
or nomination for election by the Company's stockholders, of any new
director was approved by a vote of at least two-thirds (2/3) of the
Incumbent Board, such new director shall be considered as a member of
the Incumbent Board; provided, further, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "election
contest" (as described in Rule 14a-11 promulgated under the Exchange
Act) (an "Election Contest") or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board
(a "Proxy Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of: (A) a merger,
consolidation, share exchange or reorganization involving the Company,
unless (i) the stockholders of the Company, immediately before such
merger, consolidation, share exchange or reorganization, own, directly
or indirectly immediately following such merger, consolidation, share
exchange or reorganization, at least 80% of the combined voting power of
the outstanding voting securities of the corporation that is the
successor in such merger, consolidation, share exchange or
reorganization (the "Surviving Company") in substantially the same
proportion as their ownership of Voting Securities immediately before
such merger, consolidation, share exchange or reorganization, (ii) the
individuals who were members of the Incumbent Board immediately prior to
the execution of the agreement providing for such merger, consolidation,
share exchange or reorganization constitute at least two-thirds (2/3) of
the members of the board of directors of the Surviving Company, and
(iii) no person (other than the Company or any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by the
Company, the Surviving Company or any Subsidiary, or any person who,
immediately prior to such merger, consolidation, share exchange or
reorganization had Beneficial Ownership of 15% or more of the then
outstanding Voting Securities) has Beneficial Ownership of 15% or more
of the combined voting power of the Surviving Company's then outstanding
voting securities immediately following such merger, consolidation,
share exchange or reorganization (a transaction described in clauses (i)
through (iii) is referred to herein as "Non-Control Transaction"); (B) a
complete liquidation or dissolution of the Company; or (C) an agreement
for the sale or other disposition of all or substantially all of the
assets of the Company to any person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any person (a "Subject Person") acquires
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company that, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by such
Subject Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
such Subject Person becomes the Beneficial Owner of any additional Voting
Securities that increases the percentage of the then outstanding Voting
Securities Beneficially Owned by such Subject Person, then a Change in
Control shall occur.
