<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter period ended SEPTEMBER 30, 1996
--------------------------------------------------
or
{_} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ------------------------------
Commission file number 1-10150
-------
ANGELES PARTICIPATING MORTGAGE TRUST
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
California 95-6881527
--------------------------------------- --------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3 Pickwick Plaza, Suite 250, Greenwich CT 06830
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (203) 861-0752
------------------------
340 North Westlake Boulevard, Suite 230, Westlake Village, California 91362
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year If Changed Since Last Report
Securities registered pursuant to
Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Class A Shares American Stock Exchange
- ------------------------------- ----------------------------------
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
- ---------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
As of November 14, 1996, 2,550,000 shares of the registrant's Class A Common
Stock and 1,275,000 shares of the registrant's Class B Common Stock were
outstanding.
{X}Yes {_}No
Total Pages 91
--
Index to Exhibit appears on page 13
--
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Balance Sheets - September 30, 1996 and December 31, 1995 3
Statements of Operations - For the three and nine
months ended September 30, 1996 and 1995 4
Statements of Cash Flows - For the nine months
ended September 30, 1996 and 1995 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANGELES PARTICIPATING MORTGAGE TRUST
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,693,000 $ 863,000
Investments ---- 1,196,000
Mortgage note receivable 3,763,000 ----
Accrued interest 6,000 ----
Other receivables 2,000 10,000
Other assets 125,000 125,000
----------- -----------
Total assets $ 5,589,000 $ 2,194,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 167,000 $ 39,000
----------- -----------
Total liabilities 167,000 39,000
----------- -----------
Commitments and contingencies ---- ----
Minority Interest 3,769,000 ----
----------- -----------
Shareholders' equity:
Class A Shares (2,550,000 shares
issued and outstanding, $1.00 par
value, unlimited shares authorized) 2,550,000 2,550,000
Class B Shares (1,275,000 shares
issued and outstanding, $.01 par
value, unlimited shares authorized) 13,000 13,000
Additional paid in capital 42,329,000 42,329,000
Accumulated undistributed net realized
gain from sale of mortgages 2,545,000 2,545,000
Accumulated distributions in excess
of cumulative net income other than
gain from sale of mortgages (45,784,000) (45,282,000)
----------- -----------
Total shareholders'
equity $ 1,653,000 $ 2,155,000
----------- -----------
Total liabilities and
shareholders' equity $ 5,589,000 $ 2,194,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ----------------------------
1996 1995 1996 1995
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Interest income from investments $ 29,000 $ 41,000 $ 58,000 $ 110,000
Interest income from mortgage 6,000 ---- 6,000 ----
--------- --------- --------- ---------
Total revenue 35,000 41,000 64,000 110,000
--------- --------- --------- ---------
COSTS AND EXPENSES:
General and administrative
expenses 275,000 49,000 560,000 207,000
--------- --------- --------- ---------
Total costs and
expenses 275,000 49,000 560,000 207,000
--------- --------- --------- ---------
NET LOSS BEFORE MINORITY INTEREST $(240,000) $ (8,000) $(496,000) $ (97,000)
MINORITY INTEREST (6,000) (6,000)
--------- ---------
NET LOSS $(246,000) $ (8,000) $(502,000) $ (97,000)
========= ========= ========= =========
NET LOSS PER CLASS A SHAREHOLDERS $(244,000) $ (8,000) $(497,000) $ (96,000)
========= ========= ========= =========
NET LOSS PER CLASS A SHARE $ (0.10) $ (0.00) $ (0.19) $ (0.04)
========= ========= ========= =========
CASH DISTRIBUTIONS PER CLASS A SHARE $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (502,000) $ (97,000)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Minority interest 6,000 -
Accrued interest (6,000) -
Decrease in other receivables 8,000 8,000
Increase in other assets - (12,000)
Increase (decrease) in accounts payable
and accrued expenses 128,000 (60,000)
---------- ---------
Cash flows from operating activities (366,000) (161,000)
---------- ---------
Cash flows from investing activities:
Sale of investment securities - -
Principal collections of investment
securities 1,196,000 233,000
Investment in investment securities - (165,000)
---------- ---------
Cash flows from investing activities 1,196,000 68,000
---------- ---------
Increase (decrease) in cash and cash
equivalents 830,000 (93,000)
Cash at beginning of period 863,000 872,000
---------- ---------
Cash at end of period $1,693,000 $ 779,000
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - In the opinion of management, the accompanying financial statements
contain all of the adjustments necessary to present fairly the consolidated
financial position of Angeles Participating Mortgage Trust ("APART") and its
investee operating partnership, APMT Limited Partnership (the "Partnership"), at
September 30, 1996 and the results of operations and its cash flows for the
three and nine months ended September 30, 1996 and 1995, in conformity with
generally accepted accounting principles applied on a consistent basis. All
adjustments included are of a normal and recurring nature. The operations and
financial position of APART and the Partnership are consolidated under generally
accepted accounting principles, because, although APART owns less than 50% of
the Partnership, it controls the Partnership in its capacity as general partner
of the Partnership. Furthermore, both APART and the other investor in the
Partnership are under common control as further described in Note 6. The
accounting policies followed by APART are more fully described in Note 2 to
APART's financial statements in its 1995 Form 10-K, the terms of which are
incorporated herein by reference.
The results of operations for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
NOTE 2 - At September 30, 1996, APART had 2,550,000 Class A shares outstanding
and 1,275,000 Class B shares outstanding. Both Class A and B have voting rights
of one vote per share. These Class B shares are convertible 49 for 1 into Class
A shares. As further described in Notes 5 and 6, APART also has issued
5,000,000 Class A warrants outstanding, 2,500,000 Class B warrants outstanding,
and partnership interests convertible into 4,568,944 Class A shares. The net
income per Class A share was based on 2,550,000 weighted average shares
outstanding during the three and nine months ended September 30, 1996 and 1995.
The inclusion of the warrants and common stock equivalents would be anti-
dilutive.
NOTE 3 - Cash and cash equivalents include cash held in bank or invested in
money market funds with maturity terms of less than 90 days. The cash and
cash equivalents balance at September 30, 1996 of $1,693,000 is held by the
Trust while on December 31, 1995, $863,000 was held by the APART Contingent
Claim Trust ("Contingent Claim Trust") for the benefit of APART. Such
Contingent Claim Trust was established to provide for any contingent claims
arising from the operations of APART or any liability under APART's
indemnification agreements for its Trustees. The Contingent Claim Trust was
terminated on August 12, 1996 based on the determination by its trustee that no
contingent claims exist. All assets, including cash and cash equivalents, were
returned to APART after the termination of the Contingent Claim Trust.
6
<PAGE>
The sole beneficiary of the Contingent Claim Trust was APART and the
operations of the Contingent Claim Trust were under the control of the chief
executive officer of APART. The Contingent Claim Trust has been accounted
for by APART on the consolidated method of accounting, since its inception
in 1993, as it was deemed more appropriate for including the assets and
operations of the Contingent Claim Trust with those of APART. As the
Contingent Claim Trust is a single asset trust, the differences had it not been
accounted for under the consolidated method are minor. The net current assets,
the net current liabilities and shareholders equity would have been identical.
The only difference within the balance sheet is the caption of the asset which
in consolidation is shown as an investment in investment securities versus a
receivable from the Contingent Claim Trust. The only difference in the statement
of operations is the caption relating to the interest earned on the investment
in securities versus reporting such amount as other income.
NOTE 4 - As of September 30, 1996, APART holds no investments in
U.S. Treasury Bills. A U.S. Treasury Bill matured on August 29,1996, which had
been acquired in February 1996.
As of December 31, 1995 the Contingent Claim Trust held two security
investments through the Federal Home Loan Mortgage Corporation (the "FHLMC"),
having an 8.5% coupon rate and maturing on January 1, 1996 and June 1, 1996,
respectively. During the quarter ended March 31, 1996, one of the FHLMC
investments matured and the Trust acquired a new investment in the FHLMC with a
maturity date of December 1997 and a coupon rate of 7.0%. In February 1996, the
Contingent Claim Trust sold the two FHLMC investments which had maturity dates
of June 1, 1996 and December 1997 and acquired an investment in U.S. Treasury
Bills which matured August 29, 1996. APART's intent was to hold the FHLMC
investments to maturity. However, legal counsel determined that such investment
may inadvertently bring APART within the scope of the Investment Company Act of
1940 and based on the implementation of APART's new business plan, such
investments were no longer required. APART recognized a loss upon the sale of
the two security investments of approximately $19,000.
NOTE 5 - On September 26, 1996 APART became sole general partner of the APMT
Limited Partnership (the "Partnership") by contributing $400,000 in cash, in
exchange for 400,000 Operating Partnership Units ("OPU")(a 8.05% interest) in
the Partnership. Starwood Mezzanine Investors, L.P. ("Starwood Mezzanine")
contributed to the Partnership its entire interest in certain mortgage
participation certificates valued by APART at approximately $4.6 million as of
September 30, 1996, in exchange for 4,568,944 OPU (a 91.95% interest) in the
Partnership. These OPU are convertible into registered Class A shares of APART
on a one-for-one basis, subject to certain restrictions.
The mortgage participation certificates comprise the first mortgage note on
the Warwick Hotel and Apartments ("Warwick Hotel"), a 20-story hotel and
apartment complex located in Philadelphia, PA. The mortgage has a face value of
$4.9 million and requires monthly payments of approximately $71,000,
representing principal and interest at a rate of 9% per annum. The note was
originally issued with a face amount of $8.5 million on December 1, 1979 with
the final payment due November 30, 2004. Starwood Mezzanine acquired this note
at a discount from fair value in February 1995 and has been accounting for it
under the effective interest method.
7
<PAGE>
Summary financial information for the borrower is as follows:
For six months
ended June 30, 1996
-------------------
Revenue $3,865,328
Expenses 3,372,143
----------
Net income $ 493,185
==========
At June 30, 1996
----------------
Total assets $9,744,778
==========
Total liabilities $9,112,329
Partners' capital 632,449
----------
Total liabilities and partners' capital $9,744,778
==========
Information for the quarter ended September 30, 1996 is not yet available.
NOTE 6 - On March 15, 1994, APART issued 5,000,000 warrants convertible to Class
A shares at $1 per share and 2,500,000 warrants convertible to Class B shares at
$0.01 per share. During 1996, Starwood Mezzanine acquired these Class A
warrants. As of September 30, 1996, Starwood Mezzanine and its affiliates owned
all outstanding Class B shares, all outstanding Class A and Class B warrants,
and 244,100 Class A shares. As a result of this, APART, the Partnership, and
Starwood Mezzanine are considered to be entities under common control and the
consolidated operations of APART and the Partnership have been accounted in
accordance with generally accepted accounting principles governing such
entities. Consequently, the mortgage note contributed by Starwood Mezzanine
into the Partnership has been reflected in these financial statements at its
predecessor basis of $3.76 million.
NOTE 7 - On September 26, 1996, the shareholders approved an incentive plan for
Trustees and an incentive plan for employees. The Trustee plan provides for the
issuance of up to 50,000 stock options and the employee plan provides for the
grant of up to 377,500 shares in the form of stock options, share appreciation
rights, restricted shares, and deferred shares. No grants were made under the
plan as of September 30, 1996.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On March 15, 1994, APART announced that it had entered into an
agreement with SAHI Partners, L.P., and SAHI, Inc. (affiliates of Starwood
Mezzanine) for the sale of Warrants for the right to purchase five million
shares of APART's Class A Shares at a price of $1 per share and 2,500,000 shares
of the Class B Shares at a price of $0.01 per share. SAHI Partners and SAHI,
Inc. purchased the Warrants for $101,000, which amount will be applied against
the purchase price for the first Class A and Class B Shares purchased pursuant
to the Warrants. On March 28, 1996, the Class A Warrants were assigned to
Starwood Mezzanine. Upon exercise of the entire Class A and Class B Warrants,
SAHI Partners, SAHI, Inc., and Starwood Mezzanine would jointly own 70% of the
outstanding Class A Shares and, with the voting interest of the Class B Shares,
would control 80% of the voting interest of APART. If these warrants are
exercised in their entirety, APART would increase its capital by $5,025,000, and
funds from such capitalization would be utilized to acquire additional
investments for APART based upon the defined business plan approved by holders
of a majority of the Class A and Class B Shares, as described below.
On September 26, 1996, APART became sole general partner of the Partnership
by contributing $400,000 in cash, in exchange for a 8.05% interest in the
Partnership. Starwood Mezzanine became the 91.95% limited partner by
contributing to the Partnership its entire interest in the participation
certificates in the Warwick Hotel mortgage note valued by APART at approximately
$4.6 million as of September 30, 1996. Starwood Mezzanine's interest in the
Partnership is evidenced by 4,568,944 OPU, which are convertible into Class A
Shares pursuant to the Exchange Rights Agreement. In addition, Starwood
Mezzanine has the right to require APART to register for public sale, any or all
of the Class A Shares in the Partnership issued to it upon the exercise of the
Class A Warrant or upon exchange of the OPU issued to Starwood Mezzanine.
Initially, APART will not be required to operate exclusively through the
Partnership and, thus, will not have any obligation to contribute additional
cash. Although no assurances can be given, Starwood Mezzanine has declared its
intention to exercise the Class A Warrant for at least 2,000,000 Class A Shares.
In this event, the Board of Trustees have the right to cause APART to contribute
substantially all of APART's uncontributed assets to the Partnership for
additional interests in the Partnership. Following any such contribution APART
must agree to conduct all of its real estate-related investment activities
exclusively through the Partnership.
The investment policy of APART before the adoption of the Restated
Declaration of Trust was predominantly to make mortgage loans to entities
affiliated with APART. On September 26, 1996, the shareholders approved a
Restated Declaration of Trust which significantly changed the investment policy
of APART. APART currently intends to focus its acquisition efforts on assets
which exhibit one or more of the following characteristics: (a) assets owned by
distressed sellers; (b) assets priced below or having a deemed value for
collateralization purposes that is less than reproduction cost; (c) equity
interest in, and/or debt interests secured by, assets located in markets or
submarkets experiencing population or job growth, and which are located near
historically stable employment generator bases, such as government, University
and medical centers; (d) interests which are publicly traded, including other
REIT equities, limited partnership interest and debt interests.
9
<PAGE>
APART currently intends to acquire assets opportunistically on an all cash
basis, through the issuance of additional shares or OPU, and with financing from
institutional and other lenders or sellers. APART will also be permitted to
raise additional capital through registered public offerings as well as private
placements of both debt and equity interests.
LIQUIDITY AND CAPITAL RESOURCES
APART's primary source of cash is from interest earned on
investments and cash and cash equivalents. APART's investments and cash
of approximately $1.7 million as of September 30, 1996 were held solely by
APART.
On December 31, 1995 the investments and cash of approximately $2.1 million
were all held by the APART Contingent Claim Trust ("Contingent Claim Trust") for
the benefit of APART. Such Contingent Claim Trust was established to provide
for any contingent claims arising from the operations of APART or any liability
under APART's indemnification agreements for its Trustees. The term of the
Contingent Claim Trust was to have expired automatically on December 31, 1996.
Effective August 12, 1996 the sole trustee of the Contingent Claim Trust
determined that there were no pending or threatened claims existing and
terminated the Contingent Claim Trust thereby returning all assets of the
Contingent Claim Trust of approximately $1.8 million to APART on August 12,
1996.
APART distributed the majority of its assets, $36,975,000 to Class A
shareholders of record on November 18, 1993 payable December 3, 1993. Remaining
funds, approximately $2.5 million, were retained by APART to provide for
potential liabilities or claims, minimal operating costs and the possibility of
obtaining further value for shareholders from potential strategic alternatives
with third parties who might wish to acquire an interest in the remaining Trust.
Based upon APART's investment balance at September 30, 1996, management
believes it has sufficient liquidity to operate as a going concern through the
remainder of the 1996 fiscal year. APART intends to continue to qualify as a
Real Estate Investment Trust under the Internal Revenue Code.
The amount and timing of any future cash dividends, if any, is impossible
to predict at this time. APART has made no distributions since November 1993.
RESULTS OF OPERATIONS
During the three and nine months ended September 30, 1996, total revenue
decreased $6,000 and $46,000 or 15% and 42%, respectively, as compared to
total revenue for the comparable periods in 1995. This decrease is the result
of APART selling its security investments with the Federal Home Loan Mortgage
Corporation. APART resumed its program of investment with the Federal Home
Loan Mortgage Corporation in the fourth quarter of 1996.
Costs and expenses for the three months ended September 30, 1996
increased by $226,000 or 461% as compared to the same period ending 1995. Costs
and expenses for the nine months ended September 30, 1996 increased by $353,000
or 171% when compared to the nine months ended September 30, 1995. Both
increases were due to increased legal costs associated with the preparation of a
proxy, the annual shareholders' meeting, and the establishment of the
Partnership.
10
<PAGE>
Net loss increased $238,000 and $405,000 during the three and nine months
ended September 30, 1996 as compared to the same period the prior year. This
increase was due to lower revenues and higher costs and expenses for the reasons
mentioned above.
The net income generated by the Partnership will be distributed from the
Partnership as deemed appropriate by APART's management. These distributions
will be made in accordance with the partners' respective percentage interests in
the Partnership.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 26, 1996 the Trust held its annual shareholders meeting to
elect a seven member board of trustees and to vote and approve the following
proposals.
The seven trustees that were elected as a result of the meeting are J.
D'Arcy Chisholm, Ronald J. Consiglio, Barry Sternlicht, Madison Grose, Jay
Sugarman, Eugene A. Gorab, and Jack E. McDonald. The shareholder vote was as
follows:
<TABLE>
<CAPTION>
Votes Broker
------------------------------ ----------------------
For Against Withheld Abstentions Non-Votes
--------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Barry Sternlicht 2,561,198 - 38,124 - -
Madison Grose 2,562,398 - 36,924 - -
Jay Sugarman 2,562,398 - 36,924 - -
Eugene A. Gorab 2,562,398 - 36,924 - -
J. D'Arcy Chisholm 2,528,348 - 70,974 - -
Ronald J. Consiglio 2,528,498 - 70,824 - -
Jack E. McDonald 2,528,348 - 70,974 - -
</TABLE>
11
<PAGE>
In addition, following is a summary of the proposals along with the vote
for such proposals that the shareholders voted upon:
<TABLE>
<CAPTION>
Votes Broker
-------------------------------------------- ---------------------------
For Against Withheld Abstentions Non-Votes
-------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Approve the Class A Share
Purchase Warrant owned by
Starwood Mezzanine Investors, L.P.
and Class B Share Purchase Warrant
owned by SAHI, Inc. and the
authorization and issuance of
the Class A and B Shares to
be issued upon exercise of such
warrants. 2,516,439 45,685 - 37,198 -
Amend the Trust's Declaration
of Trust to amend the purpose
of the Trust to allow the Trust
to make substantially more
debt and/or equity investments
in real property. 2,518,525 46,508 - 34,289 -
Amend the Trust's Declaration
of Trust to remove the percentage
limitation (presently 20%) on
the amount of Trust proceeds
which may be invested directly
in the equity ownership of
real estate. 2,517,703 46,090 - 35,529 -
Amend the Trust's Declaration
of Trust to eliminate the
requirement to make monthly
distributions of Net Cash, which
is generally defined as the
Trust's cash flow from operations,
to Shareholders. 2,513,212 52,197 - 33,913 -
Amend the Trust's Declaration
of Trust to make the termination
date of the Trust indefinite. 2,511,488 53,287 - 34,547 -
Amend the Trust's Declaration
of Trust to increase the shareholder
vote required to terminate the
Trust from Majority to two-thirds
of all Shareholders. 2,518,964 46,586 - 33,772 -
Amend the Trust's Declaration
of Trust to remove the prohibition
on acquiring or funding Trust loans
with an initial term of more
than 15 years. 2,513,646 47,307 - 38,369 -
Amend the Trust's Declaration
of Trust to require the issuance
of additional Class b Shares in
order to maintain the current
voting interest (33 1/3%) of the
Shareholders of the Class B Shares. 2,514,509 45,249 - 39,564 -
Amend the Trust's Declaration
of Trust to remove the right of
Shareholders of Class A to receive
a priority return before the Trust's
former advisor is paid a fee since
the advisor is no longer providing
services to the Trust. 2,519,435 43,892 - 35,995 -
Approve, among other things, the
Trust's transfer of a portion of its
assets to a newly-formed limited
partnership of which the Trust will
be the sole general partner and
Starwood Mezzanine Investors, L.P.
will be the initial limited partner. 2,515,784 43,211 - 40,327 -
Approve the Angeles Participating
Mortgage Trust 1996 Trustees' Share
Incentive Plan. 2,486,526 75,791 - 37,005 -
Approve the Angeles Participating
Mortgage Trust 1996 Share Incentive Plan. 2,485,255 73,823 - 40,244 -
Ratify the appointment of Deloitte &
Touche LLP as the independent auditors
of the Trust for fiscal year
ending December 31, 1996. 2,528,775 28,672 - 41,875 -
</TABLE>
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
3.1 Restated Declaration of Trust of Angeles Participating Mortgage
Trust
10.1 Angeles Participating Mortgage Trust 1996 Trustees' Share
Incentive Plan
10.2 Angeles Participating Mortgage Trust 1996 Share Incentive Plan
27 Financial Data Schedule - Article 5
B. REPORTS ON FORM 8-K
On September 26, 1996, APART filed a Form 8-K in connection with the
results of the shareholders meeting and to announce the election of new
officers.
Note: All items required under Part II of Form 10-Q which are applicable
have been reported herein.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Trust has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ANGELES PARTICIPATING MORTGAGE TRUST
By /s/Barry S. Sternlicht
----------------------
Barry S. Sternlicht
Chairman and Chief
Executive Officer
By /s/Jerome C. Silvey
----------------------
Jerome C. Silvey
Chief Financial Officer
Date: November 14, 1996
14
<PAGE>
EXHIBIT 3.1
RESTATED DECLARATION OF TRUST
OF
ANGELES PARTICIPATING MORTGAGE TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I The Trust; Definitions................................ 1
1.1 Name.................................................. 1
1.2 Places of Business.................................... 1
1.3 Nature of Trust....................................... 1
1.4 Purposes.............................................. 1
1.5 Definitions........................................... 2
ARTICLE II Trustees.............................................. 6
2.1 Number, Terms of Office, Qualifications of Trustees... 6
2.2 Compensation and Other Remuneration................... 7
2.3 Resignation, Removal, and Death of Trustees........... 7
2.4 Vacancies............................................. 7
2.5 Successor and Additional Trustees..................... 7
2.6 Actions by Trustees and Executive Committee; Quorum... 8
ARTICLE III Trustees' Powers...................................... 8
3.1 Power and Authority of Trustees....................... 8
3.2 Specific Powers and Authorities....................... 9
3.3 Trustees' Regulations................................. 13
ARTICLE IV Advisor............................................... 13
4.1 Employment of Advisor................................. 13
4.2 Term.................................................. 13
4.3 Independence of Trustees and Members of
Executive Committee................................ 14
4.4 Other Activities of Advisor........................... 14
4.5 Limitation on Operating Expenses...................... 14
ARTICLE V Investment Policy..................................... 15
5.1 General Statement of Policy........................... 15
5.2 Other Permissible Investments......................... 16
5.3 Prohibited Investments and Activities................. 16
5.4 Obligor's Default..................................... 16
ARTICLE VI The Shares and Shareholders........................... 17
6.1 Shares................................................ 17
6.2 Voting Rights......................................... 17
6.3 Legal Ownership of Trust Estate....................... 19
6.4 Shares Deemed Personal Property....................... 19
6.5 Share Record; Issuance and Transferability of Shares.. 19
6.6 Dividends or Distributions to Shareholders............ 20
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.7 Transfer Agent, Dividend Disbursing Agent, and Registrar........................... 21
6.8 Shareholders' Meeting.............................................................. 21
6.9 Proxies............................................................................ 22
6.10 Reports to Shareholders............................................................ 22
6.11 Fixing Record Dates................................................................ 22
6.12 Notice to Shareholders............................................................. 22
6.13 Shareholders' Disclosures; Redemption and Stop Transfers........................... 22
6.14 Conversion Rights.................................................................. 23
ARTICLE VII Liability of Trustees, Shareholders, and
Officers, and Other Matters........................................................ 25
7.1 Exculpation of Trustees and Officers............................................... 25
7.2 Express Exculpatory Clauses in Instruments......................................... 25
7.3 Liability and Indemnification of Trustees.......................................... 25
7.4 Right of Trustees and Officers to Own Shares or Other Property and to
Engage in Other Business........................................................... 26
7.5 Transactions Between the Trust and Certain Affiliates.............................. 28
7.6 Restriction of Duties and Liabilities.............................................. 28
7.7 Persons Dealing with Trustees or Officers.......................................... 28
7.8 Reliance........................................................................... 28
ARTICLE VIII Duration, Termination, Amendment,
and Qualification of Trust......................................................... 29
8.1 Duration of Trust.................................................................. 29
8.2 Termination of Trust............................................................... 29
8.3 Amendment Procedure................................................................ 30
8.4 Qualification Under the REIT Provisions of the Code................................ 30
ARTICLE IX Miscellaneous...................................................................... 31
9.1 Applicable Law..................................................................... 31
9.2 Index and Headings for Reference Only; Gender...................................... 31
9.3 Successors in Interest............................................................. 31
9.4 Inspections of Records............................................................. 31
9.5 Counterparts....................................................................... 31
9.6 Correction of Provisions of Declaration............................................ 31
9.7 Certifications..................................................................... 32
9.8 Recording and Filing............................................................... 32
</TABLE>
<PAGE>
RESTATED DECLARATION OF TRUST
ANGELES PARTICIPATING MORTGAGE TRUST
This RESTATED DECLARATION OF TRUST originally made and entered into as of
the 15th day of April, 1988, as restated as of the 18th day of July, 1988, and
as further restated as of the 26th day of September, 1996, by the Persons whose
names appear at the end of this Declaration of Trust, as Trustees of Angeles
Participating Mortgage Trust.
The Trustees do hereby form a trust and do hereby agree to hold in trust as
Trustees any and all property, real, personal, or otherwise, tangible and
intangible, which is transferred, conveyed, or paid to the Trust or to them as
Trustees and all rents, income, profits, and gains therefrom for the benefit of
the Shareholders hereunder subject to the terms and conditions and for the uses
and purposes hereinafter set forth.
ARTICLE I
THE TRUST; DEFINITIONS
1.1 Name. The name of the Trust shall be "Angeles Participating Mortgage
Trust." As far as is practicable and except as is otherwise provided in this
Declaration, the Trustees shall conduct the Trust's activities, execute all
documents, sue or be sued, and take all actions they deem appropriate in the
name of Angeles Participating Mortgage Trust.
1.2 Places of Business. The principal office of the Trust shall be at
340 N. Westlake Boulevard, Suite 230, Westlake Village, California 91362. The
Trustees, however, may from time to time change such location and maintain other
offices or places of business.
1.3 Nature of Trust. The Trust is a business trust organized under the
laws of the State of California, and it is intended that the Trust shall qualify
as a real estate investment trust within the meaning of the Code. The Trust is
not intended to be, shall not be deemed to be, and shall not be treated as a
general partnership, limited partnership, joint stock company, or association
(but nothing herein shall preclude the Trust from being taxable as an
association under the REIT Provisions of the Code), nor shall the Trustees or
Shareholders or any of them for any purpose be, or be deemed to be treated in
any way whatsoever to be, liable or responsible hereunder as partners or joint
venturers. The relationship of the Shareholders to the Trust shall be solely
that of beneficiaries of the Trust and their rights shall be limited to those
expressly conferred upon them by this Declaration.
1.4 Purposes. The primary purposes of the Trust are to acquire a
diversified portfolio of interests in real estate or real estate-related assets,
including (i) originating mortgage loans to and/or acquiring mortgage loans to
unrelated entities or to acquire securities collateralized, in whole or in part,
by such mortgage loans, as well as making equity investments in real estate
and real estate-related assets, (ii) acquiring direct or indirect interests in
short term, medium and long-term real estate-related debt securities and
mortgage interests under which the borrowers are unaffiliated with the Trust,
which may
<PAGE>
include warrants, equity participations or similar rights incidental to a debt
investment by the Trust, (iii) making, holding and disposing of purchase money
loans with respect to assets sold by the Trust, and (iv) acquiring positions in
non-performing and sub-performing debt for the purpose of either restructuring
it as performing debt or of obtaining shortly thereafter primary management
rights over or equity interests in the underlying assets securing such debt.
1.5 Definitions. The following terms shall, whenever used in this
Declaration, unless the context otherwise requires, have the meanings specified
in this Section 1.5. The singular shall refer to the plural, and the masculine
gender shall be deemed to refer to the feminine and neuter, and vice versa, as
the context requires.
(a) "Advisor" means the Person to whom, pursuant to the Advisory
Agreement, the Trustees delegate certain control and management of the Trust and
its assets as provided in Section 4.1.
(b) "Advisory Agreement" means the advisory agreement between the
Trust and the Advisor as described in Section 4.2.
(c) "Affiliate" means with respect to the Advisor, a Shareholder, or
Trustee (i) any Person directly or indirectly owning, controlling, or holding,
with power to vote, 5% or more of the outstanding voting securities of the
Advisor or such Shareholder, (ii) any Person 5% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held, with
power to vote, by the Advisor, such Trustee, or such Shareholder, and (iii) any
officer, director, or partner of the Advisor or such Shareholder.
(d) "Borrower" means those affiliated or unaffiliated Persons which
are the recipients of Trust Loans, guarantees, letters of credit, or other
financing arrangements.
(e) "Capital Contributions" means the gross amount invested in the
Trust by the Shareholders. Reference to a "Capital Contribution" means the
gross amount contributed by a respective Shareholder.
(f) "Class A Shareholders" means, at any particular time, those
Persons who are shown as the holders of record of all Class A Shares on the
records of the Trust at such time.
(g) "Class B Shareholders" means, at any particular time, those
Persons who are shown as the holders of record of all Class B Shares on the
records of the Trust at such time.
(h) "Class A Shares" means the designated shares of beneficial
interest of the Trust as described in Section 6.1.
(i) "Class B Shares" means the designated shares of beneficial
interest of the Trust as described in Section 6.1.
(j) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including successor statutes thereto.
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(k) "Declaration" means this Declaration of Trust and all amendments
and modifications thereof. References in this Declaration to "herein" and
"hereunder" shall be deemed to refer to this Declaration and shall not be
limited to the particular text, article, or section in which such words appear.
(l) "Disposition" means any Trust transaction not in the ordinary
course of its business, including, without limitation, principal repayments, all
participation (in the cash flow, income, or appreciation in value of property
securing a Trust Loan payments, prepayments, sales, or other dispositions of any
Trust Loans held by the Trust and analogous transactions involving any other
assets held by the Trust.
(m) "Disposition Price" means the total consideration received by the
Trust upon the Disposition of a Trust Loan or other asset of the Trust (prior to
payment of any commission, expense, or indebtedness related to the Trust Loan or
such asset), including all cash received and the fair market value of any other
property received.
(n) "Distributable Net Proceeds" means the portion of the proceeds
from a Disposition so defined in Section 6.6.
(o) "Gross Proceeds" means the aggregate total of the original
Capital Contributions of all of the Shareholders.
(p) "Mortgages" means mortgages, deeds of trust, or other security
instruments on real property or rights or interests in real property or entities
owning or controlling real property.
(q) "Net Assets" means the Total Assets of the Trust Estate after
deducting therefrom any liabilities of the Trust except that depreciable assets
shall be included therein at the lesser of either (i) the cost of such assets on
the books of the Trust before provision for depreciation, amortization, and
depletion, or (ii) the fair market value of such assets in the judgment of the
Trustees.
(r) "Net Cash" means, for a period, the interest earned on investments
and deposits made by the Trust and operating revenues of the Trust received
during such period, plus cash proceeds from Dispositions, plus reserves set
aside during prior periods pursuant to clause (iii) below which are no longer
necessary as reserves, less (i) all Operating Expenses (other than any expenses
previously reserved against pursuant to (iii) below) of the Trust paid during
such period, plus all fees and reimbursements payable to the Trustees, the
Advisor, including all incentive fees and compensation, and their Affiliates,
(ii) all payments made during such period to discharge Trust indebtedness, (iii)
all amounts established as reserves during such period, (iv) all amounts
expended during such period for the replacement or preservation of Trust assets,
or any part thereof, to the extent not previously reserved, and (v) all amounts
reinvested in new Trust Loans and other investments.
(s) "Non-Distributable Net Proceeds" means the portion of the
proceeds from a Disposition so defined in Section 6.6.
(t) "Offering" means the initial public offering of 5,000,000 Class A
Shares.
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(u) "Operating Expenses" means the aggregate annual expenses of the
Trust of every character regarded as operating expenses in accordance with
generally accepted accounting principles, as determined by independent
accountants selected by the Trustees, exclusive of: Organization and Offering
Expenses; interest and discounts and other costs of borrowed money; taxes on
income and real property and all other taxes and assessments applicable to the
Trust and its operations; legal, auditing, underwriting, brokerage, transfer
agent's, registrar's, and indenture trustee's fees and other such fees, whether
paid to Affiliates of the Advisor or independent Persons; fees and expenses paid
to independent contractors, independent advisors, mortgage bankers, brokers, and
servicers, real property managers, leasing agents, consultants, on-site
managers, real estate brokers, insurance agents and brokers, other brokers and
agents, and all personnel employed by the Trust or on its behalf (including all
compensation and reimbursements of expenses, payable to the Advisor by the Trust
under any Advisory Agreement with the Trust referred to in Article IV hereof and
compensation payable to Affiliates of the Advisor, but excluding the Non-
Accountable Expense Allowance defined in such Advisory Agreement and the
Administration Fee paid to the Advisor or an Affiliate) employed by or on behalf
of the Trust; costs of insurance (including Trustee's liability insurance),
whether paid to Affiliates of the Advisor or independent Persons; expenses of
organizing and terminating the Trust; all expenses connected with distributions
and communications to holders of Securities of the Trust and the other
bookkeeping and clerical work necessary in maintaining relations with holders of
Securities, including the cost of printing and mailing checks, certificates for
Securities, proxy solicitation materials, and reports to such holders; all
expenses connected with the acquisition, disposition, and ownership of Trust
Loans, and all other investments by the Trust, including the costs of appraisal,
legal services, brokerage and sales commissions, processing and foreclosure
expenses, expenses for the maintenance, repair, and improvements of Trust
assets, property management fees and expenses for day-to-day management of Trust
assets, whether paid to Affiliates of the Advisor or independent Persons;
realized losses (exceeding provisions therefor) on Dispositions; and all
provisions for depletion, depreciation, amortization, and losses.
(v) "Organization and Offering Expenses" means those expenses incurred
in connection with the formation and registration of the Trust and in qualifying
and marketing the Shares or other Securities under applicable federal and state
law, and any other expenses actually incurred and directly related to the
qualification, registration, offer, and sale of the Shares or other Securities,
including such expenses as: (i) selling commissions; (ii) all marketing
expenses and payments made to broker-dealers as compensation or reimbursement
for all costs of reviewing the offerings, including due diligence investigations
and fees or expenses of their attorneys, accountants, and other experts; (iii)
registration fees, filing fees, and taxes; (iv) the costs of printing, amending,
supplementing, and distributing the Registration Statements and Prospectuses;
(v) the costs of obtaining regulatory clearances of, printing, and distributing
sales materials used in connection with the offer and sale of the Shares or
other Securities; (vi) compensation of officers and employees of the Advisor and
its Affiliates while directly engaged in organizing and forming the Trust and in
qualifying, registering, and marketing the Shares or other Securities under
applicable federal and state law; (vii) reimbursements to the Selling Agent,
selected broker-dealers, the Advisor, and its Affiliates for special marketing
and incentive programs sponsored by those entities; (viii) the costs related to
investor and broker-dealer sales meetings; (ix) accounting and legal fees
incurred in connection with any of the foregoing; and (x) a non-accountable
expense allowance equal to 1% of the Gross Proceeds payable to the Selling
Agent.
(w) "Person" means any individual, partnership, corporation,
association, trust, or other entity.
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(x) "Prospectus" means the final prospectus, as filed with the
Securities and Exchange Commission, relating to the offering of up to 5,000,000
Class A Shares by the Trust, including all supplements and amendments thereto,
and any subsequent prospectus, including all supplements and amendments thereto,
relating to subsequent securities offerings by the Trust.
(aa) "REIT Provisions of the Code" means Part II, Subchapter M of
Chapter 1 of Subtitle A of the Code, as now enacted or hereafter amended,
including successor statutes and regulations promulgated thereunder.
(bb) "Securities" means common and preferred stock in a corporation,
shares of beneficial interest in a trust or other unincorporated association,
general partner interests in a general partnership, interests in a joint
venture, general or limited partnership interests in a limited partnership,
notes, debentures, bonds, and other evidences of indebtedness, including
Mortgages, whether secured or unsecured, and includes any options, warrants, and
rights to subscribe to or convert into any of the foregoing.
(cc) "Selling Agent" means Angeles Securities Corporation.
(dd) "Shareholders" means, at any particular time, the Class A
Shareholders, the Class B Shareholders, and all other holders of record of
outstanding Shares on the records of the Trust at such time.
(ee) "Shares" means the Class A Shares, the Class B Shares, and all
other shares of beneficial interest of the Trust issued as provided herein.
(ff) "Total Assets of the Trust Estate" means the value of all of the
assets of the Trust Estate as such value appears on the most recent balance
sheet of the Trust available to the Trustees without deduction for mortgage
loans or other security interests to which such assets are subject and before
provision for depreciation, depletion, amortization, and provision for bad debt
loss and similar reserves.
(gg) "Trust" means the trust created by this Declaration.
(hh) "Trustees" means, as of any particular time, the Persons holding
such office under this Declaration at such time, whether they be the Trustees
named herein or additional or successor Trustees, but shall not include the
officers, representatives, or agents of the Trust or the Shareholders, although
nothing herein shall be deemed to preclude the Trustees from also serving as
officers, representatives, or agents of the Trust or from owning Shares.
(ii) "Trustees' Regulations" means the regulations provided for in
Section 3.3.
(jj) "Trust Estate" means, as of any particular time, any and all
property, real, personal, or otherwise, tangible or intangible, which is held,
transferred, conveyed, or paid to the Trust or the Trustees on behalf of the
Trust and all rents, income, profits, and gains therefrom.
(kk) "Trust Loans" means the notes, debentures, bonds, and other
evidences of indebtedness or obligations acquired or entered into by the Trust
which are secured or collateralized by personal property or fee or leasehold
interests in real estate or other assets, including, but not limited to,
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<PAGE>
first mortgage loans, junior mortgage loans, construction loans, development
loans, equipment loans, loans secured by general or limited partnership
interests, capital stock, or any other assets or form of equity interest or
guarantee of the Borrower, and any other type of loan or financial arrangement,
such as providing or arranging for letters of credit, providing guarantees of
obligations to third parties, or providing commitments for Trust Loans.
ARTICLE II
TRUSTEES
2.1 Number, Terms of Office, Qualifications of Trustees. The initial
number of Trustees shall be six, but such number may be changed from time to
time by a vote of the majority of Trustees then in office or by Shareholders
voting in the manner set forth in Section 6.2(e), provided that the number of
Trustees so fixed shall not be less than three nor more than 15. The initial
Trustees shall be the signatories hereto. Subject to the provisions of Section
2.3, each Trustee shall hold office until the expiration of his term and until
the election and qualification of his successor. The term of the Trustees
executing this Declaration or any successors to them duly elected hereunder
prior to the first annual meeting of Shareholders to be held within six months
after the end of the fiscal year ending in 1989, shall expire at such annual
meeting of Shareholders following the election of Trustees. Thereafter, the
term of each Trustee shall expire at the annual meeting of Shareholders
following the election of such Trustee. Trustees may be re-elected
indefinitely. A Trustee shall be an individual at least 21 years of age who is
not under legal disability. Such individual shall qualify as a Trustee when he
has either signed this Declaration or agreed in writing to be bound by it.
Unless otherwise required by law, no Trustee shall be required to give bond,
surety, or security in any jurisdiction for the performance of any duties or
obligations hereunder. The Trustees in their capacity as trustees shall not be
required to devote their entire time to the business and affairs of the Trust,
and it is understood that all or some of the Trustees may be involved in, and/or
shareholders, officers, directors, representatives, agents, partners, or
beneficiaries of, businesses and ventures which may be in direct competition
with the Trust.
2.2 Compensation and Other Remuneration. The Trustees shall be entitled
to receive such reasonable compensation for their services as Trustees as they
may determine from time to time. The Trustees, either directly or indirectly,
shall also be entitled to receive remuneration for services rendered to the
Trust in any other capacity. Such services may include, without limitation,
services as an officer of the Trust, legal, accounting, or other professional
services, or services as a broker, transfer agent, or underwriter, whether
performed by a Trustee or an Affiliate of a Trustee.
2.3 Resignation, Removal, and Death of Trustees. A Trustee may resign at
any time by giving written notice in recordable form to the remaining Trustees
at the principal office of the Trust. Such resignation shall take effect on the
date such notice is given or at any later time specified in the notice without
need for prior accounting. A Trustee may be removed for cause at a special
meeting of Shareholders voting in the manner set forth in Section 6.2, or with
cause by all remaining Trustees. "Cause" for purposes of this Section 2.3 shall
mean a Trustee's willful violations of this Declaration or the Trustees'
Regulations which violations are materially against the interests of the
Shareholders or gross negligence in the performance of his duties.
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<PAGE>
Upon the resignation or removal of any Trustee, or his otherwise ceasing to
be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the conveyance of any Trust property held in his
name, shall account to the remaining Trustee or Trustees as they require for all
property which he holds as Trustee, and shall thereupon be discharged as
Trustee. Upon the incapacity or death of any Trustee, his legal representative
shall perform the acts set forth in the preceding sentence, and the discharge
mentioned therein shall run to such legal representative and to the
incapacitated Trustee or the estate of the deceased Trustee as the case may be.
2.4 Vacancies. If any or all of the Trustees cease to be Trustees
hereunder, whether by reason of resignation, removal, incapacity, death, or
otherwise, such event shall not terminate the Trust or affect its continuity.
Until vacancies are filled, the remaining Trustee or Trustees (even though less
than three) may exercise the powers of the Trustees hereunder. Vacancies
(including vacancies created by increases in number) may be filled by the
remaining Trustee or by vote of a majority of the remaining Trustees or by the
Shareholders voting in the manner set forth in Section 6.2(a). Any Trustee so
elected by the remaining Trustees or the Shareholders shall hold office until
the next annual meeting of Shareholders. If at any time there shall be no
Trustees in office, successor Trustees shall be elected by the Shareholders as
provided in Section 6.2(a).
2.5 Successor and Additional Trustees. The right, title, and interest of
the Trustees in and to the Trust Estate shall also vest in successor and
additional Trustees upon their acceptance of the office, and they shall
thereupon have all the rights and obligations of Trustees hereunder. Such right,
title, and interest shall vest in the Trustees whether or not conveyancing
documents have been executed and delivered pursuant to Section 2.3 or otherwise.
2.6 Actions by Trustees and Executive Committee; Quorum. A quorum for
all meetings of the Trustees shall be a majority of the Trustees. Unless
specifically provided otherwise in this Declaration, any action of the Trustees
may be taken at a meeting by vote of a majority of the Trustees. Any agreement,
deed, mortgage, lease, or other instrument or writing executed by one or more of
the Trustees or by any authorized Person shall be valid and binding upon the
Trustees and upon the Trust; provided that such action is pursuant to
authorization of a majority of the Trustees given either at a meeting or in
writing or as provided in the Trustees' Regulations.
The Trustees may appoint a committee (the "Executive Committee") with
authority to exercise the powers of the Trustees and consisting of three or more
of the Trustees. Unless specifically provided otherwise in this Declaration,
any action of the Executive Committee may be taken at a meeting by vote of a
majority of the members of the Committee. A quorum for all meetings of the
Executive Committee shall be a majority of the members thereof. With respect to
the actions of the Trustees and the Executive Committee, Trustees who are
Affiliates of the Advisor may be counted for all quorum purposes.
Unless otherwise specifically provided in this Declaration, any action
required or permitted to be taken at any meeting of the Trustees or of the
Executive Committee may be taken without a meeting if all of the Trustees or
members of the Executive Committee, as the case may be, consent thereto in
writing. Trustees or members of the Executive Committee may participate in a
meeting of the Trustees or the Executive Committee, as the case may be, by means
of conference telephone or similar communications equipment by which all
individuals participating in the meeting can hear each other, and participation
in such meeting pursuant to this paragraph shall constitute presence in person
at such meeting for all purposes of this Declaration.
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ARTICLE III
TRUSTEES' POWERS
3.1 Power and Authority of Trustees. The Trustees, subject only to the
specific limitations contained in this Declaration, shall have, without further
or other authorization, and free from any power or control on the part of the
Shareholders, full, absolute, and exclusive power, control, and authority (a)
over the Trust Estate and over the business and affairs of the Trust to the same
extent as if the Trustees were the sole owners thereof in their own right, and
(b) to do all such acts and things as in their sole judgment and discretion are
necessary or incidental to, or desirable for the carrying out of, any of the
purposes of the Trust or conducting the business of the Trust. Any
determination made in good faith by the Trustees of the purposes of the Trust or
the existence of any power or authority hereunder shall be conclusive as to the
Trust and its Shareholders. In construing the provisions of this Declaration,
presumption shall be in favor of the grant of powers and authority to the
Trustees. The enumeration of any specific power or authority herein shall not be
construed as limiting the general powers or authority or any other specified
power or authority conferred herein upon the Trustees.
3.2 Specific Powers and Authorities. Subject only to the express
limitations contained in this Declaration and in addition to any powers and
authorities conferred by this Declaration or which the Trustees may have by
virtue of any present or future statute or rule or law, the Trustees without any
action or consent by the Shareholders shall have and may exercise at any time
and from time to time the following powers and authorities which may be
exercised by them in their sole judgment and discretion and in such manner and
upon such terms and conditions as they may from time to time deem appropriate:
(a) To retain, invest, and reinvest the capital or other funds of the
Trust in Trust Loans and real or personal property investments of any kind, and
to purchase, invest in, or otherwise acquire for cash or other property or
through the issuance of Shares or other Securities Trust Loans and fee,
leasehold, or other participating Interests in property, real, personal, or
mixed, tangible or intangible, including notes, bonds, or other obligations, all
for such consideration as they deem appropriate and without regard to whether
any such property is authorized by law for the investment of trust funds. In
connection with any such investment, purchase, or acquisition, the Trustees
shall have the power to acquire a share of rents, lease payments, or other gross
income from, or a share of the profits from, or a share in the equity or
ownership of the security for such Trust Loans; to invest in Trust Loans secured
by the pledge or transfer of Mortgages, other assets, and/or contractual
obligations; to develop, operate, pool, unitize, grant production payments out
of or lease or otherwise dispose of mineral, oil and gas properties, and rights.
(b) To possess and exercise all the rights, powers, and privileges
appertaining to the ownership of the Trust Estate and to increase the capital of
the Trust at any time by the issuance of additional Shares or other Securities,
in all cases for such consideration and upon such terms as they deem
appropriate.
(c) To sell, rent, lease, hire, exchange, release, partition, assign,
mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate,
convey, transfer, or otherwise dispose of any and all of the Trust Estate by
deeds, trust deeds, assignments, bills of sale, transfers, leases, Mortgages,
financing statements, security agreements, and other instruments for any of such
purposes executed and
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delivered for and on behalf of the Trust or the Trustees by one or more of the
Trustees or by a duly authorized officer, employee, agent, or any nominee of the
Trust.
(d) To issue Shares or other Securities which may be subordinated to
any indebtedness of the Trust and may be convertible into Shares, all without
vote of or other action by the Shareholders to such Persons for such cash,
property, or other consideration (including securities issued or created by, or
interests in any Person) at such time or times and on such terms as the Trustees
may deem advisable and to list any of the Securities issued by the Trust on any
securities exchange and to purchase or otherwise acquire, hold, cancel, reissue,
sell, and transfer any of the Securities.
(e) To enter into leases, contracts, obligations, easement agreements,
party wall agreements, boundary line agreements, loan commitments of every kind,
nature, and description, guarantees, financing arrangements and participations,
and other agreements, any one of which may be for a term extending beyond the
term of office of the Trustees and beyond the possible termination of the Trust
or for a lesser term.
(f) To borrow money and give negotiable or non-negotiable instruments
therefor; to guarantee, indemnify, or act as surety with respect to payment or
performance of obligations of third parties; to enter into other obligations on
behalf of the Trust and to assign, convey, transfer, mortgage, subordinate,
pledge, grant security interests in, encumber, or hypothecate the Trust Estate
to secure any of the foregoing.
(g) To lend money, whether secured or unsecured, pursuant to Trust
Loans or otherwise.
(h) To create reserve funds for any purpose.
(i) To incur and pay out of the Trust Estate any charges or expenses,
and disburse any funds of the Trust, which charges, expenses, or disbursements
are, in the opinion of the Trustees, necessary or incidental to or desirable for
the carrying out of any of the purposes of the Trust or conducting the business
of the Trust, including, without limitation, all Organization and Offering
Expenses, Operating Expenses, payments, reimbursements, and compensation to the
Trustees, the Advisor, and their Affiliates, taxes and other governmental
levies, charges, and assessments, of whatever kind or nature, imposed upon or
against the Trustees in connection with the Trust or the Trust Estate or upon or
against the Trust Estate or any part thereof, and for any of the purposes
herein.
(j) To deposit funds of the Trust in banks, trust companies, savings
and loan associations, and other depositories, whether or not such deposits will
draw interest, the same to be subject to withdrawal on such terms, in such
manner, and by such Person or Persons (including any one or more Trustees,
officers, agents, representatives, or the Advisor) as the Trustees may
determine.
(k) To possess and exercise all the rights, powers, and privileges
appertaining to the ownership of all or any Mortgages or Securities, issued or
created by, or interests in, any Person, forming part of the Trust Estate, to
the same extent that an individual might, and, without limiting the generality
of the foregoing, to vote or give any consent, request, or notice, or waive any
notice, either in person or by proxy or power of attorney, with or without power
of substitution, to one or more Persons, which
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proxies and powers of attorney may be for meetings or action generally or for
any particular meeting or action and may include the exercise of discretionary
powers.
(l) To cause to be organized or assist in organizing any Person under
the laws of any jurisdiction to acquire the Trust Estate or any part or parts
thereof or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, rent, lease, hire, convey, negotiate,
assign, exchange, or transfer the Trust Estate or any part or parts thereof to
or with any such Person in exchange for the Securities thereof or otherwise, and
to lend money to, subscribe for the Securities of, and enter into any contracts
with, any such Person the Securities or any other interest of which the Trust
holds or is about to acquire.
(m) To enter into joint ventures, general or limited partnerships, and
any other lawful combinations or associations.
(n) To elect one of themselves as Managing Trustee or Chairman of the
Board of Trustees and to elect, appoint, engage, or employ other officers for
the Trust (including a Secretary, Treasurer, and such Vice Presidents and other
officers as the Trustees may determine), who may be removed or discharged at the
discretion of the Trustees, such officers to have such powers and duties, and to
serve such terms, as may be prescribed by the Trustees or by the Trustees'
Regulations; to engage or employ any Persons (including, subject to the
provisions of Sections 7.4 and 7.5, any Trustee, officer, or employee of the
Trust or any Affiliate of any of such Trustee, officer, or employee of the
Trust) as agents, representatives, or employees (including, without limitation,
real estate advisors, investment advisors, transfer agents, registrars,
underwriters, accountants, attorneys at law, real estate agents, managers,
appraisers, brokers, architects, engineers, construction managers, general
contractors, or otherwise) in one or more capacities, and to pay compensation
from the Trust for services in as many capacities as such Persons may be so
engaged or employed; and, except as prohibited by law, to delegate any of the
powers and duties of the Trustees to any one or more Trustees, agents,
representatives, officers, employees, independent contractors, the Advisor, or
other Persons.
(o) To determine whether monies, Securities, or other assets received
by the Trust shall be charged or credited to income or capital or allocated
between income and capital, including the power to amortize or fail to amortize
any part or all of any premium or discount, to treat any part or all of the
profit resulting from the maturity or sale of any asset whether purchased at a
premium or at a discount, as income or capital, or apportion the same between
income and capital, to apportion the sales price of any asset between income and
capital, and to determine in what manner any expenses or disbursements are to be
borne as between income and capital, whether or not in the absence of the power
and authority conferred by this subsection such moneys, Securities, or other
assets would be regarded as income or as capital or such expense or disbursement
would be charged to income or to capital; to treat any dividend or other
distribution or any investment as income or capital or apportion the same
between income and capital; to provide or fail to provide reserves for
depreciation, amortization, or obsolescence in respect of all or any part of the
Trust Estate subject to depreciation, depletion, amortization, or obsolescence
in such amounts and by such methods as they shall determine; and to determine
the method or form in which the accounts and records of the Trust shall be kept
and to change from time to time such method or form.
(p) To determine from time to time, the value of all or any part of
the Trust Estate and of any services, Securities, Trust Loans, property, or
other consideration to be furnished to or acquired by
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the Trust, and from time to time to revalue all or any part of the Trust Estate
in accordance with such appraisals or other information as are, in the Trustees'
sole judgment, necessary and/or satisfactory.
(q) To collect, sue for, and receive all sums of money coming due to
the Trust, and to engage in, intervene in, prosecute, join, defend, compound,
compromise, abandon, or adjust, by arbitration or otherwise, any actions, suits,
proceedings, disputes, claims, controversies, demands, or other litigation
relating to the Trust, the Trust Estate, or the Trust's affairs, to enter into
agreements therefor, whether or not any suit is commenced or claim accrued or
asserted and, in advance of any controversy, to enter into agreements regarding
arbitration, adjudication, or settlement thereof.
(r) To renew, modify, release, compromise, extend, consolidate, or
cancel, in whole or in part, any obligation to or of the Trust.
(s) To purchase and pay for out of the Trust Estate insurance
contracts and policies insuring the Trust Estate against any and all risks and
insuring the Trust and/or any or all of the Trustees, the Shareholders, or
officers against any and all claims and liabilities of every nature asserted by
any Person arising by reason of any action alleged to have been taken or omitted
by the Trust or by the Trustees, Shareholders, or officers, regardless of
whether such insurance contracts and policies are provided by Persons affiliated
with the Advisor or the Trustees.
(t) To cause legal title to any of the Trust Estate to be held by
and/or in the name of the Trustees, and/or, except as prohibited by law, in the
name of the Trust or one or more of the Trustees or any other Person, on such
terms, in such manner, and with such powers in such Person as the Trustees may
determine, and with or without disclosure that the Trust or Trustees are
interested therein.
(u) To adopt a fiscal year for the Trust, and from time to time
change such fiscal year.
(v) To adopt and use a seal (but the use of a seal shall not be
required for the execution of instruments or obligations of the Trust).
(w) To help ensure that (i) the objectives of the Trust (including the
objectives of providing Shareholders with a pass-through investment vehicle, as
well as minimizing unrelated business taxable income for tax-exempt
Shareholders) will not be defeated by future legislation or other action, (ii)
the Trust will not be deemed to hold assets of an employee benefit plan ("Plan
Assets") for purposes of the Employee Retirement Income Security Act of 1974
("ERISA"), and (iii) the transactions contemplated hereunder would constitute
prohibited transactions under ERISA or the Code. In order to accomplish the
foregoing, the Trustees and the Advisor have the right (upon notice to all
Shareholders but without the need to obtain the consent of any Shareholder) to
take any actions including (1) restructuring the Trust's activities and, if
deemed necessary by the Trustees and the Advisor, converting the Trust to
another type of entity (including a partnership), (2) restructuring the Trust's
activities to the extent necessary to comply with any exemption in Plan Asset
legislation or the Plan Asset regulations adopted by the Department of Labor
from time to time, including establishing a fixed percentage of Shares permitted
to be held by employee benefit plans or other tax-exempt entities, or
discontinuing sales of Securities to such investors after a given date as
necessary to obtain a prohibited transaction exemption from the Department of
Labor or to comply with any exemption in the Plan Asset legislation or Plan
Asset regulations, and/or (3) terminating the Offering or any subsequent
offering, or compelling a dissolution and termination of the Trust.
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(x) To do all other such acts and things as are incident to the
foregoing and to exercise all powers which are necessary or useful to carry on
the business of the Trust, to promote any of the purposes for which the Trust is
formed, and to carry out the provisions of this Declaration.
3.3 Trustees' Regulations. The Trustees may make, adopt, amend, or
repeal regulations (the "Trustees' Regulations") containing provisions relating
to the business of the Trust, the conduct of its affairs, its rights or powers,
and the rights or powers of its Shareholders, Trustees, or officers not
inconsistent with law or with this Declaration.
ARTICLE IV
ADVISOR
4.1 Employment of Advisor. The Trustees are responsible for the general
policies of the Trust and for such general supervision of the business of the
Trust conducted by all officers, agents, employees, advisors, managers, or
independent contractors of the Trust as may be necessary to insure that such
business conforms to the provisions of this Declaration. However, the Trustees
are not and shall not be required personally to conduct the business of the
Trust and, consistent with their ultimate responsibility as stated above, the
Trustees shall have the power to appoint, employ, or contract with any Person
(including one or more of themselves, or any Affiliate of any of them) as the
Trustees may deem necessary or proper for the transaction of the business of the
Trust. The Trustees may therefore employ or contract with such Person (herein
referred to as the "Advisor"), and the Trustees may grant or delegate such
authority to the Advisor as the Trustees may in their sole discretion deem
necessary or desirable, without regard to whether such authority is normally
granted or delegated by Trustees.
The Trustees (subject to the provisions of Section 4.5) shall have the
power to determine the terms and compensation of the Advisor or any other Person
whom they may employ or with whom they may contract. The Trustees may exercise
broad discretion in allowing the Advisor to administer and regulate the
operations of the Trust, to act as agent for the Trust, to execute documents on
behalf of the Trustees, and to make executive decisions which conform to general
policies and general principles previously established by the Trustees.
4.2 Term. The Trustees shall enter into a contract with the Advisor
("Advisory Agreement") which shall provide for an initial term of three years
and for the automatic annual extension thereafter. This Advisory Agreement may
be terminated, without penalty, after the initial three-year term, upon no less
than 60 days' written notice of the Advisor or by vote of a majority of the
Trustees or by the Shareholders voting as set forth in Section 6.2.
4.3 Independence of Trustees and Members of Executive Committee. Not
more than 49% of the total number of Trustees or of the total number of members
of the Executive Committee may be Affiliates of any Person who is then the
Advisor; provided, however, that if at any time the percentage of Trustees or
members of the Executive Committee who are Affiliates of such Person becomes
more than 49% of the total number of Trustees or members of the Executive
Committee then in office, whether because of the death, resignation, removal, or
change in affiliation of one or more Trustees or members of the Executive
Committee or otherwise, then such requirement shall not be applicable for a
period of 90 days of such event occurring, during which period the continuing
Trustees or Trustee then in office shall
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appoint, pursuant to Section 2.4, a sufficient number of other individuals as
Trustees or as members of the Executive Committee so that again not more than
49% of the total number of Trustees or members of the Executive Committee then
in office are Affiliates of such Person. The Trustees shall at all times
endeavor to comply with the requirement of this Section 4.3 as to independence,
but failure so to comply with such requirement shall not affect the validity or
effectiveness of any action of the Trustees or of the Executive Committee.
4.4 Other Activities of Advisor. The Advisor shall not be required to
administer the Trust as its sole and exclusive function and may have other
business interests and may engage in other activities in addition to those
relating to the Trust which may be in direct competition with the Trust,
including acting as a real estate or loan broker, acting as a general partner or
manager, and rendering of advice or services of any kind to any other Person
(including, but not limited to, Affiliates of the Advisor). The Trustees may
request the Advisor and/or its Affiliates to engage in certain other activities
relating to the Trust's investments, including property management, contracting
for the construction of improvements, and the placement or brokerage of real
property, equity investments in real property, Mortgages, or other financing
arrangements; and the Advisor and/or its Affiliates may act as broker or provide
services requested by sellers, mortgagors, prospective sellers, or prospective
mortgagors to the Trust and may receive brokerage commissions and other
compensation from such sellers, mortgagors, prospective sellers, and prospective
mortgagors in addition to compensation paid to the Advisor by the Trust.
The Advisor shall be required to use its best efforts to present a
continuing and suitable investment program to the Trust which is consistent with
the investment policies and objectives of the Trust, but neither the Advisor nor
any Affiliate of the Advisor shall be obligated to present any particular
investment opportunity to the Trust even if such opportunity is of a character
which, if presented to the Trust, could be taken by the Trust, and subject to
the foregoing, each of them shall have the right to take for its own account or
to recommend to others any such particular investment opportunity. The Advisor
shall act on a basis which is fair and reasonable to the Trust and the
Shareholders in selecting from among the various investment opportunities that
come to the Advisor those investment opportunities which it presents to and
approves on behalf of the Trust. So long as there is an Advisor or other Person
performing similar functions, the Trustees shall have no responsibility to
originate investment opportunities for the Trust.
4.5 Limitation on Operating Expenses. The Operating Expenses of the Trust
for any full fiscal year shall not (except as set forth herein) exceed an amount
equal to the greater of (a) 2% of the average Net Assets of the Trust Estate for
such year or (b) 25% of the Trust's net income for such year, determined in
accordance with generally accepted accounting principles, before deducting any
non-accountable expense allowances, regular and incentive advisory fees,
administrative fees and expenses, and depreciation, depletion, and amortization.
The Trustees shall limit such expenses to amounts that do not exceed such
limitations unless a majority of the Trustees who are not Affiliates of the
Advisor determine that based upon such factors as they deem sufficient, a higher
level of expenses is justified. Each contract made with the Advisor under this
Article IV shall specifically provide that in the event such Trustees determine
that such excess expenses are not justified, the Advisor shall refund to the
Trust promptly after the end of any such year the amount, if any, by which the
Operating Expenses so exceed said amount; provided, that (i) the maximum
liability of the Advisor for such excess in any year shall be limited to the
amount of the Non-Accountable Expense Allowance and the Administration Fee
received by the Advisor during such year as defined and provided for in the
Advisory Agreement and (ii) to the extent that the Operating Expenses for any
subsequent fiscal year are less than the greater of clauses (a)
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or (b) above, the Trust shall reimburse the Advisor the amount(s) it previously
refunded to the Trust pursuant to this Section 4.5.
ARTICLE V
INVESTMENT POLICY
5.1 General Statement of Policy. While the Trustees are authorized,
pursuant to Article III, to invest the Trust Estate in a wide variety of
investments, it is the present intention of the Trust that it shall be the
principal investment objective and policy of the Trust for the Trustees to
invest the Trust Estate in the Diversified Portfolio.
Investments of the Trust may be made in various combinations and may
involve participations with other Persons, including Affiliates of the Advisor
and/or Trustees. Such investments may incorporate a variety of real property
equity and financing techniques, including, without limitation, partnerships,
joint ventures, purchase and leasebacks, land purchase-leases, net lease
financings, purchase and installment salebacks, and Mortgages.
The general purpose of the Trust is to seek real estate investment trust
income as defined in the REIT Provisions of the Code. The Trustees intend to
make investments in such a manner as to comply with the requirements of the REIT
Provisions of the Code with respect to the composition of the Trust's
investments and the derivation of its income; provided, however, that no
Trustee, director, officer, employee, or agent of the Trust or the Advisor shall
be liable to any Person, including any Shareholder, for any act or omission
resulting in the loss of tax benefits under the Code or for the Trust not being
treated for tax purposes as a "real estate investment trust" under the REIT
Provisions of the Code. Subject to Section 5.3 hereof and subject to such
restrictions as may be necessary to qualify the Trust as a "real estate
investment trust" as defined in the REIT Provisions of the Code, the Trustees
may alter the above-declared investment policy in light of changes in economic
circumstances and other relevant factors, and the methods of implementing the
Trust's investment policies may change, in the discretion of the Trustees as
economic and other conditions change.
5.2 Other Permissible Investments. To the extent that the Trust has
assets not invested in accordance with Section 5.1, the Trustees may employ such
assets by investing them in:
(a) Obligations of, or guaranteed or insured by, the United States
Government or any agency or political subdivision thereof;
(b) Obligations of, or guarantees by, any state, territory, or
possession of the United States of America or any agency or political
subdivision thereof;
(c) Evidences of deposits in, or obligations of, banking institutions,
state and federal savings and loan associations, and savings institutions;
(d) Real and personal property and interests therein; and
(e) Other Securities, liquid short-term investments, and property.
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5.3 Prohibited Investments and Activities. The Trustees shall not engage
in any of the following investment practices or activities:
(a) Invest in commodities, foreign currencies, or bullion except in
connection with investments in other property;
(b) Engage in any material trading activities with respect to any of
the assets of the Trust Estate;
(c) Issue "redeemable securities" as defined in Section 2(a)(32) of
the Investment Company Act of 1940, as amended;
(d) Engage in the underwriting or public distribution of Securities
issued by others; and
(e) Purchase any property from or sell any property to the Advisor,
nor shall the Trust lend any funds to the Advisor.
5.4 Obligor's Default. Notwithstanding any provision in any Article of
this Declaration, when an obligor to the Trust is in default under the terms of
any obligation (including a Trust Loan) to the Trust, the Trustees or the
Advisor shall have the power to pursue any remedies permitted by law which in
their sole judgment are in the interest of the Trust, and the Trustees or the
Advisor shall have the power to receive and hold any investment and to enter
into any commitment or obligation on behalf of the Trust in connection with or
in pursuit of such remedies which, in the judgment of the Trustees or the
Advisor, is necessary or desirable for the purpose of acquiring property and
disposing of property acquired in the pursuit of such remedies.
ARTICLE VI
THE SHARES AND SHAREHOLDERS
6.1 Shares. The units into which the beneficial interest in the
Trust will be divided shall be designated as Shares, which Shares shall
initially be of two classes, Class A Shares and Class B Shares. The Class A
Shares shall have a par value of $1.00 per Share, and the Class B Shares shall
have a par value of $.01 per Share. The certificates evidencing the Shares
shall be in such form and signed (manually or by facsimile) on behalf of the
Trust in such manner as the Trustees may from time to time prescribe or as may
be prescribed in the Trustees' Regulations. The certificates shall be
negotiable and title thereto and to the Shares represented thereby shall be
transferred by assignment and delivery thereof to the same extent and in all
respects as a share certificate of a California corporation. There shall be no
limit upon the number or classes of Shares to be issued. The Shares may be
issued for such consideration as the Trustees shall determine or by way of share
dividend or share split in the discretion of the Trustees. Shares reacquired by
the Trust shall no longer be deemed outstanding and shall have no voting or
other rights unless and until reissued. Shares reacquired by the Trust may be
canceled and restored to the status of authorized and unissued Shares by action
of the Trustees. All Shares shall be fully paid and non-assessable by or on
behalf of the Trust upon receipt of full consideration for which they have been
issued or without additional consideration if issued by way of share dividend or
share split. The Shares shall not
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entitle the holder to preference, pre-emptive, appraisal, conversion, or
exchange rights of any kind, except as provided in Section 6.14.
Upon termination of the Offering, the Trustees shall issue for par a
sufficient number of Class B Shares to the Advisor and/or its nominee(s) such
that the total number of outstanding Class B Shares shall equal one-half of the
total number of outstanding Class A Shares. In order to maintain such
proportion between Class A Shares and Class B Shares, the Trustees are hereby
required to issue additional Class B Shares for par in like proportion to the
extent that (a) additional Class A Shares or other Securities convertible into
Class A Shares are issued by the Trust (provided that if and to the extent such
issuance is subject to the approval of the American Stock Exchange,) Inc. or
such other exchange or market on which the Class A Shares or other securities of
the Trust are traded, then such approval shall be obtained), and (b) the Class A
Shares are subject to any stock dividend, stock split, or other recapitalization
affecting the number of Class A Shares outstanding. For the purposes of
determining the total number of Class B Shares issued and outstanding following
the termination of this Offering and issuance of Class B Shares pursuant to this
Section 6.1 as required in Sections 6.6(a) and 6.14, all additional Class B
Shares issued pursuant to this paragraph of Section 6.1 shall be deemed to be
issued and outstanding following termination of the Offering.
6.2 Voting Rights. The Shareholders shall be entitled to vote only upon
the following matters:
(a) Election of Trustees. Trustees shall be elected annually pursuant
to an annual meeting of the Shareholders to be held at such time and place as
the Trustees' Regulations shall prescribe; provided that the initial Trustees
shall serve until the first annual meeting of the Shareholders which shall be
held within six months after the end of the fiscal year commencing in 1989. In
any election of Trustees, the Class A Shareholders and the Class B Shareholders
shall vote together as a single class with each Class A Share and Class B Share
held of record entitled to one vote in person or by proxy.
Any vacancy in the office of Trustees may be filled by a vote of the
Class A Shareholders and the Class B Shareholders voting together as a single
class with each Share held of record entitled to one vote in person or by proxy,
or, in the absence of any such Shareholder vote, such vacancy may be filled by
the vote of the remaining Trustees. If the number of Trustees is increased in
accordance with this Declaration, the Trustees' Regulations, or otherwise, any
vacancy so created may be filled by the existing Trustees.
In connection with the election or removal of Trustees as provided in
this Section 6.2(a) and in Section 6.2(b), the Shareholders shall be entitled to
cumulate their votes so that each Shareholder shall be entitled to cast in
person or by proxy as many votes as shall equal the number of Class A and Class
B Shares he holds of record multiplied by the number of Trustees to be elected
or removed by the Shareholders, and such Shareholder may cast all of such votes
for a single Trustee, or may distribute such votes among the number of Trustees
to be voted on, or for any two or more of them as he may see fit.
(b) Removal of Trustees. A Trustee may be removed for cause (defined
as willful violations of this Declaration or the Trustees' Regulations which
violations are materially against the interests of the Shareholders or gross
negligence in the performance of his duties) by majority vote or written consent
of the Shareholders with the Class A Shareholders and the Class B Shareholders
voting together as a single class with each Share held of record entitled to one
vote in person or by proxy. Any vacancy created by the removal of a Trustee
shall be filled as provided in Section 6.2(a).
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(c) Termination of Advisory Agreement. The Advisory Agreement may be
terminated to the extent provided in Section 4.2 upon majority vote or written
consent of the Shareholders with the Class A Shareholders and the Class B
Shareholders voting together as a single class with each Share held of record
entitled to one vote in person or by proxy.
(d) Termination of the Trust. The Trust may be terminated at a
meeting of the Shareholders, specially called for such purpose, upon a vote by
the Shareholders holding 66-2/3% of the Class A Shares and the Class B Shares
voting together as a single class with each Share of record entitled to one vote
in person or by proxy.
(e) Other Matters. All other matters to be voted on, consented to, or
ratified by the Shareholders shall be passed, consented to, or ratified by a
majority vote of the Shareholders with the Class A Shareholders and the Class B
Shareholders voting together as a single class with each Share held of record
entitled to cast one vote in person or by proxy.
Notwithstanding anything in this Article VI to the contrary, at all
times that there are no Class A Shares outstanding, the Class B Shareholders
shall have exclusive voting power on all matters upon which Shareholders are
entitled to vote pursuant to this Declaration. Wherever any provision of this
Declaration sets forth a specific percentage of the Shares outstanding and
entitled to vote which is required for approval or ratification of any action
upon which the vote of the Shareholders is required or may be obtained, such
provision shall mean such specified percentage of the votes entitled to be cast
by holders of all Shares then outstanding and entitled to vote on such action.
6.3 Legal Ownership of Trust Estate. The legal ownership of the
Trust Estate and the right to conduct the business of the Trust are vested
exclusively in the Trustees, and the Shareholders shall have no interest therein
other than beneficial interest in the Trust conferred by their Shares issued
hereunder, and they shall have no right to compel any partition, division,
dividend, or distribution of the Trust or any of the Trust Estate.
6.4 Shares Deemed Personal Property. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth in this Declaration. The death, insolvency, or
incapacity of a Shareholder shall not dissolve or terminate the Trust or affect
its continuity nor give his legal representative any rights whatsoever, whether
against or in respect of other Shareholders, the Trustees, or the Trust Estate
or otherwise, except the sole right to demand and, subject to the provisions of
this Declaration, the Trustees' Regulations, and any requirements of law, to
receive a new certificate for Shares registered in the name of such legal
representative, in exchange for, and upon delivery pursuant to Section 6.5 of,
the certificate held by such Shareholder.
6.5 Share Record; Issuance and Transferability of Shares. Records
shall be kept by or on behalf of and under the direction of the Trustees, which
shall contain the names and addresses of the Shareholders, the number of Shares
held by them respectively, and the numbers of the certificates representing the
Shares, and in which there shall be recorded all transfers of Shares.
Certificates shall be issued, listed, and transferred in accordance with the
Trustees' Regulations. The Persons in whose names certificates are registered
on the records of the Trust shall be deemed the absolute owners of the Shares
represented thereby for all purposes of this Trust; but nothing herein shall be
deemed to preclude the Trustees or officers, or their agents or representatives,
from inquiring as to the actual ownership of Shares. Until a transfer is duly
effected on the records of the Trust, the Trustees shall not be affected by any
notice
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of such transfer, either actual or constructive. The receipt by the Person in
whose name any Shares are registered on the records of the Trust or of the duly
authorized agent of such Person, or if such Shares are so registered in the
names of more than one Person, the receipt of any one of such Persons, or of the
duly authorized agent of any of such Persons, shall be a sufficient discharge
for all dividends or distributions payable or deliverable in respect of such
Shares and from all liability to see to the application thereof.
Subject to the provisions of Section 6.13, Shares shall be transferable on
the records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing upon delivery to the Trustees or a transfer
agent of the certificate or certificates therefor, properly endorsed or
accompanied by duly executed instruments of transfer and accompanied by all
necessary documentary stamps, together with such evidence of the genuineness of
each such endorsement, execution, or authorization and of other matters as may
reasonably be required by the Trustees or such transfer agent. Upon such
delivery, the transfer shall be recorded in the records of the Trust and a new
certificate for the Shares so transferred shall be issued to the transferee and
in case of transfer of only a part of the Shares represented by any certificate,
a new certificate for the balance shall be issued to the transferor. Any Person
becoming entitled to any Shares in consequences of the death of a Shareholder or
otherwise by operation of law shall be recorded as the holder of such Shares and
shall receive a new certificate therefor, but only upon delivery to the Trustees
or a transfer agent of instruments and other evidence required by the Trustees
or the transfer agent to demonstrate such entitlement, the existing certificate
for such Shares, and such necessary releases from applicable governmental
authorities. In case of the loss, mutilation, or destruction of any certificate
for Shares, the Trustees may issue or cause to be issued a replacement
certificate on such terms and subject to such rules and regulations as the
Trustees may from time to time prescribe. Nothing in this Declaration shall
impose upon the Trustees or a transfer agent a duty, or limit their rights, to
inquire into adverse claims.
6.6 Dividends or Distributions to Shareholders. The Trustees may
from time to time declare and pay to Shareholders such dividends or
distributions in cash or other form, out of current or accumulated income,
capital, capital gains, principal, surplus, proceeds from the increase of
refinancing of Trust obligations, or from the Disposition of portions of the
Trust Estate or from any other source as the Trustees in their discretion shall
determine. The Trustees may declare dividends or distributions as far in
advance as they shall determine in their discretion, including the advance
declaration of dividends or distributions with respect to more than one month or
other period. Shareholders shall have no right to any dividend or distribution
unless and until the record date therefor as declared by the Trustees.
(a) Distributions of Net Cash. The Trustees shall endeavor to declare
distributions of Net Cash, which shall be distributed 99% to the Class A
Shareholders and 1% to the Class B Shareholders, in amounts such that the Trust
shall maintain its status as a "real estate investment trust" under the Code.
To the extent that Class B Shareholders convert their Class B Shares into Class
A Shares as provided in Section 6.14, the percentage of distributions of Net
Cash to be distributed to the Class B Shareholders, as well as the other
distributions provided for in this Section 6.6, shall be reduced by multiplying
such 1% by a fraction, the numerator of which is the aggregate number of Class B
Shares outstanding as of the record date for any such distribution and the
denominator of which is the aggregate number of Class B Shares issued and
outstanding prior to any such conversion.
(b) Distributions of Proceeds. Upon any Disposition, the proceeds of
the Disposition shall be applied first, to the payment of any selling or
refinancing expenses, fees and commissions, including mortgage brokerage fees,
and all other fees and costs incurred in connection with the
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Disposition; and second, to the payment of principal and interest owed in
connection with the asset disposed of immediately prior to the Disposition which
is to be repaid in connection with the Disposition. All proceeds remaining
thereafter shall be segregated and not commingled with the other assets of the
Trust except for any amounts thereof which the Trustees, in their absolute
discretion, determine are required for support of the operations of the Trust,
or for investment in additional Trust assets. Any portion of such remaining
segregated proceeds in the form of assets which the Trustees, in their absolute
discretion, determine cannot reasonably be distributed to the Shareholders
(including any net interest earned thereon) is herein called "Non-Distributable
Net Proceeds," and any other portion of such segregated proceeds is herein
called "Distributable Net Proceeds."
The Distributable Net Proceeds of any Disposition shall be distributed
to the Shareholders in the same manner as distributions of Net Cash by the
Trust. The Non-Distributable Net Proceeds of any Disposition shall be
considered Distributable Net Proceeds at such time as the Trustees, in their
absolute discretion, determine that the assets comprising such Non-Distributable
Net Proceeds can reasonably be distributed or such assets are transformed into
Distributable Net Proceeds. They shall be distributed to the Shareholders in
the same manner as distributions of Net Cash by the Trust after any such
determination in the same manner as other Distributable Net Proceeds.
(c) Other Distributions. All distributions other than those
specifically provided for in Sections 6.6(a) and (b) may be declared by the
Trustees at such time that they, in their absolute discretion, determine that
the Trust has sufficient cash or other property which is not needed in the
operation of the Trust, and shall be distributed in accordance with the first
sentence of Section 6.6(a).
6.7 Transfer Agent, Dividend Disbursing Agent, and Registrar. The
Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents, and registrars and to authorize them on behalf of the Trust
to keep records, to hold and disburse any dividends and distributions, and to
have and to perform in respect of all original issues and transfers of Shares,
dividends and distributions, and reports and communications to Shareholders, the
powers and duties usually had and performed by transfer agents, dividend
disbursing agents, and registrars of a California corporation.
6.8 Shareholders' Meeting. There shall be an annual meeting of the
Shareholders at such time and place as the Trustees' Regulations shall prescribe
at which the Trustees shall be elected and any other proper business may be
conducted. The annual meeting of Shareholders shall be held after delivery to
the Shareholders of the Annual Report (set forth in Section 6.10) and within six
months after the end of each fiscal year commencing with the fiscal year
starting in 1989. Special meetings of Shareholders may be called by the
Managing Trustee, if any, the Chairman of the Board of Trustees, or at least two
of the other Trustees and shall be called upon the written request of
Shareholders holding not less than 20% of the outstanding Class A Shares or 20%
of the outstanding Class B Shares, entitled to vote in the manner provided in
the Trustees' Regulations. If there shall be no Trustees, the officers of the
Trust shall promptly call a special meeting of the Shareholders for the election
of successor Trustees. Notice of any special meeting shall state the purposes
of the meeting. A majority of the outstanding Class A Shares and Class B Shares
entitled to vote at any meeting represented in person or by proxy and counted
together as a single class shall constitute a quorum at any such meeting.
Whenever Shareholders are required or permitted to take any action, such action
may be taken without a meeting on written consent setting forth the action so
taken, signed by a sufficient proportion of the Class A Shareholders and Class B
Shareholders as would be required for a vote at meeting as provided in Section
6.2; provided that solicitation of such consents complies with Rule 706 of the
American Stock Exchange, Inc. as such Rule or its successor is then in
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effect. The vote or consent of Shareholders shall not be required for the
pledging, hypothecating, granting security interests in, mortgaging, or
encumbering of all or any of the Trust Estate, or for the sale, exchange, or
other Disposition of all or any portion of the Trust Estate.
6.9 Proxies. Whenever the vote or consent of Shareholders is
required or permitted under this Declaration, such vote or consent may be given
either directly by the Shareholders or by a proxy in the form prescribed in the
Trustees' Regulations. The Trustees may solicit such proxies from the
Shareholders or any of them in any matter requiring or permitting the
Shareholders' vote or consent.
6.10 Reports to Shareholders. Not later than 120 days after the
close of each full fiscal year of the Trust, the Trustees shall mail a report of
the business and operation of the Trust during such fiscal year to the
Shareholders, which report shall constitute the accounting of the Trustees for
such fiscal year. The report (herein "Annual Report") shall be in such form and
have such content as the Trustees deem proper. The Annual Report shall include
a balance sheet and a statement of income and surplus of the Trust. Such
financial statement shall be accompanied by the report of an independent public
accountant thereon. A manually signed copy of the accountant's report shall be
filed with the Trustees.
6.11 Fixing Record Dates. The Trustees' Regulations may provide for
fixing or, in the absence of such provision, the Trustees may fix, in advance, a
date as the record date for determining the Shareholders entitled to notice of
or to vote at any meeting of the Shareholders or to express consent to any
proposal without a meeting, or for the purpose of determining Shareholders
entitled to receive payment of any dividend or distribution (whether before or
after termination of the Trust) or any Annual Report or other communication from
the Trustees, or for any other purpose. The record date so fixed shall be not
less than ten days nor more than 90 days prior to the date of the meeting or
event for the purpose of which it is fixed.
6.12 Notice to Shareholders. Any notice of meeting or other notice,
communication, or report to any Shareholder shall be deemed duly delivered to
such Shareholder when such notice, communication, or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
6.13 Shareholders' Disclosures; Redemption and Stop Transfers. The
Shareholders shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect, including beneficial, ownership
of the Shares as the Trustees deem necessary. If the Trustees shall at any time
be of the opinion that direct or indirect ownership of Shares of the Trust has
or may become concentrated to an extent which may prevent the Trust from
qualifying as a real estate investment trust under the REIT Provisions of the
Code, the Trustees shall have the power by lot or other means deemed equitable
by them to prevent the transfer of such Shares, and/or to call for redemption of
a number of such Shares, sufficient in the opinion of the Trustees to maintain
or bring the direct or indirect ownership of Shares into conformity with the
requirements of the REIT Provisions of the Code. In particular, the Trustees are
specifically empowered to prohibit any Person from directly or indirectly
acquiring ownership (beneficial or otherwise) in the aggregate of more than 9.8%
of the outstanding Class A Shares (such Class A Shares in excess of 9.8%
constituting "Excess Class A Shares"). If the holder of the Excess Class A
Shares does not sell the Excess Class A Shares within 30 days of notification by
the Trust, then the Trustees are empowered (a) to prohibit the holder of Excess
Class A Shares from voting the Excess Class A Shares, (b) to place any
distributions with respect to such Excess Class A Shares in an escrow account
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for payment when those Class A Shares are no longer classified as Excess Class A
Shares, and (c) to redeem any or all Excess Class A Shares for a non-interest
bearing promissory note.
The redemption price to be paid for Shares, including the Excess
Shares, so called for redemption shall be (i) the last reported sale price of
the Shares on the last business day prior to the redemption date on the
principal national securities exchange on which the Shares are listed or
admitted to trading, or (ii) if the Shares are not listed or admitted to
trading, the latest bid quotation for the Shares on such last business day as
reported by the National Quotation Bureau Incorporated or a similar organization
selected from time to time by the Trust for the purpose, or (iii) if not
determinable as aforesaid, as determined in good faith by the Trustees. The
redemption price shall be payable by the Trust pursuant to a non-interest
bearing promissory note which shall require three equal monthly payments
commencing upon the date fixed for redemption by the Trustees. From and after
the date fixed for redemption by the Trustees, the holder of any Shares so
called for redemption, including the Excess Shares, shall cease to be entitled
to any dividends, distributions, voting rights, and other benefits with respect
to such Shares, excepting only the right to payment of the redemption price
fixed as aforesaid.
In addition, if any Person knowingly holds Excess Class A Shares and
the Trust loses its qualification as a real estate investment trust under the
REIT Provisions of the Code or becomes a personal holding company, that Person
will be required to indemnify the Trust for the full amount of any damages and
expenses resulting from the loss of its REIT qualification. This liability
might include increased corporate taxes, attorneys' fees, and administrative
costs. The Trustees may require each proposed transferee of Class A Shares to
deliver a statement or affidavit setting forth the number of Class A Shares, if
any, already owned, directly or indirectly, by such transferee and may declare
void any transfer of Class A Shares which would cause an accumulation of Class A
Shares in excess of 9.8% of the outstanding Class A Shares of the Trust.
In order to further assure that ownership of the Shares does not
become so concentrated, any transfer of Shares that would prevent the Trust from
continuing to be qualified as a real estate investment trust under the REIT
Provisions of the Code shall be void ab initio, and the intended transferee of
such Shares shall be deemed never to have had any interest therein. If the
foregoing provision is determined to be void or invalid by virtue of any legal
decision, statute, rule, or regulation, then the transferee of such Shares shall
be deemed to have acted as agent on behalf of the Trustees in acquiring such
Shares and to hold such Shares on behalf of the Trustees.
6.14 Conversion Rights. Subject to the terms and conditions of this Section
6.14, the Class B Shareholders as a group shall at their option be entitled to
convert up to 20% of the total of the Class B Shares, issued and outstanding
following the termination of the Offering and issuance of the Class B Shares
pursuant to Section 6.1, each year commencing with 1990 into fully paid and non-
assessable Class A Shares on the basis of one Class A Share for 49 Class B
Shares. Such conversion rights may be exercised at any time after December 31,
1989, and such rights shall be cumulative for each year thereafter, so that to
the extent that less than 20% of the Class B Shares held of record by a Class B
Shareholder are converted in any year, the percentage of Class B Shares
convertible in the succeeding years shall be increased accordingly. For example,
if only 10% of the total outstanding Class B Shares were converted into Class A
Shares in 1990, up to 30% of such total number of Class B Shares shall be
convertible in 1991, and to the extent that no Class B Shares are converted from
1990 through 1993, 100% of the total outstanding Class B Shares will be
convertible into Class A Shares in 1994 and each year thereafter. After
conversion of the Class B Shares into Class A Shares, the rights of the
remaining
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Class B Shareholders with respect to distributions of Net Cash shall be adjusted
as provided in Section 6.6.
In order to exercise such conversion rights, the Class B Shareholder
shall surrender the certificate or certificates for such Class B Shares at the
office of said transfer agent (or other place as provided by the Trustees),
which certificate or certificates, if the Trustees shall so request, shall be
duly endorsed to the Trust or in blank or accompanied by proper instruments of
transfer to the Trust (such endorsements or instruments of transfer to be in
form satisfactory to the Trust), and shall give written notice to the Trust at
said office that he elects so to convert said Class B Shares in accordance with
the terms of this Section 6.14, and shall state in writing therein the name or
names in which he wishes the certificate or certificates for Class A Shares to
be registered. Every such notice of election to convert shall constitute a
binding contract between the holder of such Class B Shares and the Trust,
whereby the Class B Shareholder shall be deemed to subscribe for the amount of
Class A Shares which he shall be entitled to receive upon such conversion, and,
in satisfaction of such subscription, to deposit the Class B Shares to be
converted and to release the Trust for all liability thereunder, and thereby the
Trust shall be deemed to agree that the surrender of the certificate or
certificates therefor and the extinguishment of liability thereon shall
constitute full payment of such subscription for Class A Shares to be issued
upon such conversion.
The Trust will, as soon as practicable after such deposit of a
certificate or certificates for Class B Shares accompanied by the written notice
and the statement above prescribed, issue and deliver at the office of said
transfer agent (or other place as provided above) to the Person for whose
account such Class B Shares were so surrendered, or to his nominee or nominees,
a certificate or certificates for the number of Class A Shares to which he shall
be entitled as aforesaid. Subject to the provisions of this Section 6.14, such
conversion shall be deemed to have been made as of the date of such surrender of
the Class B Shares to be converted; and the Person or Persons entitled to
receive the Class A Shares issuable upon conversion of such Class B Shares shall
be treated for all purposes as the record holder or holders of such Class A
Shares on such date. Upon conversion of Class B Shares, the Class B Shares so
converted shall be canceled and retired by the Trust.
The issuance of certificates for Class A Shares upon conversion of Class B
Shares shall be made without charge for any stamp or other similar tax in
respect of such issuance; provided, however, that if any such certificate is to
be issued in a name other than that of the holder of the Class B Shares
converted, the Person or Persons requesting the issuance thereof shall pay to
the Trust the amount of any tax which may be payable in respect of any transfer
involved in such issuance or shall establish to the satisfaction of the Trust
that such tax has been paid or that no such tax is due.
The Trust will at all times reserve and keep available, solely for the
purpose of issuance upon conversion of the outstanding shares of Class B Shares,
such number of Class A Shares as shall be issuable upon the conversion of all
such outstanding Class B Shares; provided that nothing contained herein shall be
construed to preclude the Trust from satisfying its obligations in respect of
the conversion of the outstanding Class B Shares by delivery of Class A Shares
which are held in the treasury of the Trust. The Trust covenants that if any
Class A Shares, required to be reserved for purposes of conversion hereunder,
require registration with or approval of any governmental authority under any
federal or state law before such Class A Shares may be issued upon conversion,
the Trust will use its best efforts at its expense to cause such Class A Shares
to be duly registered or approved, as the case may be. The Trust will also at
its expense endeavor to list the Class A Shares required to be delivered upon
conversion prior to such delivery upon each national securities exchange, if
any, upon which the outstanding Class A Shares are
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listed at the time of such delivery. The Trust covenants that all Class A Shares
which shall be issued upon conversion of the Class B Shares, will, upon issue,
be fully paid and non-assessable and not entitled to any preemptive rights.
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS, AND
OFFICERS, AND OTHER MATTERS
7.1 Exculpation of Trustees and Officers. No Trustee or officer of
the Trust shall be liable to the Trust or to any Trustee for any act or omission
of any other Trustee, Shareholder, officer, or agent of the Trust, including the
Advisor, or be held to any personal liability whatsoever in tort, contract, or
otherwise in connection with the affairs of this Trust except only that arising
from his own willful violation of the provisions of this Declaration or of the
Trustees' Regulations which violation is materially against the interests of the
Shareholders and results in material harm to such interests, or gross negligence
in the performance of his duties.
7.2 Express Exculpatory Clauses in Instruments. The Trustees shall
cause any written instrument creating an obligation of the Trust to include a
reference to this Declaration to provide that neither the Shareholders nor the
Trustees nor officers shall be liable thereunder and that the other parties to
such instrument shall look solely to the Trust Estate for the payment of any
claim thereunder or for the performance thereof. However, the omission of such
provision from any such instrument shall not render the Shareholders or any
Trustee or officer liable nor shall the Trustees or any officer of the Trust be
liable to anyone for such omission.
7.3 Liability and Indemnification of Trustees. The Trustees,
officers, employees, and agents of the Trust, including the Advisor, and their
affiliates, shall not be liable to the Trust or the Shareholders, and the Trust
shall indemnify the Trustees, officers, employees, and agents; of the Trust,
including the Advisor, and their Affiliates, against any claim or liability by
or to any Person other than the Trust, in respect of any act or any failure to
act so long as such act or failure to act was performed in a manner determined
in good faith to be within the scope of the Trustees' authority and to be in the
best interest of the Trust, and so long as he, she, or it was not guilty of
negligence, misconduct, or a breach of his fiduciary obligations in such act or
failure to act.
The indemnification authorized by this Section 7.3 shall include
payment of (i) reasonable attorney's fees or other expenses incurred in settling
any such claim or liability or incurred in any finally adjudicated legal
proceeding and (ii) expenses incurred by the removal of any liens affecting any
property of the Person to be indemnified. Indemnification shall be made from
assets of the Trust, and no Shareholder shall be personally liable to any Person
to be indemnified. This Section 7.3 shall inure to the benefit of the Trustees
and their Affiliates.
Notwithstanding the foregoing, the Trustees and their affiliates and
any Person acting as a broker-dealer shall not be indemnified for liabilities
arising under federal and state securities laws, unless; (a) there has been a
successful adjudication on the merits of each count involving securities law
violations as to the particular indemnitee and the court approves
indemnification of such litigation expenses; or (b) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to
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a particular indemnitee and the court approves indemnification of such
litigation expenses; or (c) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and the court approves
indemnification of such litigation expenses. In any claim for indemnification
for federal or state securities law violations, the party seeking
indemnification shall place before the court the position of the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
the securities administrator or applicable state agency charged with
administration and regulation of the offer and sale of these securities with
respect to the issue of indemnification securities law violations. The Trust
shall not incur the cost of the portion of any insurance which insures any party
against any liability as to which such party is herein prohibited from being
indemnified. For the purposes of this Section 7.3 only, the term "Affiliates"
shall mean any Person performing services on behalf of the Trust who; (i)
directly or indirectly controls, is controlled by, or is under common control
with the Trustees; or (ii) owns or controls 10% or more of the outstanding
voting securities of the Trustees; or (iii) is an officer, director, partner, or
trustee of the Trustees; or (iv) is any company for which the Trustees act as an
officer, director, partner, or trustee.
7.4 Right of Trustees and Officers to Own Shares or Other Property and to
Engage in Other Business.
(a) Any Trustee, officer, agent, or employee of the Trust and the
Advisor may acquire, own, hold, and dispose of Securities of the Trust, for his
individual account, and may exercise all rights of a holder of such Securities
to the same extent and in the same manner as if he were not a Trustee, officer,
employee, agent, or the Advisor; have personal business interests and engage in
personal business activities, which interests and activities may include the
acquisition, syndication, holding, management, operation, or disposition, for
his own account or for the account of others, of interests in Mortgages, real
property, or other assets, even if the same compete directly with the actual
business being conducted by the Trust; subject to the provisions of Article IV,
be interested as trustee, officer, director, stockholder, partner, member,
advisor, or employee, or otherwise have a direct or indirect interest in a
Person who may be engaged to render advice or services to the Trust (as the
Advisor or otherwise) and receive compensation from such Person and any
Affiliate of such Person as well as compensation as Trustee, officer, agent, or
employee of the Trust; and, in a capacity of trustee, officer, director,
stockholder, partner, member, advisor, or employee of any Person, have business
interests and engage in business activities in addition to those relating to the
Trust, which interests and activities may include the acquisition, syndication,
holding, management, operation, or disposition, for his own account or for the
account of others, of interests in Mortgages, real property, or other assets, or
interests in Persons engaged in the mortgage or real estate business, which
interests or activities may be in direct competition with the Trust; and each
Trustee, officer, employee, and agent of the Trust shall be free of any
obligation to present to the Trust any investment opportunity which comes to him
in any capacity other than solely as Trustee, officer, employee, or agent of the
Trust, even if such opportunity is of a character which, if presented to the
Trust, could be taken by the Trust; and none of the foregoing interests or
activities (singly, or in combination) shall be deemed to conflict with or be
inconsistent with his powers, duties, and responsibilities as Trustee, officer,
agent or employee of the Trust.
(b) Nothing in this Declaration shall be deemed to
(i) Prohibit a Trustee, officer, employee, or agent of the Trust
from acquiring or owning any amount or percentage of any class of outstanding
Securities of any publicly-owned Person whose shares are listed or traded on a
national securities exchange or in the over-the-counter market;
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(ii) Prohibit a Trustee, officer, employee, or agent of the Trust
who is also engaged in rendering legal, accounting, financial advisory, or other
services from rendering such services to any Person or from acting as trustee,
director, member, advisor, officer, or representative of any such Person to whom
he renders or has rendered such services;
(iii) Require a Trustee, officer, employee, or agent of the Trust
to dispose of a personal business interest acquired, or to discontinue personal
business activities begun, whether acquired or begun before or when he was a
Trustee, officer, employee, or agent, regardless of whether such interests or
activities compete with the business of the Trust; or
(iv) Prohibit a Trustee, officer, employee, or agent of the Trust
from having personal business interests or engaging in personal business
activities regardless of whether:
(A) The Trustees (by vote or consent sufficient for such
purpose including the vote of the interested Trustee(s)) have decided that such
interests or activities should or should not be acquired or engaged in by the
Trust; or
(B) The Trust could have acquired such interests or engaged
in such activities without endangering the qualification of the Trust as a real
estate investment trust under the REIT Provisions of the Code or without
violating any provision of this Declaration or applicable law,
even though any such Person, interests, or activities are or could be in
competition, in any way, with the Trust, or any such Person is in the same or
similar business as the Trust.
7.5 Transactions Between the Trust and Certain Affiliates. Except as
prohibited by this Declaration and in the absence of fraud, a contract, act, or
other transaction between the Trust and any other Person, or in which the Trust
is interested, shall be valid even though (i) one or more of the Trustees,
officers of the Trust, or the Advisor are Affiliates of such other Person, or
(ii) one or more of the Trustees, officers, or the Advisor, individually or
jointly with others, is a party or are parties to or directly or indirectly
interested in, or connected with, such contract, act, or transaction. Neither
any such Trustee, officer, nor the Advisor shall be under any disability from or
have any liability as a result of entering into any such contract, act, or
transaction, provided that (a) such interest or connection is disclosed or known
to the Trustees and the Trustees authorized such contract, act, or other
transaction by vote sufficient for such purpose including the vote of the
interested Trustee(s), or (b) such interest or connection is disclosed or known
to the Shareholders, and such contract, act, or transaction is approved or
subsequently ratified by the Shareholders, or (c) such contract, act, or
transaction is fair and reasonable as to the Trust at the time it is authorized
by the Trustees or by the Shareholders.
Notwithstanding any other provision of this Declaration of Trust,
Affiliates of the Advisor may receive compensation from, and/or a share of the
proceeds received by, borrowers in connection with Trust Loans.
7.6 Restriction of Duties and Liabilities. To the extent that the
nature of this Trust (that is, a business trust) will permit, the duties and
liabilities of Shareholders, Trustees, and officers shall in no event be greater
than the duties and liabilities of shareholders, directors, and officers of a
California corporation. The Shareholders, Trustees, and officers shall in no
event have any greater duties or liabilities than those imposed by applicable
law as shall be in effect from time to time.
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7.7 Persons Dealing with Trustees or Officers. Any act of the
Trustees or officers purporting to be done in their capacity as such, shall, as
to any Persons dealing with such Trustees or officers, be conclusively deemed to
be within the purpose of this Trust and within the powers of the Trustees and
officers. No Person dealing with the Trustees or any of them, or with the
authorized officers, agents, or representatives of the Trust, shall be bound to
see to the application of any funds or property passing into their hands or
control. The receipt of the Trustees or any of them, or of authorized officers,
agents, or representatives of the Trust, for moneys or other consideration,
shall be binding upon the Trust.
7.8 Reliance. The Trustees and officers may consult with counsel
(which may be a firm in which one or more of the Trustees or officers is or are
members) and the advice or opinion of such counsel shall be full and complete
personal protection to all of the Trustees and officers in respect of any action
taken or suffered by them in good faith and in reliance on or in accordance with
such advice or opinion. In discharging their duties, Trustees and officers,
when acting in good faith, may rely upon financial statements of the Trust
represented to them to be correct by the Managing Trustee or the Chairman of the
Board of Trustees, if any, or the officer of the Trust having charge of its
books of account, or stated in a written report by an independent public
accountant fairly to present the financial position of the Trust. The Trustees
may rely, and shall be personally protected in acting, upon any instrument or
other document believed by them to be genuine.
ARTICLE VIII
DURATION, TERMINATION, AMENDMENT,
AND QUALIFICATION OF TRUST
8.1 Duration of Trust. In the event that it shall be finally
determined by a court of competent jurisdiction in any state in which the Trust
shall own property that the holding of such property is or shall be in
contravention of a law, whether statutory or otherwise, similar to the common
law "rule against perpetuities," then with respect to the property affected
thereby, unless this Trust shall be earlier terminated as provided in this
Section 8, the Trust shall continue only until the expiration of 20 years after
the death of the last survivor of the following named persons:
<TABLE>
<CAPTION>
NAME DATE OF BIRTH PARENTS RESIDENCE
- ------------- ------------------ ------------------ ---------------------
<S> <C> <C> <C>
Adam G. September 10, 1985 Mr. and Mrs. 348 South Citrus
Edwards Steven Edwards Los Angeles, CA 90036
Lindsey M. September 27, 1986 Mr. and Mrs. 5701 West 76th Street
Nicholls Donald G. Nicholls Los Angeles, CA 90045
Daniel L. December 11, 1987 Mr. and Mrs. 4745 Yarmouth Avenue
Reuben Timothy D. Reuben Encino, CA 91316
Lucas J. July 15, 1986 Mr. and Mrs. 9914 Garden Grove
Sexton Phillip J. Sexton Northridge, CA 91325
Taylor C. January 13, 1987 Mr. and Mrs. 2816 Hilary Court
Smith Michael F. Smith Thousand Oaks, CA 91362
</TABLE>
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8.2 Termination of Trust.
(a) Upon termination of the Trust:
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, transfer, or otherwise dispose of all or any
part of the remaining Trust Estate to one or more Persons at a public or private
sale for consideration which may consist in whole or in part of cash,
securities, or other property of any kind, discharge or pay its liabilities, and
do all other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities, and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Estate, in cash or in kind or partly each, among
the Shareholders according to their respective rights and the Advisor pursuant
to the Advisory Agreement.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
8.3 Amendment Procedure.
(a) Prior to the issuance of any Shares, this Declaration may be
amended by a majority of the Trustees. Thereafter, this Declaration may be
amended by Shareholders voting as provided in Section 6.2. The Trustees may
also amend this Declaration without the vote or consent of Shareholders if they
deem it necessary to (i) conform this Declaration to the requirements of the
REIT Provisions of the Code or to other applicable federal laws or regulations,
but the Trustees shall not be liable for failing so to do, and (ii) clarify,
supplement, correct, or otherwise revise any provision of this Declaration as
provided in Section 9.6(a).
(b) No amendment may be made, under Section 8.3(a) above, which would
change any rights with respect to any outstanding Shares of the Trust by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or consent of the holders of two-thirds of the outstanding class of Shares
affected and entitled to vote thereon.
(c) A certification in recordable form signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
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8.4 Qualification Under the REIT Provisions of the Code. It is intended
that the Trust shall qualify as a "real estate investment trust" under the REIT
Provisions of the Code during such period as the Trustees shall deem it
advisable to so qualify the Trust.
ARTICLE IX
MISCELLANEOUS
9.1 Applicable Law. This Declaration is executed and acknowledged by
the Trustees in the State of California and with reference to the statutes and
laws thereof, and the rights of all parties and the construction and effect of
every provision hereof shall be subject to and construed according to statutes
and laws of said State.
9.2 Index and Headings for Reference Only; Gender. The table of
contents and heading preceding the text, articles, and sections hereof have been
inserted for convenience and reference only and shall not be construed to affect
the meaning, construction, or effect of this Declaration. Whenever the context
so requires references to the masculine gender shall include the female and
neuter genders and vice versa, and singular references shall include the plural
form.
9.3 Successors in Interest. This Declaration and the Trustees'
Regulations shall be binding upon and inure to the benefit of the undersigned
Trustees and their successors, assigns, heirs, distributees, and legal
representatives, and every Shareholder and his successors, assigns, heirs,
distributees, and legal representatives.
9.4 Inspections of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a California corporation would be available
for inspection by stockholders under the laws of the State of California.
Except as specifically provided for in this Declaration, Shareholders shall have
no greater right than stockholders of a California corporation to require
financial or other information from the Trust, Trustees, or officers.
9.5 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
9.6 Correction of Provisions of Declaration.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any one or more of
such provisions are in conflict with the REIT Provisions of the Code, or with
other applicable federal or state laws and regulations, or that any provision of
this Declaration should be clarified or supplemented, or contains a mistake,
ambiguity, or inconsistency with any other provision of this Declaration, or
should otherwise be revised, they shall, without the consent or vote of the
Shareholders, immediately amend this Declaration to delete such inconsistency,
clarify or supplement such provision, and/or correct such mistake or ambiguity;
provided, however, that such determination by the Trustees shall not affect or
impair any of the remaining provisions
-28-
<PAGE>
of this Declaration or render invalid or improper any action taken or omitted
(including, but not limited to, the election of Trustees) prior to such
determination. A certification in recordable form signed by a majority of the
Trustees setting forth any such determination and reciting that it was duly
adopted by the Trustees, or a copy of this Declaration, with the conflicting
provisions amended or removed pursuant to such a determination, in recordable
form, signed by a majority of the Trustees, shall be conclusive evidence of such
determination when lodged in the records of the Trust. The Trustees shall not be
liable for failure to make any determination under this Section 9.6(a). Nothing
in this Section 9.6(a) shall in any way limit or affect the right of the
Trustees to amend this Declaration as provided in Section 8.3(a).
(b) If any provisions of this Declaration shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provisions and shall not in any manner affect or render invalid or unenforceable
any other provision of this Declaration, and this Declaration shall be carried
out as if any such invalid or unenforceable provision were not contained herein.
9.7 Certifications. The following certifications shall be final and
conclusive as to any Person dealing with the Trust when made in writing by the
Secretary of the Trust or by any Trustee:
(a) A certification as to the number and identity of Persons holding
office as Trustees or officers at any particular time;
(b) A certification that a copy of this Declaration or of the
Trustees' Regulations is a true and correct copy thereof as then in force; and
(c) A certification as to any actions by Trustees, officers, or the
Advisor, other than the above.
9.8 Recording and Filing. A copy of this Declaration and any
amendments shall be recorded in the office of the County Recorder of Los Angeles
County, California, and in the office of the County Recorder or its equivalent
in every county where the Trust is or Trustees are the record owner of real
property, provided that provision is made in such county for such recording and
further provided that this Declaration is accepted for recording. This
Declaration and any amendments may also be filed or recorded as in such other
places the Trustees deem appropriate.
IN WITNESS WHEREOF, the undersigned have executed this Restated
Declaration of Trust as of the date first hereinabove set forth.
-----------------------------------
J. D'Arcy Chisholm, Trustee
-----------------------------------
Jack E. McDonald, Trustee
-----------------------------------
Ronald J. Consiglio, Trustee
-29-
<PAGE>
-----------------------------------
Madison F. Grose, Trustee
-----------------------------------
Barry S. Sternlicht, Trustee
-----------------------------------
Jay Sugarman, Trustee
-----------------------------------
Eugene A. Gorab, Trustee
-30-
<PAGE>
EXHIBIT 10.1
ANGELES PARTICIPATING MORTGAGE TRUST
1996 TRUSTEES' SHARE INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I ESTABLISHMENT............................................. 4
1.1 Purpose................................................... 4
ARTICLE II DEFINITIONS............................................... 4
2.1 "Affiliate"............................................... 4
2.2 "Agreement" or "Option Agreement"......................... 4
2.3 "Beneficiary"............................................. 4
2.4 "Board of Trustees" or "Board"............................ 4
2.5 "Cause"................................................... 4
2.6 "Change in Control" and "Change in Control Price"......... 5
2.7 "Code" or "Internal Revenue Code"......................... 5
2.8 "Commission".............................................. 5
2.9 "Committee"............................................... 5
2.10 "Disability".............................................. 5
2.11 "Effective Date".......................................... 5
2.12 "Exchange Act"............................................ 5
2.13 "Fair Market Value"....................................... 5
2.14 "Grant Date".............................................. 5
2.15 "Initial Grant Date"...................................... 6
2.16 "Nonqualified Option"..................................... 6
2.17 "Option".................................................. 6
2.18 "Option Period"........................................... 6
2.19 "Option Price"............................................ 6
2.20 "Participant"............................................. 6
2.21 "Plan".................................................... 6
2.22 "Representative".......................................... 6
2.23 "Rule 16b-3 and "Rule 16a-1(c)(3)"........................ 6
2.24 "SAHI Group".............................................. 6
2.25 "Securities Act".......................................... 7
2.26 "Shares".................................................. 7
2.27 "Termination of Trusteeship".............................. 7
2.28 "Trust"................................................... 7
2.29 "Trustee"................................................. 7
ARTICLE III ADMINISTRATION............................................ 7
3.1 Committee Structure and Authority......................... 7
ARTICLE IV SHARES SUBJECT TO PLAN.................................... 9
4.1 Number of Shares.......................................... 9
4.2 Release of Shares......................................... 9
4.3 Restrictions on Shares.................................... 9
4.4 Shareholder Rights........................................ 10
4.5 Best Efforts To Register.................................. 10
4.6 Anti-Dilution............................................. 10
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V OPTION GRANTS............................................. 11
5.1 Eligibility............................................... 11
5.2 Grant and Exercise........................................ 11
5.3 Terms and Conditions...................................... 12
5.4 Termination by Reason of Death............................ 13
5.5 Termination by Reason of Disability....................... 13
5.6 Other Termination......................................... 13
5.7 Cashing Out of Option..................................... 13
ARTICLE VI PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER
THE PLAN.................................................. 14
6.1 Limited Transfer During Offering.......................... 14
6.2 Committee Discretion...................................... 14
6.3 No Trust Obligation....................................... 14
ARTICLE VII CHANGE IN CONTROL PROVISIONS.............................. 14
7.1 Impact of Event........................................... 14
7.2 Definition of Change in Control........................... 15
7.3 Change in Control Price................................... 16
ARTICLE VIII MISCELLANEOUS............................................. 16
8.1 Amendments and Termination................................ 16
8.2 Unfunded Status of Plan................................... 16
8.3 General Provisions........................................ 17
8.4 Mitigation of Excise Tax.................................. 18
8.5 Options in Substitution for Options Granted
by Other Corporation..................................... 18
8.6 Procedure for Adoption.................................... 18
8.7 Procedure for Withdrawal.................................. 18
8.8 Delay..................................................... 19
8.9 Headings.................................................. 19
8.10 Severability.............................................. 19
8.11 Successors and Assigns.................................... 19
8.12 Entire Agreement.......................................... 19
</TABLE>
3
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
1996 TRUSTEES' SHARE INCENTIVE PLAN
-------------------------------------------
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose.
-------
The Angeles Participating Mortgage Trust 1996 Trustees' Share Incentive
Plan ("Plan") is hereby established by Angeles Participating Mortgage Trust
("Trust"). The purpose of the Plan is to promote the overall financial
objectives of the Trust and its shareholders by motivating trustees of the Trust
who are not officers or employees to achieve long-term growth in shareholder
equity in the Trust and to retain the association of those individuals. The
Plan and the grant of awards thereunder is expressly conditioned upon the Plan's
approval by the shareholders of the Trust. The Plan is adopted to be effective
as of September 26, 1996, subject to the approval of the shareholders of the
Trust.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
---------
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Trust) that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with the Trust.
2.2 "Agreement" or "Option Agreement" means, individually or
--------- ----------------
collectively, any agreement entered into pursuant to the Plan pursuant to which
an Option is granted to a Participant.
2.3 "Beneficiary" means the person, persons, trust or trusts which have
-----------
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated beneficiary, then the
term means the person or persons, trust or trusts entitled by will or the laws
of descent and distribution to receive such benefits.
2.4 "Board of Trustees" or "Board" means the Board of Trustees of the
----------------- -----
Trust.
2.5 "Cause" shall mean, for purposes of whether and when a Participant
-----
has incurred a Termination of Trusteeship for Cause (a) any act or failure to
act deemed to constitute cause under the Trust's or Affiliate's established
practices, policies or guidelines applicable to the Participant or (b) the
Participant's act or omission of gross misconduct with respect to the Trust or
an Affiliate in any material respect.
2.6 "Change in Control" and "Change in Control Price" have the meanings
----------------- -----------------------
set forth in Sections 7.2 and 7.3, respectively.
4
<PAGE>
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code
---- ---------------------
of 1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.8 "Commission" means the Securities and Exchange Commission or any
----------
successor agency.
2.9 "Committee" means the person or persons appointed by the Board of
---------
Trustees to administer the Plan, as further described in the Plan.
2.10 "Disability" means a mental or physical illness that renders a
----------
Participant totally and permanently incapable of performing the Participant's
duties for the Trust or an Affiliate. Notwithstanding the foregoing, a
Disability shall not qualify under this Plan if it is the result of (a) a
willfully self-inflicted injury or willfully self-induced sickness; or (b) an
injury or disease contracted, suffered, or incurred, while participating in a
criminal offense. The determination of Disability shall be made by the
Committee. The determination of Disability for purposes of this Plan shall not
be construed to be an admission of disability for any other purpose.
2.11 "Effective Date" means September 26, 1996, subject to the approval
--------------
of the shareholders of the Trust.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
2.13 "Fair Market Value" means the value per Share determined on the
-----------------
basis of the good faith determination of the Committee, without regard to
whether the Shares are restricted or represent a minority interest, pursuant to
the applicable method described below:
(a) if the Shares are listed on a national securities exchange or
quoted on the NASDAQ Stock Market ("NNM"), the closing price per Share on
the relevant date, as reported by the principal national exchange on which
such shares are traded (in the case of an exchange) or by the NNM, as the
case may be;
(b) if the Shares are not listed on a national securities exchange
or quoted on the NNM, but are actively traded in the over-the-counter
market, the average of the closing bid and asked prices per Share on the
relevant date, or the most recent preceding date for which such quotations
are reported; and
(c) if, on the relevant date, the Shares are not publicly traded or
reported as described in (a) or (b), the per Share value determined in good
faith by the Committee.
2.14 "Grant Date" means the date that as of which an Option is granted
----------
pursuant to the Plan.
2.15 "Initial Grant Date" means the first business day following the
--------------------
date a Trustee joins the Board, but only if the Trustee was not a Trustee on the
Effective Date.
2.16 "Nonqualified Option" means an Option to purchase Shares granted
-------------------
under this Plan the taxation of which is pursuant to Section 83 of the Code.
5
<PAGE>
2.17 "Option" means the right to purchase the number of Shares specified
------
by the Plan at a price and for a term fixed by the Plan, and subject to such
other limitations and restrictions as the Plan, the Agreement and the Committee
imposes.
2.18 "Option Period" means the period during which the Option shall be
-------------
exercisable in accordance with the Agreement and the Plan.
2.19 "Option Price" means the price per Share at which the Shares may be
------------
purchased under an Option as provided in Section 5.2.
2.20 "Participant" means a person who satisfies the eligibility
-----------
conditions of Article V and to whom an Option has been granted by the Committee
under this Plan, and in the event a Representative is appointed for a
Participant or another person becomes a Representative, then the term
"Participant" shall mean such Representative. The term shall also include a
trust for the benefit of the Participant, a partnership the interest of which is
by or for the benefit of the Participant, the Participant's parents, spouse or
descendants, or a custodian under a uniform gifts to minors act or similar
statute for the benefit of the Participant's descendants, to the extent
permitted by the Committee and not inconsistent with Rule 16b-3 to the extent
intended. Notwithstanding the foregoing, the term "Termination of Employment"
shall mean the Termination of Employment of the employee.
2.21 "Plan" means the Angeles Participating Mortgage Trust 1996
----
Trustees' Share Incentive Plan, as herein set forth and as may be amended from
time to time.
2.22 "Representative" means (a) the person or entity acting as the
--------------
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.23 "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule 16a-
---------------------------------
1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.24 "SAHI Group" collectively refers to SAHI Partners, a Delaware
----------
general partnership, SAHI, Inc., a Delaware corporation, Starwood Mezzanine
Investors, L.P., Barry Sternlicht, Madison Grose, Eugene Gorab, Jay Sugarman or
any of their respective affiliates.
2.25 "Securities Act" means the Securities Act of 1933, as amended, and
--------------
the rules and regulations promulgated thereunder.
2.26 "Shares" means the Class A Shares, $1.00 par value, of beneficial
------
interest in the Trust, whether presently or hereafter issued, and any other
securities resulting from adjustment thereof as described hereinafter or the
securities of any successor to the Trust which are designated for the purpose of
the Plan.
6
<PAGE>
2.27 "Termination of Trusteeship" means the occurrence of any act or event
--------------------------
that actually or effectively causes or results in the person's ceasing, for
whatever reason, to be a Trustee of the Trust or of any Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Trust or its Affiliates of all businesses
owned or operated by the Trust or its Affiliates.
2.28 "Trust" means the Angeles Participating Mortgage Trust, a California
-----
business trust created by Declaration of Trust, dated April 15, 1988, and
recorded in the Official Records of the Recorder's Office of Los Angeles County,
California on August 29, 1988, and includes any successor or assignee business
trust or trusts or corporation or corporations into which the Trust may be
merged, changed or consolidated; any business trust or corporation for whose
securities the securities of the Trust shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Trust.
2.29 "Trustee" means each and any trustee who serves on the Board and who
-------
is not also an officer or employee of the Trust or any of its affiliates.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
-----------
ADMINISTRATION
--------------
3.1 Committee Structure and Authority. The Plan shall be administered by
---------------------------------
the Committee which shall be the Audit and Compensation Committee of the Board
of Trustees, unless such committee does not exist or the Board establishes a
committee whose purpose is the administration of this Plan; provided that only
those members of the Audit and Compensation Committee of the Board who
participate in the decision relative to Options under the Plan shall be deemed
to be part of the "Committee" for purposes of the Plan. A majority of the
Committee shall constitute a quorum at any meeting thereof (including telephone
conference) and the acts of a majority of the members present, or acts approved
in writing by a majority of the entire Committee without a meeting, shall be the
acts of the Committee for purposes of this Plan. The Committee may authorize
any one or more of its members or an officer of the Trust to execute and deliver
documents on behalf of the Committee. A member of the Committee shall not
exercise any discretion respecting himself or herself under the Plan. The Board
shall have the authority to remove, replace or fill any vacancy of any member of
the Committee upon notice to the Committee and the affected member. Any member
of the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan and the limitation of Section (c)(2)(ii) of Rule 16b-3, if
applicable, so that the Plan is described in that section to do the following:
(a) to determine the terms and conditions of any Option granted
hereunder (including, but not limited to, the Option Period, any exercise
restriction or limitation and any exercise acceleration or forfeiture
waiver regarding any Option and the Shares relating thereto);
7
<PAGE>
(b) to adjust the terms and conditions, at any time or from time to
time, of any Option, subject to the limitations of Section 8.1;
(c) to provide for the forms of Agreement to be utilized in connection
with this Plan;
(d) to determine whether a Participant has a Disability or has
retired;
(e) to determine what securities law requirements are applicable to
the Plan, Options, and the issuance of Shares and to require of a
Participant that appropriate action be taken with respect to such
requirements;
(f) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Options;
(g) to require as a condition of the exercise of an Option or the
issuance or transfer of a certificate of Shares, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Trust or any other employer to obtain a
deduction or as may be otherwise required by law;
(h) to determine whether and with what effect an individual has
incurred a Termination of Trusteeship;
(i) to determine whether the Trust or any other person has a right or
obligation to purchase Shares from a Participant and, if so, the terms and
conditions on which such Shares are to be purchased;
(j) to determine the restrictions or limitations on the transfer of
Shares;
(k) to determine whether an Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(l) to interpret and make a final determination with respect to the
remaining number of Shares available under this Plan;
(m) to determine the permissible methods of Option exercise and
payment, including cashless exercise arrangements;
(n) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(o) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority 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 Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to different Options.
8
<PAGE>
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Option, may be made at the time of the grant of the Option or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Trust and
Participants. Any determination shall not be subject to de novo review if
-- ----
challenged in court.
ARTICLE IV
----------
SHARES SUBJECT TO PLAN
----------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
----------------
total number of Shares reserved and available for distribution pursuant to
Options under the Plan shall be 50,000 Shares authorized for issuance on the
Effective Date. Such Shares may consist, in whole or in part, of authorized and
unissued Shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
-----------------
determine the number of Shares available for Options, and in its discretion may
include (without limitation) as available for distribution any Shares that have
ceased to be subject to an Option, any Shares subject to any Option that are
forfeited, any Option that otherwise terminates without issuance of Shares being
made to the Participant, or any Shares (whether or not restricted) that are
received by the Trust in connection with the exercise of an Option including the
satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any Shares could not again be available for Options to a
particular Participant under any applicable law, such Shares shall be available
exclusively for Options to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares issued upon exercise of an Option
----------------------
shall be subject to the terms and conditions specified herein and to such other
terms, conditions and restrictions as the Committee in its discretion may
determine or provide in the Option Agreement. The Trust shall not be required
to issue or deliver any certificates for Shares, cash or other property prior to
(a) the listing of such Shares on any stock exchange (or other public market) on
which the Shares may then be listed (or regularly traded), (b) the completion of
any registration or qualification of such Shares under federal or state law, or
any ruling or regulation of any government body which the Committee determines
to be necessary or advisable, and (c) the satisfaction of any applicable
withholding obligation in order for the Trust or an Affiliate to obtain a
deduction with respect to the exercise of an Option. The Trust may cause any
certificate for any Shares to be delivered to be properly marked with a legend
or other notation reflecting the limitations on transfer of such Shares as
provided in this Plan or as the Committee may otherwise require. The Committee
may require any person exercising an Option to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of the Shares in compliance with applicable law or
otherwise. Fractional Shares shall not be delivered, but shall be rounded to the
next lower whole number of Shares.
4.4 Shareholder Rights. No person shall have any rights of a shareholder
------------------
as to Shares subject to an Option until, after proper exercise of the Option or
other action required, such Shares shall have been recorded on the Trust's
official shareholder records as having been issued or transferred. Upon
exercise of the Option or any portion thereof, the Trust will have a reasonable
time in which to issue the Shares, and the Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the
9
<PAGE>
date such Shares are recorded as issued or transferred in the Trust's official
shareholder records, except as provided herein or in an Agreement.
4.5 Best Efforts To Register. The Trust will register under the
------------------------
Securities Act the Shares delivered or deliverable pursuant to Options on
Commission Form S-8 if available to the Trust for this purpose (or any successor
or alternate form that is substantially similar to that form to the extent
available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as such forms are available for
registration to the Trust for this purpose. The Trust will use its best efforts
to cause the registration statement to become effective as soon as possible and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Trust is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all Shares
delivered pursuant to any Option. The Trust may delay the foregoing obligation
if the Committee determines in its sole discretion that any such registration
would adversely affect the Trust's interests, the Trust would incur unreasonable
expenses in any such registration or if there is no material benefit to
Participants.
4.6 Anti-Dilution. In the event of any Share dividend, Share split,
-------------
combination or exchange of Shares, recapitalization or other change in the
capital structure of the Trust, separation or division of the Trust (including,
but not limited to, a split-up, spin-off, split-off or distribution to Trust
shareholders other than a normal cash dividend), sale by the Trust of all or a
substantial portion of its assets (measured on either a stand-alone or
consolidated basis), reorganization, rights offering, a partial or complete
liquidation, or any other business trust transaction, Share offering or event
involving the Trust and having an effect similar to any of the foregoing, then
the Committee may adjust or substitute, as the case may be, the number of Shares
available for Options under the Plan, the number of Shares covered by
outstanding Options, the exercise price per Share of outstanding Options, and
any other characteristics or terms of the Options as the Committee shall deem
necessary or appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that any fractional Shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
Shares with appropriate payment for such fractional Shares as shall reasonably
be determined by the Committee.
ARTICLE V
---------
OPTION GRANTS
-------------
5.1 Eligibility. Each Trustee shall be granted Options to purchase
-----------
Shares.
5.2 Grant and Exercise. Each Trustee who is a Trustee on the Effective
------------------
Date shall be granted an Option on such date to purchase 1,000 Shares without
further action by the Board or the Committee. Each Trustee who joins the Board
after the Effective Date shall be granted an Option on the Initial Grant Date to
purchase 1,000 Shares without further action by the Board or the Committee. On
each anniversary date of the Initial Grant Date, if the Trustee is still a
Trustee on such anniversary date, such Trustee shall be granted an additional
Option to purchase 1,000 Shares without further action by the Board or the
Committee. If any Trustee is required to retire pursuant to the policies of the
Board during the 12-month period beginning on any anniversary of an Initial
Grant Date, or if the Director has notified the Board that he or she intends to
resign for any reason during the 12-month period beginning on any anniversary of
an Initial Grant Date, said Trustee shall instead be granted on the relevant
anniversary of an Initial Grant Date an Option to purchase the number of shares
of Common Stock equal to (i) 1,000
10
<PAGE>
multiplied by (ii) a fraction, the numerator of which is the number of full
calendar months the Trustee will serve during the period beginning on the
anniversary of an Initial Grant Date and ending on the Trustee's last date of
service and the denominator of which is 12. If the number of shares of Common
Stock available to grant under the Plan on a scheduled date of grant is
insufficient to make all automatic grants required to be made pursuant to the
Plan on such date, then each eligible Trustee shall receive an Option to
purchase a pro rata number of the remaining shares of Common Stock available
under the Plan; provided further, however, that if such proration results in
fractional shares of Common Stock, then such Option shall be rounded down to the
nearest number of whole shares of Common Stock. If there is no whole number of
shares remaining to be granted, then no grants shall be made under the Plan.
Notwithstanding the foregoing, no Trustee may be granted Options if such grant
would cause the Trustee to possess in the aggregate outstanding and unexercised
Options to purchase more than 5,000 Shares. If the number of Shares available to
grant under the Plan on a scheduled date of grant is insufficient to make all
automatic grants required to be made pursuant to the Plan on such date, then
each eligible Trustee shall receive an Option to purchase a pro rata number of
the remaining Shares available under the Plan; provided, further, however, that
if such proration results in fractional Shares, then such Option shall be
rounded down to the nearest number of whole Shares. In all events, the Option
Price shall be the Fair Market Value on the date the Option is granted. Each
Option granted under this Plan shall be evidenced by an Agreement, in a form
approved by the Committee, which shall embody the terms and conditions of such
Option and which shall be subject to the express terms and conditions set forth
in the Plan. Such Agreement shall become effective upon execution by the
Participant.
5.3 Terms and Conditions. Options shall be subject to such terms and
--------------------
conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Option shall be ten (10)
-------------
years from the date of the grant of the Option.
(b) Exercisability. Subject to Section 7.1, Options shall be
--------------
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that
any Option is exercisable only in installments, the Committee may at any
time waive such installment exercise provisions, in whole or in part. In
addition, the Committee may at any time accelerate the exercisability of
any Option.
(c) Method of Exercise. Subject to the provisions of this Article V,
------------------
a Participant may exercise Options, in whole or in part, at any time during
the Option Period by the Participant's giving written notice of exercise on
a form provided by the Committee (if available) to the Trust specifying the
number of Shares subject to the Option to be purchased. Such notice shall
be accompanied by payment in full of the purchase price by cash or check or
such other form of payment as the Trust may accept. If approved by the
Committee (including approval at the time of exercise), payment in full or
in part may also be made (i) by delivering Shares already owned by the
Participant having a Fair Market Value on the date of such delivery equal
to the Option Price; (ii) by the execution and delivery of a note or other
evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with Section
5.3(d); (iii) by authorizing the Trust to retain Shares which would
otherwise be issuable upon exercise of the Option having a Fair Market
Value on the date of delivery equal to the Option Price; (iv) by the
delivery of cash by a broker-dealer to whom the Participant has submitted
an irrevocable notice of exercise (in accordance with Part 220, Chapter II,
Title 12 of the Code of Federal Regulations, so-called "cashless"
exercise); or (v) by certifying ownership of
11
<PAGE>
Shares owned by the Participant to the satisfaction of the Committee for
later delivery to the Trust as specified by the Committee; or (vi) by any
combination of the foregoing.
(d) Trust Loan or Guarantee. Upon the exercise of any Option and
-----------------------
subject to the pertinent Agreement and the discretion of the Committee, the
Trust may at the request of the Participant:
(i) lend to the Participant an amount equal to such portion of
the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-
party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate, whether the loan is with recourse and any security interest
thereunder, shall be determined by the Committee, except that no extension
of credit or guarantee shall obligate the Trust for an amount to exceed the
lesser of the following: (i) the aggregate Fair Market Value on the date of
exercise of the Shares to be purchased upon exercise of the Option less the
aggregate par value of such Shares, or (ii) the amount permitted under
applicable laws or the regulations and rules of the Federal Reserve Board
and any other governmental agency having jurisdiction.
(e) Non-transferability of Options. Except as provided herein or in
------------------------------
an Agreement, no Option or interest therein shall be transferable by the
Participant other than by will or by the laws of descent and distribution
or by a designation of Beneficiary effective upon the death of the
Participant, and all Options shall be exercisable during the Participant's
lifetime only by the Participant. If and to the extent transferability is
permitted by Rule 16b-3 and except as otherwise provided herein or by an
Agreement, every Option granted hereunder shall be freely transferable, but
only if such transfer does not result in liability under Section 16 of the
Exchange Act to the Participant or other Participants and is consistent
with registration of the Option and sale of Shares on Form S-8 (or a
successor form) or the Committee's waiver of such condition.
5.4 Termination by Reason of Death. Unless otherwise provided in an
------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Trusteeship due to death, any unexpired and unexercised Option held by such
Participant shall thereafter be fully exercisable for a period of one (1) year
(or such other period or no period as the Committee may specify) immediately
following the date of such death or until the expiration of the Option Period
for such Option, whichever period is the shorter.
5.5 Termination by Reason of Disability. Unless otherwise provided in an
-----------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Trusteeship due to a Disability, any unexpired and unexercised Option held by
such Participant shall thereafter be fully exercisable by the Participant for
the period of one (1) year (or such other period or no period as the Committee
may specify) immediately following the date of such Termination of Trusteeship
or until the expiration of the Option Period for such Option, whichever period
is shorter, and the Participant's death at any time following such Termination
of Trusteeship due to Disability shall not affect the foregoing.
5.6 Other Termination. Unless otherwise provided in an Agreement or
-----------------
determined by the Committee, if a Participant's Termination of Trusteeship is
involuntary on the part of the Participant (but
12
<PAGE>
is not due to death, Disability or with Cause), any Option held by such
Participant shall thereupon terminate, except that such Option, to the extent
then exercisable, may be exercised for the lesser of the three (3) month period
commencing with the date of such Termination of Trusteeship or until the
expiration of the Option Period for such Option, and the Participant's death or
Disability at any time following such involuntary Termination of Trusteeship
shall not effect the foregoing. Unless otherwise determined by the Committee, if
the Participant incurs a Termination of Trusteeship which is either (a)
voluntary on the part of the Participant or (b) with Cause, the Option shall
terminate immediately.
5.7 Cashing Out of Option. On receipt of written notice of exercise, the
---------------------
Committee may elect to cash out all or part of the portion of any Option by
paying the Participant an amount, in cash or Shares, equal to the excess of the
Fair Market Value of the Shares that is subject to the Option over the Option
Price times the number of Shares subject to the Option on the effective date of
such cash out.
ARTICLE VI
----------
PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THE PLAN
-------------------------------------------------------
6.1 Limited Transfer During Offering. In the event there is an effective
--------------------------------
registration statement under the Securities Act pursuant to which Shares shall
be offered for sale in an underwritten offering, a Participant shall not, during
the period requested by the underwriters managing the registered public
offering, effect any public sale or distribution of Shares received directly or
indirectly pursuant to an exercise of an Option.
6.2 Committee Discretion. The Committee may in its sole discretion
--------------------
include in any Agreement an obligation that the Trust purchase a Participant's
Shares received upon the exercise of an Option (including the purchase of any
unexercised Options which have not expired), or may obligate a Participant to
sell Shares to the Trust upon such terms and conditions as the Committee may
determine and set forth in an Agreement. The provisions of this Article VI
shall be construed by the Committee in its sole discretion, and shall be subject
to such other terms and conditions as the Committee may from time to time
determine.
6.3 No Trust Obligation. None of the Trust, an Affiliate or the Committee
-------------------
shall have any duty or obligation to affirmatively disclose to a record or
beneficial holder of Shares or an Option, and such holder shall have no right to
be advised of, any material information regarding the Trust or any Affiliate at
any time prior to, upon or in connection with receipt or the exercise of an
Option or the Trust's purchase of Shares or an Option from such holder in
accordance with the terms hereof.
ARTICLE VII
-----------
CHANGE IN CONTROL PROVISIONS
----------------------------
7.1 Impact of Event. Notwithstanding any other provision of this Plan to
---------------
the contrary, in the event of a Change in Control (as defined in Section 7.2),
the Committee shall have full discretion, notwithstanding anything herein or in
an Agreement to the contrary, to do any or all of the following with respect to
an outstanding Award:
13
<PAGE>
(a) to provide that the Options outstanding as of the date of the
Change in Control which are not then exercisable shall become fully
exercisable to the full extent of the original grant;
(b) to cause any Option to be cancelled, provided notice of at least
15 days thereof is provided before the date of cancellation;
(c) to provide that the securities of another entity be substituted
hereunder for the Shares and to make equitable adjustment with respect
thereto;
(d) to grant the Participant the right to elect by giving notice
during a set period of time from and after a Change in Control to surrender
all or part of the Option to the Trust and to receive cash in an amount
equal to the amount by which the "Change in Control Price" (as defined in
Section 7.3) per Share on the date of the election exceeds the amount the
Participant must pay to exercise the Option per Share (the "Spread")
multiplied by the number of Shares granted under the Option; and
(e) to take any other action the Committee determines to take.
7.2 Definition of Change in Control. For purposes of the Plan, a "Change
-------------------------------
in Control" shall mean the happening of any of the following events:
(a) (i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")
(other than the SAHI Group) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of the then outstanding
Shares (the "Outstanding Shares") or the combined voting power of the then
outstanding voting securities of the Trust entitled to vote generally in
the election of trustees (the "Outstanding Trust Voting Securities") or
(ii) the approval by the shareholders of the Trust of a reorganization,
merger, consolidation, complete liquidation or dissolution of the Trust,
the sale or disposition of all or substantially all of the assets of the
Trust or similar trust transaction (in each case referred to in this
Section 7.2 as a "Trust Transaction") or, if consummation of such Trust
Transaction is subject, at the time of such approval by shareholders, to
the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly); provided such acquisition of
beneficial ownership or such Trust Transaction would result in any Person's
beneficially owning (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of the Outstanding Trust Shares or 30% or more of
the Outstanding Trust Voting Securities; excluding, however, the following:
(i) any acquisition by or consummation of a Trust Transaction with the
Trust or an Affiliate, or by an employee benefit plan (or related trust)
sponsored or maintained by the Trust, (ii) the acquisition by or
consummation of a Trust Transaction with any Person who beneficially owned,
immediately prior to the Effective Date, directly or indirectly, 30% or
more of the Outstanding Shares or Outstanding Trust Voting Securities,
(iii) an acquisition by or consummation of a Trust Transaction with the
SAHI Group, or (iv) any acquisition or Trust Transaction, if more than 70%
of the beneficial ownership of the entity resulting from the acquisition or
Trust Transaction is held by persons who held more than 70% of the
beneficial ownership of the Outstanding Shares or Outstanding Trust Voting
Securities before the acquisition or Trust Transaction; or
14
<PAGE>
(b) A change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for
purposes of this Section 7.2(b), that any individual who becomes a member
of the Board subsequent to the Effective Date and whose election, or
nomination for election by the Trust's shareholders, was approved by a vote
of at least a majority of those individuals who are members of the Board
and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided, further, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board shall not be so considered as a member of the
Incumbent Board.
7.3 Change in Control Price. For purposes of the Plan, "Change in Control
-----------------------
Price" means the higher of (a) the highest reported sales price of a Share in
any transaction reported on the principal exchange on which such Shares are
listed or on NNM during the 60-day period prior to and including the date of a
Change in Control or (b) if the Change in Control is the result of a tender or
exchange offer or Trust Transaction, the highest price per Share paid in such
tender or exchange offer or a Trust Transaction. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1 Amendments and Termination. The Board may amend, alter or discontinue
--------------------------
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Option theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Trust or an Affiliate, (b) made to cause the Plan
to qualify for the exemption provided by Rule 16b-3, or (c) made to permit the
Trust or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Trust's shareholders to the
extent such approval is required by law or agreement. The Committee may amend,
alter or discontinue the terms of any Award theretofore granted, prospectively
or retroactively, on the same conditions and limitations (and exceptions to
limitations) as the Board and further subject to any approval or limitations the
Board may impose.
Notwithstanding anything in the Plan to the contrary, if any right under
this Plan or an Agreement would cause a transaction to be ineligible for pooling
of interest accounting that would, but for the right hereunder, be eligible for
such accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Shares having a Fair Market Value equal to the cash otherwise payable hereunder
for the right which caused the transaction to be ineligible for pooling of
interest accounting.
8.2 Unfunded Status of Plan. It is intended that the Plan be an
-----------------------
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Shares or make payments; provided, however,
15
<PAGE>
that, unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
8.3 General Provisions.
------------------
(a) Representation. The Committee may require each person purchasing
--------------
or receiving Shares pursuant to an Option to represent to and agree with
the Trust in writing that such person is acquiring the Shares without a
view to the distribution thereof. The certificates for such Shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan shall
------------------------
prevent the Trust or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
-----------
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Option, the Participant shall pay
to the Trust (or other entity identified by the Committee), or make
arrangements satisfactory to the Trust or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Trust or an Affiliate to obtain a current
deduction. Unless otherwise determined by the Committee, withholding
obligations may be settled with Shares, including Shares that are part of
the Option that gives rise to the withholding requirement, provided that
any applicable requirements under Section 16 of the Exchange Act are
satisfied. The obligations of the Trust under the Plan shall be
conditional on such payment or arrangements, and the Trust and its
Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant.
(d) Representation. The Committee shall establish such procedures as
--------------
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(e) Controlling Law. The Plan and all Options made and actions taken
---------------
thereunder shall be governed by and construed in accordance with the laws
of the State of California (other than its law respecting choice of law).
The Plan shall be construed to comply with all applicable law, and to avoid
liability to the Trust, an Affiliate or a Participant, including, without
limitation, liability under Section 16(b) of the Exchange Act.
(f) Offset. Any amounts owed to the Trust or an Affiliate by the
------
Participant of whatever nature may be offset by the Trust from the value of
any Shares, cash or other thing of value under this Plan or an Agreement to
be transferred to the Participant, and no Shares, cash or other thing of
value under this Plan or an Agreement shall be transferred unless and until
all disputes between the Trust and the Participant have been fully and
finally resolved and the Participant has waived all claims to such against
the Trust or an Affiliate.
(g) Fail-Safe. With respect to persons subject to Section 16 of the
---------
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and
16
<PAGE>
deemed advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated
herein, such provision (other than one relating to eligibility requirements
or the price and amount of Awards) shall be deemed to be incorporated by
reference into the Plan with respect to Participants subject to Section 16.
(h) Right to Capitalize. The grant of an Option shall in no way
-------------------
affect the right of the Trust to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidation, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
8.4 Mitigation of Excise Tax. Subject to any agreement between the Trust
------------------------
and the Participant, if any payment or right accruing to a Participant under
this Plan (without the application of this Section 8.4), either alone or
together with other payments or rights accruing to the Participant from the
Trust or an Affiliate ("Total Payments") would constitute a "parachute payment"
(as defined in Section 280G of the Code and regulations thereunder), such
payment or right shall be reduced to the largest amount or greatest right that
will result in no portion of the amount payable or right accruing under the Plan
being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee
in making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 8.4 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
8.5 Options in Substitution for Options Granted by Other Corporations.
-----------------------------------------------------------------
Options may be granted under this Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Options so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.
8.6 Procedure for Adoption. Any Affiliate of the Trust may by resolution
----------------------
of such Affiliate's board of directors or trustees, as the case may be, with the
consent of the Board of Trustees and subject to such conditions as may be
imposed by the Board of Trustees, adopt the Plan for the benefit of its
employees as of the date specified in the board resolution.
8.7 Procedure for Withdrawal. Any Affiliate which has adopted the Plan
------------------------
may, by resolution of the board of directors or trustees, as the case may be, of
such Affiliate, with the consent of the Board of Trustees and subject to such
conditions as may be imposed by the Board of Trustees, terminate its adoption of
the Plan.
8.8 Delay. If at the time a Participant incurs a Termination of
-----
Trusteeship (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not
17
<PAGE>
to exceed the Option Period. The Trust shall have the right to suspend or delay
any time period described in the Plan or an Agreement if the Committee shall
determine that the action may constitute a violation of any law or result in
liability under any law to the Trust, an Affiliate or a shareholder of the Trust
until such time as the action required or permitted shall not constitute a
violation of law or result in liability to the Trust, an Affiliate or a
shareholder of the Trust. The Committee shall have the discretion to suspend the
application of the provisions of the Plan required solely to comply with Rule
16b-3 if the Committee shall determine that Rule 16b-3 does not apply to the
Plan.
8.9 Headings. The headings contained in this Plan are for reference
--------
purposes only and shall not affect the meaning or interpretation of this Plan.
8.10 Severability. If any provision of this Plan shall for any reason be
------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
8.11 Successors and Assigns. This Plan shall inure to the benefit of and
----------------------
be binding upon each successor and assign of the Trust. All obligations imposed
upon a Participant, and all rights granted to the Trust hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.
8.12 Entire Agreement. This Plan and the Agreement constitute the entire
----------------
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
18
<PAGE>
EXHIBIT 10.2
ANGELES PARTICIPATING MORTGAGE TRUST
1996 SHARE INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I ESTABLISHMENT.............................................. 5
1.1 Purpose.................................................... 5
ARTICLE II DEFINITIONS................................................ 5
2.1 "Affiliate"................................................ 5
2.2 "Agreement" or "Award Agreement"........................... 5
2.3 "Award".................................................... 5
2.4 "Beneficiary".............................................. 5
2.5 "Board of Trustees" or "Board"............................. 5
2.6 "Cause".................................................... 5
2.7 "Change in Control" and "Change in Control Price".......... 6
2.8 "Code" or "Internal Revenue Code".......................... 6
2.9 "Commission"............................................... 6
2.10 "Committee"................................................ 6
2.11 "Deferred Shares".......................................... 6
2.12 "Disability"............................................... 6
2.13 "Effective Date"........................................... 6
2.14 "Exchange Act"............................................. 6
2.15 "Fair Market Value"........................................ 6
2.16 "Grant Date"............................................... 7
2.17 "Incentive Option"......................................... 7
2.18 "Nonqualified Option"...................................... 7
2.19 "Option"................................................... 7
2.20 "Option Period"............................................ 7
2.21 "Option Price"............................................. 7
2.22 "Participant".............................................. 7
2.23 "Plan"..................................................... 7
2.24 "Representative"........................................... 7
2.25 "Restricted Shares"........................................ 7
2.26 "Retirement"............................................... 8
2.27 "Rule 16b-3 and "Rule 16a-1(c)(3)"......................... 8
2.28 "SAHI Group"............................................... 8
2.29 "Securities Act"........................................... 8
2.30 "Share Appreciation Right"................................. 8
2.31 "Shares"................................................... 8
2.32 "Termination of Employment"................................ 8
2.33 "Trust".................................................... 8
ARTICLE III ADMINISTRATION............................................. 9
3.1 Committee Structure and Authority.......................... 9
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV SHARES SUBJECT TO PLAN.................................... 11
4.1 Number of Shares.......................................... 11
4.2 Release of Shares......................................... 11
4.3 Restrictions on Shares.................................... 11
4.4 Shareholder Rights........................................ 12
4.5 Best Efforts To Register.................................. 12
4.6 Anti-Dilution............................................. 12
ARTICLE V ELIGIBILITY............................................... 13
5.1 Eligibility............................................... 13
ARTICLE VI OPTIONS................................................... 13
6.1 General................................................... 13
6.2 Grant and Exercise........................................ 13
6.3 Terms and Conditions...................................... 14
6.4 Termination by Reason of Death............................ 16
6.5 Termination by Reason of Disability....................... 16
6.6 Other Termination......................................... 16
6.7 Cashing Out of Option..................................... 16
ARTICLE VII SHARE APPRECIATION RIGHTS................................. 17
7.1 General................................................... 17
7.2 Grant..................................................... 17
7.3 Terms and Conditions...................................... 17
ARTICLE VIII RESTRICTED SHARES......................................... 18
8.1 General................................................... 18
8.2 Awards and Certificates................................... 18
8.3 Terms and Conditions...................................... 19
ARTICLE IX DEFERRED SHARES........................................... 20
9.1 General................................................... 20
9.2 Terms and Conditions...................................... 20
ARTICLE X PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER
THE PLAN.................................................. 21
10.1 Limited Transfer During Offering.......................... 21
10.2 Committee Discretion...................................... 21
10.3 No Trust Obligation....................................... 21
ARTICLE XI CHANGE IN CONTROL PROVISIONS.............................. 22
11.1 Impact of Event........................................... 22
11.2 Definition of Change in Control........................... 22
11.3 Change in Control Price................................... 23
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE XII MISCELLANEOUS............................................. 24
12.1 Amendments and Termination................................ 24
12.2 Unfunded Status of Plan................................... 24
12.3 General Provisions........................................ 24
12.4 Mitigation of Excise Tax.................................. 26
12.5 Rights with Respect to Continuance of Employment.......... 26
12.6 Awards in Substitution for Awards Granted
by Other Corporations.................................... 26
12.7 Procedure for Adoption.................................... 26
12.8 Procedure for Withdrawal.................................. 26
12.9 Delay..................................................... 27
12.10 Headings.................................................. 27
12.11 Severability.............................................. 27
12.12 Successors and Assigns.................................... 27
12.13 Entire Agreement.......................................... 27
</TABLE>
4
<PAGE>
ANGELES PARTICIPATING MORTGAGE TRUST
1996 SHARE INCENTIVE PLAN
---------------------------------
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose.
-------
The Angeles Participating Mortgage Trust 1996 Share Incentive Plan ("Plan")
is hereby established by Angeles Participating Mortgage Trust ("Trust"). The
purpose of the Plan is to promote the overall financial objectives of the Trust
and its shareholders by motivating those persons selected to participate in the
Plan to achieve long-term growth in shareholder equity in the Trust and by
retaining the association of those individuals who are instrumental in achieving
this growth. The Plan and the grant of awards thereunder is expressly
conditioned upon the Plan's approval by the shareholders of the Trust. The Plan
is adopted to be effective as of September 26, 1996, subject to the approval of
the shareholders of the Trust.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
---------
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Trust) that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, the Trust.
2.2 "Agreement" or "Award Agreement" means, individually or
--------- ---------------
collectively, any agreement entered into pursuant to the Plan pursuant to which
an Award is granted to a Participant.
2.3 "Award" means a Share Option, Share Appreciation Right, Restricted
-----
Share or Deferred Share.
2.4 "Beneficiary" means the person, persons, trust or trusts which have
-----------
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated beneficiary, then the
term means the person or persons, trust or trusts entitled by will or the laws
of descent and distribution to receive such benefits.
2.5 "Board of Trustees" or "Board" means the Board of Trustees of the
----------------- -----
Trust.
2.6 "Cause" shall mean, for purposes of whether and when a Participant
-----
has incurred a Termination of Employment for Cause, any act or omission which
permits the Trust to terminate the written agreement or arrangement between the
Participant and the Trust or an Affiliate for Cause as defined in such agreement
or arrangement, or in the event there is no such agreement or arrangement or the
agreement or arrangement does not define the term "cause," then Cause shall mean
(a) any act or
5
<PAGE>
failure to act deemed to constitute cause under the Trust's or Affiliate's
established practices, policies or guidelines applicable to the Participant or
(b) the Participant's act or omission of gross misconduct with respect to the
Trust or an Affiliate in any material respect.
2.7 "Change in Control" and "Change in Control Price" have the meanings
----------------- -----------------------
set forth in Sections 11.2 and 11.3, respectively.
2.8 "Code" or "Internal Revenue Code" means the Internal Revenue Code
---- ---------------------
of 1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.9 "Commission" means the Securities and Exchange Commission or any
----------
successor agency.
2.10 "Committee" means the person or persons appointed by the Board of
---------
Directors to administer this Plan, as further described herein; provided,
however, the Committee shall consist of directors who are "disinterested"
persons or "non-employee" directors within the meaning of Rule 16b-3 and each of
whom is an "outside" director under Section 162(m) of the Code.
2.11 "Deferred Shares" means an award made pursuant to Article IX.
---------------
2.12 "Disability" means a mental or physical illness that entitles the
----------
Participant to receive benefits under the long term disability plan of the Trust
or an Affiliate, or if the Participant is not covered by such a plan or the
Participant is not an employee of the Trust or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Trust or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (a) a willfully self-inflicted injury or willfully self-
induced sickness; or (b) an injury or disease contracted, suffered, or incurred,
while participating in a criminal offense. The determination of Disability
shall be made by the Committee. The determination of Disability for purposes of
this Plan shall not be construed to be an admission of disability for any other
purpose.
2.13 "Effective Date" means September 26, 1996, subject to the approval
--------------
of the shareholders of the Trust.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means the fair market value of Shares, Awards
-----------------
or other property as determined by the Committee or under procedures established
by the Committee. Unless otherwise determined by the Committee, the Fair Market
Value per Share as of any date shall be the closing sale price per share
reported on a consolidated basis for stock listed on the principal stock
exchange or market on which the Shares are traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
2.16 "Grant Date" means the date that as of which an Award is granted
----------
pursuant to the Plan.
2.17 "Incentive Option" means any Option intended to be and designated
----------------
as an "incentive stock option" within the meaning of Section 422 of the Code.
6
<PAGE>
2.18 "Nonqualified Option" means an Option to purchase Shares granted
-------------------
under this Plan the taxation of which is pursuant to Section 83 of the Code.
2.19 "Option" means an option granted under Article VI.
------
2.20 "Option Period" means the period during which the Option shall be
-------------
exercisable in accordance with the Agreement and Article VI.
2.21 "Option Price" means the price per Share at which the Shares may be
------------
purchased under an Option as provided in Section 6.3.
2.22 "Participant" means a person who satisfies the eligibility
-----------
conditions of Article V and to whom an Award has been granted by the Committee
under this Plan, and in the event a Representative is appointed for a
Participant or another person becomes a Representative, then the term
"Participant" shall mean such Representative. The term shall also include a
trust for the benefit of the Participant, a partnership the interest of which is
by or for the benefit of the Participant, the Participant's parents, spouse or
descendants, or a custodian under a uniform gifts to minors act or similar
statute for the benefit of the Participant's descendants, to the extent
permitted by the Committee and not inconsistent with the Rule 16b-3 or the
status of the Option as an Incentive Option to the extent intended.
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the employee.
2.23 "Plan" means the Angeles Participating Mortgage Trust 1996 Share
----
Incentive Plan, as herein set forth and as may be amended from time to time.
2.24 "Representative" means (a) the person or entity acting as the
--------------
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.25 "Restricted Shares" means an award under Article VIII.
-----------------
2.26 "Retirement" means the Participant's Termination of Employment from
----------
active employment with the Trust or an Affiliate after attaining either the
minimal retirement age or the early retirement age as defined in the principal
(as defined by the Committee) tax-qualified plan of the Trust or an Affiliate,
if the Participant is covered by such plan, and if the Participant is not
covered by such a plan, the age 65, or age 55 with the accrual of 10 years of
service.
2.27 "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule 16a-
--------------------------------
1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.28 "SAHI Group" collectively refers to SAHI Partners, a Delaware
----------
general partnership, SAHI, Inc., a Delaware corporation, Starwood Mezzanine
Investors, L.P., Barry Sternlicht, Madison Grose, Eugene Gorab, Jay Sugarman or
any of their respective affiliates.
7
<PAGE>
2.29 "Securities Act" means the Securities Act of 1933, as amended, and
--------------
the rules and regulations promulgated thereunder.
2.30 "Share Appreciation Right" means a right granted under Article VII.
------------------------
2.31 "Shares" means the Class A Shares, $1.00 par value, of beneficial
------
interest in the Trust, whether presently or hereafter issued, and any other
securities resulting from adjustment thereof as described hereinafter or the
securities of any successor to the Trust which is designated for the purpose of
the Plan.
2.32 "Termination of Employment" means the occurrence of any act or
-------------------------
event, whether pursuant to an employment agreement or otherwise, that actually
or effectively causes or results in the person's ceasing, for whatever reason,
to be an officer, independent contractor, director, trustee or employee of the
Trust or of any Affiliate, or to be an officer, independent contractor,
director, trustee or employee of any entity that provides services to the Trust
or an Affiliate, including, without limitation, death, Disability, dismissal,
severance at the election of the Participant, Retirement, or severance as a
result of the discontinuance, liquidation, sale or transfer by the Trust or its
Affiliates of all businesses owned or operated by the Trust or its Affiliates.
With respect to any person who is not an employee with respect to the Trust or
an Affiliate, the Agreement shall establish what act or event shall constitute a
Termination of Employment for purposes of the Plan. A Termination of Employment
shall occur to an employee who is employed by an Affiliate if the Affiliate
shall cease to be an Affiliate and the Participant shall not immediately
thereafter become an employee of the Trust or an Affiliate.
2.33 "Trust" means the Angeles Participating Mortgage Trust, a
-----
California business trust created by Declaration of Trust, dated April 14, 1988,
and recorded in the Official Records of the Recorder's Office of Los Angeles
County, California on August 29, 1994, and includes any successor or assignee
business trust or trusts or corporation or corporations into which the Trust may
be merged, changed or consolidated; any business trust or corporation for whose
securities all or substantially all of the securities of the Trust shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Trust.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
-----------
ADMINISTRATION
--------------
3.1 Committee Structure and Authority. The Plan shall be administered
---------------------------------
by the Committee. Subject to the limitation regarding persons who may serve on
the Committee, the Committee shall be the Audit and Compensation Committee of
the Board of Trustees, unless such committee does not exist or the Board
establishes a committee whose purpose is the administration of this Plan;
provided that only those members of the Audit and Compensation Committee of the
Board who participate in the decision relative to Awards under the Plan shall be
deemed to be part of the "Committee" for purposes of the Plan. In the absence
of an appointment, the Board or the portion thereof that satisfy the conditions
of Rule 16b-3 or Section 162(m) of the Code shall be the Committee. A majority
of the Committee shall constitute a quorum at any meeting thereof (including
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
shall be the
8
<PAGE>
acts of the Committee for purposes of this Plan. The Committee may authorize any
one or more of its members or an officer of the Trust to execute and deliver
documents on behalf of the Committee. A member of the Committee shall not
exercise any discretion respecting himself or herself under the Plan. The Board
shall have the authority to remove, replace or fill any vacancy of any member of
the Committee upon notice to the Committee and the affected member. Any member
of the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select those persons to whom Awards may be granted from time to
time;
(b) to determine whether and to what extent Options, Share
Appreciation Rights, Restricted Shares and Deferred Shares or any
combination thereof are to be granted hereunder;
(c) to determine the number of Shares to be covered by each Award
granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration or forfeiture waiver regarding any Award and the Shares
relating thereto);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 12.1;
(f) to determine to what extent and under what circumstances Shares
and other amounts payable with respect to an Award shall be deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Shares;
(h) to provide for the forms of Agreement to be utilized in connection
with this Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards, and the issuance of Shares and to require of a
Participant that appropriate action be taken with respect to such
requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
(l) to interpret and make a final determination with respect to the
remaining number of Shares available under this Plan;
(m) to require as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Shares, the withholding from a
Participant of the amount of any federal, state
9
<PAGE>
or local taxes as may be necessary in order for the Trust or any other
employer to obtain a deduction or as may be otherwise required by law;
(n) to determine whether and with what effect an individual has
incurred a Termination of Employment;
(o) to determine whether the Trust or any other person has a right or
obligation to purchase Shares from a Participant and, if so, the terms and
conditions on which such Shares are to be purchased;
(p) to determine the restrictions or limitations on the transfer of
Shares;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority 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 Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to different Awards.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Trust and
Participants. Any determination shall not be subject to de novo review if
-- ----
challenged in court.
ARTICLE IV
----------
SHARES SUBJECT TO PLAN
----------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
----------------
total number of Shares reserved and available for distribution pursuant to
Awards under the Plan shall be 377,500 Shares authorized for issuance on the
Effective Date. Such Shares may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares.
4.2 Release of Shares. The Committee shall have full authority to
-----------------
determine the number of Shares available for Award, and in its discretion may
include (without limitation) as available for
10
<PAGE>
distribution any Shares that have ceased to be subject to an Award, any Shares
subject to any Award that are forfeited, any Award that otherwise terminates
without issuance of Shares being made to the Participant, or any Shares (whether
or not restricted) that are received by the Trust in connection with the
exercise of an Award including the satisfaction of any tax liability or the
satisfaction of a tax withholding obligation. If any Shares could not again be
available for Awards to a particular Participant under any applicable law, such
Shares shall be available exclusively for Awards to Participants who are not
subject to such limitations.
4.3 Restrictions on Shares. Shares issued upon exercise of an Award shall
----------------------
be subject to the terms and conditions specified herein and to such other terms,
conditions and restrictions as the Committee in its discretion may determine or
provide in the Award Agreement. The Trust shall not be required to issue or
deliver any certificates for Shares, cash or other property prior to (a) the
listing of such Shares on any stock exchange (or other public market) on which
the Shares may then be listed (or regularly traded), (b) the completion of any
registration or qualification of such Shares under federal or state law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable, and (c) the satisfaction of any applicable withholding
obligation in order for the Trust or an Affiliate to obtain a deduction with
respect to the exercise of an Award. The Trust may cause any certificate for
any Shares to be delivered to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Shares as provided in this Plan
or as the Committee may otherwise require. The Committee may require any person
exercising an Award to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of the
Shares in compliance with applicable law or otherwise. Fractional Shares shall
not be delivered, but shall be rounded to the next lower whole number of Shares.
4.4 Shareholder Rights. No person shall have any rights of a shareholder
------------------
as to Shares subject to an Award until, after proper exercise of the Award or
other action required, such Shares shall have been recorded on the Trust's
official shareholder records as having been issued or transferred. Upon
exercise of the Award or any portion thereof, the Trust will have a reasonable
time in which to issue the Shares, and the Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such Shares are recorded as issued or transferred in the
Trust's official shareholder records, except as provided herein or in an
Agreement.
4.5 Best Efforts To Register. The Trust will register under the
------------------------
Securities Act the Shares delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Trust for this purpose (or any successor
or alternate form that is substantially similar to that form to the extent
available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as such forms are available for
registration to the Trust for this purpose. The Trust will use its best efforts
to cause the registration statement to become effective as soon as possible and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Trust is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all Shares
delivered pursuant to any Award. The Trust may delay the foregoing obligation
if the Committee determines in its sole discretion that any such registration
would adversely affect the Trust's interests, the Trust would incur unreasonable
expenses in any such registration or if there is no material benefit to
Participants.
11
<PAGE>
4.6 Anti-Dilution. In the event of any Share dividend, Share split,
-------------
combination or exchange of Shares, recapitalization or other change in the
capital structure of the Trust, separation or division of the Trust (including,
but not limited to, a split-up, spin-off, split-off or distribution to Trust
shareholders other than a normal cash dividend), sale by the Trust of all or a
substantial portion of its assets (measured on either a stand-alone or
consolidated basis), reorganization, rights offering, a partial or complete
liquidation, or any other business trust transaction, Share offering or event
involving the Trust and having an effect similar to any of the foregoing, then
the Committee may adjust or substitute, as the case may be, the number of Shares
available for Awards under the Plan, the number of Shares covered by outstanding
Awards, the exercise price per Share of outstanding Awards, and any other
characteristics or terms of the Awards as the Committee may deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that any fractional Shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
Shares with appropriate payment for such fractional Shares as shall reasonably
be determined by the Committee; provided, however, that the Committee may limit
any such adjustment so as to maintain the deductibility of the Awards under
Section 162(m) of the Code, and that any fractional shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional share as shall reasonably be
determined by the Committee.
ARTICLE V
---------
ELIGIBILITY
-----------
5.1 Eligibility. Except as herein provided, the persons who shall be
-----------
eligible to participate in the Plan and be granted Awards shall be those persons
who are officers, directors, trustees, employees, independent contractors or
other service providers of the Trust or any Affiliate including, without
limitation, the officers, directors, trustees and employees of any other entity
which provides services to the Trust or any Affiliate, who shall be in a
position, in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Trust and its Affiliates. Of those
persons described in the preceding sentence, the Committee may, from time to
time, select persons to be granted Awards and shall determine the terms and
conditions with respect thereto. In making any such selection and in
determining the form of the Award, the Committee may give consideration to the
functions and responsibilities of the person's contributions to the Trust and
its Affiliates, the value of the individual's service to the Trust and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee may designate in writing any person who is not eligible to participate
in the Plan if such person would otherwise be eligible to participate in the
Plan (and members of the Committee are expressly excluded from participation to
the extent necessary for purposes of Rule 16b-3, Section 162(m) of the Code or
any other legal reason).
ARTICLE VI
----------
OPTIONS
-------
6.1 General. The Committee shall have authority to grant Options under
-------
the Plan at any time or from time to time. Options may be granted alone or in
addition to other Awards and may be either Incentive Options or Nonqualified
Options. An Option shall entitle the Participant to receive Shares upon
exercise of such Option, subject to the Participant's satisfaction in full of
any conditions, restrictions or limitations imposed in accordance with the Plan
or an Agreement (the terms and provisions of which may
12
<PAGE>
differ from other Agreements) including without limitation, payment of the
Option Price. During any calendar year, Options to purchase no more than 125,833
Shares shall be granted to any Participant.
6.2 Grant and Exercise. The grant of an Option shall occur as of the date
------------------
the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Trust, a parent corporation of the Trust or a subsidiary (as
such terms are defined in Section 424 of the Code) on the date of grant shall be
eligible to be granted an Option which is intended to be and is an Incentive
Option. To the extent that any Option is not designated as an Incentive Option
or even if so designated does not qualify as an Incentive Option, it shall
constitute a Nonqualified Option.
6.3 Terms and Conditions. Options shall be subject to such terms and
--------------------
conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Option shall be fixed by
-------------
the Committee; provided that no Nonqualified Option shall be exercisable
more than fifteen (15) years after the date the Option is granted. In the
case of an Incentive Option, the Option Period shall not exceed ten (10)
years from the date of grant or five (5) years from the date of grant in
the case of an individual who owns more than ten percent (10%) of the
combined voting power of all classes of shares of beneficial interest in
the Trust, a corporation which is a parent corporation of the Trust or any
subsidiary of the Trust (each as defined in Section 424 of the Code). No
Option which is intended to be an Incentive Option shall be granted more
than ten (10) years from the date the Plan is adopted by the Trust or the
date the Plan is approved by the shareholders of the Trust, whichever is
earlier.
(b) Option Price. The Option Price shall be determined by the
------------
Committee. If such Option is intended to qualify as an Incentive Option,
the Option Price shall be not less than the Fair Market Value on the date
the Option is granted, or where granted to an individual who owns or who is
deemed to own Shares possessing more than ten percent (10%) of the combined
voting power of all classes of shares of beneficial interest in the Trust,
a corporation which is a parent corporation of the Trust or any subsidiary
of the Trust (each as defined in Section 424 of the Code), not less than
one hundred ten percent (110%) of such Fair Market Value.
(c) Exercisability. Subject to Section 11.1, Options shall be
--------------
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that
any Option is exercisable only in installments, the Committee may at any
time waive such installment exercise provisions, in whole or in part. In
addition, the Committee may at any time accelerate the exercisability of
any Option. If the Committee intends that an Option be an Incentive Stock
Option, the Committee shall, in its discretion, provide that the aggregate
Fair Market Value (determined at the Grant Date) of an Incentive Option
which is exercisable for the first time during the calendar year shall not
exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
------------------
a Participant may exercise Options, in whole or in part, at any time during
the Option Period by the Participant's giving written notice of exercise on
a form provided by the Committee (if available) to the Trust specifying the
number of Shares subject to the Option to be purchased. Such notice shall
be
13
<PAGE>
accompanied by payment in full of the purchase price by cash or check or
such other form of payment as the Trust may accept. If approved by the
Committee (including approval at the time of exercise), payment in full or
in part may also be made (i) by delivering Shares already owned by the
Participant having a Fair Market Value on the date of such delivery equal
to the Option Price; (ii) by the execution and delivery of a note or other
evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with Section
6.3(e); (iii) by authorizing the Trust to retain Shares which would
otherwise be issuable upon exercise of the Option having a Fair Market
Value on the date of delivery equal to the Option Price; (iv) by the
delivery of cash by a broker-dealer to whom the Participant has submitted
an irrevocable notice of exercise (in accordance with Part 220, Chapter II,
Title 12 of the Code of Federal Regulations, so-called "cashless"
exercise); or (v) by certifying ownership of Shares owned by the
Participant to the satisfaction of the Committee for later delivery to the
Trust as specified by the Committee; or (vi) by any combination of the
foregoing. If payment of the Option Price of a Nonqualified Option is made
in whole or in part in the form of Restricted Shares or Deferred Shares,
the number of Shares to be received upon such exercise equal to the number
of Restricted Shares or Deferred Shares used for payment of the Option
Price shall be subject to the same forfeiture restrictions or deferral
limitations to which such Restricted Shares or Deferred Shares were
subject, unless otherwise determined by the Committee. In the case of an
Incentive Option, the right to make a payment in the form of already owned
Shares may be authorized only at the time the Option is granted. No Shares
shall be issued until full payment therefor has been made. Subject to any
forfeiture restrictions or deferral limitations that may apply if an Option
is exercised using Restricted Shares or Deferred Shares, a Participant
shall have all of the rights of a shareholder of the Trust holding the
Shares (including the right to vote the Shares and the right to receive
dividends), when the Participant has given written notice of exercise, has
paid in full for such Shares and such Shares have been recorded on the
Trust's official shareholder records as having been issued or transferred.
(e) Trust Loan or Guarantee. Upon the exercise of any Option and
-----------------------
subject to the pertinent Agreement and the discretion of the Committee, the
Trust may at the request of the Participant:
(i) lend to the Participant an amount equal to such portion of
the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-
party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate, whether the loan is with recourse and any security interest
thereunder, shall be determined by the Committee, except that no extension
of credit or guarantee shall obligate the Trust for an amount to exceed the
lesser of the following (i) the aggregate Fair Market Value on the date of
exercise of the Shares to be purchased upon exercise of the Option less the
aggregate par value of such Shares, or (ii) the amount permitted under
applicable laws or the regulations and rules of the Federal Reserve Board
and any other governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in
------------------------------
an Agreement and then only consistent with the intent that the Option be an
Incentive Option, no Option or interest therein shall be transferable by
the Participant other than by will or by the laws of descent and
14
<PAGE>
distribution or by a designation of Beneficiary effective upon the death of
the Participant, and all Options shall be exercisable during the
Participant's lifetime only by the Participant. If and to the extent
transferability is permitted by Rule 16b-3 and except as otherwise provided
herein or by an Agreement, every Option granted hereunder shall be freely
transferable, but only if such transfer does not result in liability under
Section 16 of the Exchange Act to the Participant or other Participants and
is consistent with registration of the Option and sale of Shares on Form S-
8 (or a successor form) or the Committee's waiver of such condition.
6.4 Termination by Reason of Death. Unless otherwise provided in an
------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Option held by such
Participant shall thereafter be fully exercisable for a period of one (1) year
(or such other period or no period as the Committee may specify) immediately
following the date of such death or until the expiration of the Option Period
for such Option, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
-----------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Option held by
such Participant shall thereafter be fully exercisable by the Participant for
the period of one (1) year (or such other period or no period as the Committee
may specify) immediately following the date of such Termination of Employment or
until the expiration of the Option Period for such Option, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability shall not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Option is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, such Option will thereafter be treated as a
Nonqualified Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
-----------------
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death, Disability or with Cause), any
Option held by such Participant shall thereupon terminate, except that such
Option, to the extent then exercisable, may be exercised for the lesser of the
three (3) month period commencing with the date of such Termination of
Employment or until the expiration of the Option Period for such Option, and the
Participant's death or Disability at any time following such Retirement or
involuntary Termination of Trusteeship shall not affect the foregoing. Unless
otherwise provided in an Agreement, if the Participant incurs a Termination of
Employment which is either (a) voluntary on the part of the Participant (and is
not due to Retirement) or (b) with Cause, the Option shall terminate
immediately.
6.7 Cashing Out of Option. On receipt of written notice of exercise, the
---------------------
Committee may elect to cash out all or part of the portion of any Option by
paying the Participant an amount, in cash or Shares, equal to the excess of the
Fair Market Value of the Shares that is subject to the Option over the Option
Price times the number of shares of Shares subject to the Option on the
effective date of such cash out.
ARTICLE VII
-----------
SHARE APPRECIATION RIGHTS
-------------------------
7.1 General. The Committee shall have authority to grant Share
-------
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions,
15
<PAGE>
restrictions or limitations imposed in accordance with the Plan or an Agreement,
a Share Appreciation Right shall entitle the Participant to surrender to the
Trust the Share Appreciation Right and to be paid therefor in Shares, cash or a
combination thereof as herein provided, the amount described in Section 7.3(b).
7.2 Grant. Share Appreciation Rights may be granted in conjunction
-----
with all or part of any Option granted under the Plan, in which case the
exercise of the Share Appreciation Right shall require the cancellation of a
corresponding portion of the Option, and the exercise of the Option shall
require the cancellation of the corresponding portion of the Share Appreciation
Right. In the case of a Nonqualified Option, such rights may be granted either
at or after the time of grant of such Option. In the case of an Incentive
Option, such rights may be granted only at the time of grant of such Option. A
Share Appreciation Right may also be granted on a stand alone basis. The grant
of a Share Appreciation Right shall occur as of the date the Committee
determines. Each Share Appreciation Right granted under this Plan shall be
evidenced by an Agreement, which shall embody the terms and conditions of such
Share Appreciation Right and which shall be subject to the terms and conditions
set forth in the Plan. During any calendar year, Share Appreciation Rights with
respect to no more than 125,833 Shares shall be granted to any Participant.
7.3 Terms and Conditions. Share Appreciation Rights shall be subject
--------------------
to such terms and conditions as shall be determined by the Committee, including
the following:
(a) Period and Exercise. The term of a Share Appreciation Right shall
-------------------
be established by the Committee. If granted in conjunction with a Option,
the Share Appreciation Right shall have a term which is the same as the
Option Period and shall be exercisable only at such time or times and to
the extent the related Options would be exercisable in accordance with the
provisions of Article VI. A Share Appreciation Right which is granted on a
stand alone basis shall be for such period and shall be exercisable at such
times and to the extent provided in an Agreement. Share Appreciation
Rights shall be exercised by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Trust
specifying the portion of the Share Appreciation Right to be exercised.
(b) Amount. Upon the exercise of a Share Appreciation Right granted
------
conjunction with an Option, a Participant shall be entitled to receive an
amount in cash, Shares or both as determined by the Committee or as
otherwise permitted in an Agreement equal in value to the following: (i)
the excess of the Fair Market Value over the Option Price, multiplied by
(ii) the number of Shares in respect of which the Share Appreciation Right
is exercised. In the case of a Share Appreciation Right granted on a stand
alone basis, the Agreement shall specify the value to be used in lieu of
the Option Price. The Fair Market Value shall be determined as of the date
of exercise of such Share Appreciation Right.
(c) Special Rules. In the case of Share Appreciation Rights held by
-------------
Participants who are actually or potentially subject to Section 16(b) of
the Exchange Act the Committee may require that such Share Appreciation
Rights be exercised only in accordance with Rule 16b-3.
(d) Non-transferability of Share Appreciation Rights. Share
------------------------------------------------
Appreciation Rights shall be transferable only when and to the extent that
a Option would be transferable under the Plan unless otherwise provided in
an Agreement.
16
<PAGE>
(e) Termination. A Share Appreciation Right shall terminate at such
-----------
time as a Option would terminate under the Plan, unless otherwise provided
in an Agreement.
(f) Effect on Shares Under this Plan. To the extent required by Rule
--------------------------------
16b-3, upon the exercise of a Share Appreciation Right, the Option or part
thereof to which such Share Appreciation Right is related shall be deemed
to have been exercised for the purpose of the limitation set forth in
Section 4.2 on the number of shares of Common Stock to be issued under this
Plan, but only to the extent of the number of Shares covered by the Share
Appreciation Right at the time of exercise based on the value of the Share
Appreciation Right at such time.
(g) Incentive Option. A Share Appreciation Right granted in tandem
----------------
with an Incentive Option shall not be exercisable unless the Fair Market
Value of the Shares on the date of exercise exceeds the Option Price. In
no event shall any amount paid pursuant to the Share Appreciation Right
exceed the difference between the Fair Market Value on the date of exercise
and the Option Price.
ARTICLE VIII
------------
RESTRICTED SHARES
-----------------
8.1 General. The Committee shall have authority to grant Restricted
-------
Shares under the Plan at any time or from time to time. Restricted Shares may
be awarded either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the persons to whom and the time or times at which
grants of Restricted Shares will be awarded, the number of Restricted Shares to
be awarded to any Participant, the time or times within which such Awards may be
subject to forfeiture and any other terms and conditions of the Awards. Each
Award shall be confirmed by, and be subject to the terms of, an Agreement. The
Committee may condition the grant of Restricted Shares upon the attainment of
specified performance goals by the Participant or by the Trust or an Affiliate
(including a division or department of the Trust or an Affiliate) for or within
which the Participant is primarily employed or upon such other factors or
criteria as the Committee shall determine. The provisions of Restricted Share
Awards need not be the same with respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on issuance
-----------------------
of Shares otherwise provided in the Plan, each Participant receiving an Award of
Restricted Shares shall be issued a certificate in respect of such Restricted
Shares. Such certificate shall be registered in the name of such Participant
and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award as determined by the Committee. The
Committee may require that the certificates evidencing such Shares be held in
custody by the Trust until the restrictions thereon shall have lapsed and that,
as a condition of any Award of Restricted Shares, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Shares covered by
such Award.
8.3 Terms and Conditions. Restricted Shares shall be subject to the
--------------------
following terms and conditions:
(a) Limitations on Transferability. The purchase price for Restricted
------------------------------
Shares shall be set by the Committee and may be zero. Subject to the
provisions of the Plan and the Agreement, during a period set by the
Committee, commencing with the date of such Award (the "Restriction
17
<PAGE>
Period"), the Participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber Restricted Shares.
(b) Rights. Except as provided in Section 8.3(a), the Participant
------
shall have, with respect to the Restricted Shares, all of the rights of a
shareholder of the Trust holding the Shares, including the right to vote
the Shares and the right to receive any cash dividends. Unless otherwise
determined by the Committee and subject to the Plan, cash dividends on the
Restricted Shares shall be automatically deferred and reinvested in
additional Restricted Shares, and dividends on the Restricted Shares
payable in Shares shall be paid in the form of the Restricted Shares on
which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant or by
--------
the Trust or the Affiliate, including any division or department for which
the Participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
----------
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Restricted Shares. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all Restricted Shares still subject to restriction shall be
forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's Restricted Shares.
(e) Delivery. If and when the Restriction Period expires without a
--------
prior forfeiture of the Restricted Shares subject to such Restriction
Period, unlegended certificates for such Shares shall be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of the
--------
Restricted Shares for a specified period or until a specified event,
subject in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
ARTICLE IX
----------
DEFERRED SHARES
---------------
9.1 General. The Committee shall have authority to grant Deferred Shares
-------
under the Plan at any time or from time to time. Deferred Shares may be awarded
either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the persons to whom and the time or times at which
Deferred Shares will be awarded, the number of Deferred Shares to be awarded to
any Participant, the duration of the period (the "Deferral Period") prior to
which the Shares will be delivered, and the conditions under which receipt of
the Shares will be deferred and any other terms and conditions of the Awards.
Each Award shall be confirmed by, and be subject to the terms of, an Agreement.
The Committee may condition the grant of Deferred Shares upon the attainment of
specified performance goals
18
<PAGE>
by the Participant or by the Trust or an Affiliate, including a division or
department of the Trust or an Affiliate for or within which the Participant is
primarily employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Shares Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Shares Awards shall be subject to the
--------------------
following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
------------------------------
Plan and the Agreement, Deferred Shares Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral Period.
At the expiration of the Deferral Period (or Elective Deferral Period as
defined in Section 9.2(e), where applicable), the Committee may elect to
deliver Shares, cash equal to the Fair Market Value of such Shares or a
combination of cash and Shares, to the Participant for the Shares covered
by the Deferred Shares Award.
(b) Rights. Unless otherwise determined by the Committee and subject
------
to the Plan, cash dividends on the Deferred Shares shall be automatically
deferred and reinvested in additional Deferred Shares, and dividends on the
Deferred Shares shall be paid in the form of the Deferred Shares on which
such dividend was paid.
(c) Criteria. Based on service, performance by the Participant or by
--------
the Trust or the Affiliate, including any division or department for which
the Participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Award and waive the deferral limitations for all or any
part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
----------
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Deferred Shares. Unless otherwise provided in an Agreement or determined by
the Committee, upon a Participant's Termination of Employment for any
reason during the Deferral Period other than death or Disability, the
rights to the Shares still covered by the Award shall be forfeited by the
Participant, except the Committee shall have the discretion to waive in
whole or in part any or all remaining deferral limitations with respect to
any or all of such Participant's Deferred Shares.
(e) Election. A Participant may elect to further defer receipt of the
--------
Deferred Shares payable under an Award (or an installment of an Award) for
a specified period or until a specified event, subject in each case to the
Committee's approval and to such terms as are determined by the Committee.
Subject to any exceptions adopted by the Committee, such election must be
made at one (1) year prior to completion of the Deferral Period for the
Award.
ARTICLE X
---------
PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THE PLAN
-------------------------------------------------------
10.1 Limited Transfer During Offering. In the event there is an effective
--------------------------------
registration statement under the Securities Act pursuant to which Shares shall
be offered for sale in an underwritten offering, a
19
<PAGE>
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of Shares
received directly or indirectly pursuant to an exercise of an Award.
10.2 Committee Discretion. The Committee may in its sole discretion
--------------------
include in any Agreement an obligation that the Trust purchase a Participant's
Shares received upon the exercise of an Award (including the purchase of any
unexercised Awards which have not expired), or may obligate a Participant to
sell Shares to the Trust upon such terms and conditions as the Committee may
determine and set forth in an Agreement. The provisions of this Article X shall
be construed by the Committee in its sole discretion, and shall be subject to
such other terms and conditions as the Committee may from time to time
determine. Notwithstanding any provision herein to the contrary, the Trust may
upon determination by the Committee assign its right to purchase Shares pursuant
to this Article X, whereupon the assignee of such right shall have all the
rights, duties and obligations of the Trust with respect to purchase of the
Shares.
10.3 No Trust Obligation. None of the Trust, an Affiliate or the Committee
-------------------
shall have any duty or obligation to affirmatively disclose to a record or
beneficial holder of Shares or an Award, and such holder shall have no right to
be advised of any material information regarding the Trust or any Affiliate at
any time prior to, upon or in connection with receipt or the exercise of an
Award or the Trust's purchase of Shares or an Award from such holder in
accordance with the terms hereof.
ARTICLE XI
----------
CHANGE IN CONTROL PROVISIONS
----------------------------
11.1 Impact of Event. Notwithstanding any other provision of this
---------------
Plan to the contrary, in the event of a Change in Control (as defined in Section
11.2), the Committee shall have full discretion, notwithstanding anything herein
or in an Agreement to the contrary, to do any or all of the following with
respect to an outstanding Award:
(a) to provide that the Options and Share Appreciation Rights
outstanding as of the date of the Change in Control which are not then
exercisable shall become fully exercisable to the full extent of the
original grant;
(b) to provide that the restrictions and deferral limitations
applicable to any Restricted Shares, or Deferred Shares shall lapse, and
such Restricted Shares, or Deferred Shares or other Award shall become free
of all restrictions and become fully vested and transferrable to the full
extent of the original grant;
(c) to cause any Award to be cancelled, provided notice of at least 15
days thereof is provided before the date of cancellation;
(d) to provide that the securities of another entity be substituted
hereunder for the Shares and to make equitable adjustment with respect
thereto;
(e) to grant the Participant the right to elect by giving notice
during a set period of time from and after a Change in Control to surrender
all or part of a stock-based Award to the Trust and to receive cash in an
amount equal to the amount by which the "Change in Control
20
<PAGE>
Price" (as defined in Section 11.3) per Share on the date of the election
exceeds the amount the Participant must pay to exercise the Award per Share
(the "Spread") multiplied by the number of Shares granted under the Award;
and
(f) to take any other action the Committee determines to take.
11.2 Definition of Change in Control. For purposes of the Plan, a "Change
-------------------------------
in Control" shall mean the happening of any of the following events:
(a) (i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")
(other than the SAHI Group) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of the then outstanding
Shares (the "Outstanding Trust Shares") or the combined voting power of the
then outstanding voting securities of the Trust entitled to vote generally
in the election of directors (the "Outstanding Trust Voting Securities") or
(ii) the approval by the shareholders of the Trust of a reorganization,
merger, consolidation, complete liquidation or dissolution of the Trust,
the sale or disposition of all or substantially all of the assets of the
Trust or similar corporate transaction (in each case referred to in this
Section 11.2 as a "Trust Transaction") or, if consummation of such Trust
Transaction is subject, at the time of such approval by shareholders, to
the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly); provided such acquisition of
beneficial ownership or such Trust Transaction would result in any Person's
beneficially owning (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of the Outstanding Trust Shares or 30% or more of
the Outstanding Trust Voting Securities; excluding, however, the following:
(i) any acquisition by or consummation of a Trust Transaction with the
Trust or an Affiliate, or by an employee benefit plan (or related trust)
sponsored or maintained by the Trust, (ii) the acquisition by or
consummation of a Trust Transaction with any Person who beneficially owned,
immediately prior to the Effective Date, directly or indirectly, 30% or
more of the Outstanding Shares or Outstanding Trust Voting Securities,
(iii) an acquisition by or consummation of a Trust Transaction with the
SAHI Group, or (iv) any acquisition or Trust Transaction, if more than 70%
of the beneficial ownership of the entity resulting from the acquisition or
Trust Transaction is held by persons who held more than 70% of the
beneficial ownership of the Outstanding Shares or Outstanding Trust Voting
Securities before the acquisition or Trust Transaction; or
(b) A change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for
purposes of this Section 11.2(b), that any individual who becomes a member
of the Board subsequent to the Effective Date and whose election, or
nomination for election by the Trust's shareholders, was approved by a vote
of at least a majority of those individuals who are members of the Board
and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; but, provided, further, that any
such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board shall not be so considered as a member of the
Incumbent Board.
21
<PAGE>
11.3 Change in Control Price. For purposes of the Plan, "Change in Control
-----------------------
Price" means the higher of (a) the highest reported sales price of a Share in
any transaction reported on the principal exchange on which such Shares are
listed or on NNM during the 60-day period prior to and including the date of a
Change in Control or (b) if the Change in Control is the result of a tender or
exchange offer or Transaction, the highest price per Share paid in such tender
or exchange offer or a Transaction, except that, in the case of Incentive
Options and Share Appreciation Rights relating to Incentive Options, such price
shall be based only on the Fair Market Value of the Shares on the date such
Incentive Option or Share Appreciation Right is exercised. To the extent that
the consideration paid in any such transaction described above consists all or
in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Committee.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 Amendments and Termination. The Board may amend, alter or
--------------------------
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
under an Award theretofore granted without the Participant's consent, except
such an amendment (a) made to avoid an expense charge to the Trust or an
Affiliate, (b) made to cause the Plan to qualify for the exemption provided by
Rule 16b-3, or (c) made to permit the Trust or an Affiliate a deduction under
the Code. In addition, no such amendment shall be made without the approval of
the Trust's stockholders to the extent such approval is required by law or
agreement. The Committee may amend, alter or discontinue the terms of any Award
theretofore granted, prospectively or retroactively, on the same conditions and
limitations (and exceptions to limitations) as the Board and further subject to
any approval or limitations the Board may impose.
Notwithstanding anything in the Plan to the contrary, if any right
under this Plan or an Agreement would cause a transaction to be ineligible for
pooling of interest accounting that would, but for the right hereunder, be
eligible for such accounting treatment, the Committee may modify or adjust the
right so that pooling of interest accounting shall be available, including the
substitution of Shares having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.
12.2 Unfunded Status of Plan. It is intended that the Plan be an
-----------------------
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Shares or make payments; provided, however,
that, unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
12.3 General Provisions.
------------------
(a) Representation. The Committee may require each person purchasing
--------------
or receiving Shares pursuant to an Award to represent to and agree with the
Trust in writing that such person is acquiring the Shares without a view to
the distribution thereof. The certificates for such Shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer.
22
<PAGE>
(b) No Additional Obligation. Nothing contained in the Plan shall
------------------------
prevent the Trust or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
-----------
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to
the Trust (or other entity identified by the Committee), or make
arrangements satisfactory to the Trust or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Trust or an Affiliate to obtain a current
deduction. Unless otherwise determined by the Committee, withholding
obligations may be settled with Shares, including Shares that are part of
the Award that gives rise to the withholding requirement, provided that any
applicable requirements under Section 16 of the Exchange Act are satisfied.
The obligations of the Trust under the Plan shall be conditional on such
payment or arrangements, and the Trust and its Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
------------
Deferred or Restricted Shares at the time of any dividend payment shall
only be permissible if sufficient Shares are available for such
reinvestment (taking into account then outstanding Options and other
Awards).
(e) Representation. The Committee shall establish such procedures as
--------------
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(f) Controlling Law. The Plan and all Awards made and actions taken
---------------
thereunder shall be governed by and construed in accordance with the laws
of the State of California (other than its law respecting choice of law).
The Plan shall be construed to comply with all applicable law, and to avoid
liability to the Trust, an Affiliate or a Participant, including, without
limitation, liability under Section 16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Trust or an Affiliate by the
------
Participant of whatever nature may be offset by the Trust from the value of
any Shares, cash or other thing of value under this Plan or an Agreement to
be transferred to the Participant, and no Shares, cash or other thing of
value under this Plan or an Agreement shall be transferred unless and until
all disputes between the Trust and the Participant have been fully and
finally resolved and the Participant has waived all claims to such against
the Trust or an Affiliate.
(h) Fail-Safe. With respect to persons subject to Section 16 of the
---------
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee. Moreover, in the event the Plan
does not include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to
be stated herein, such provision (other than one relating to eligibility
requirements or the price and amount of Awards) shall be deemed to be
incorporated by reference into the Plan with respect to Participants
subject to Section 16.
23
<PAGE>
(i) Right to Capitalize. The grant of an Award shall in no way affect
-------------------
the right of the Trust to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidation,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
12.4 Mitigation of Excise Tax. Subject to any agreement between the
------------------------
Participant and the Trust, if any payment or right accruing to a Participant
under this Plan (without the application of this Section 12.4), either alone or
together with other payments or rights accruing to the Participant from the
Trust or an Affiliate ("Total Payments") would constitute a "parachute payment"
(as defined in Section 280G of the Code and regulations thereunder), such
payment or right shall be reduced to the largest amount or greatest right that
will result in no portion of the amount payable or right accruing under the Plan
being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee
in making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 12.4 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
12.5 Rights with Respect to Continuance of Employment. Nothing contained
------------------------------------------------
herein shall be deemed to alter the relationship between the Trust or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Trust or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Trust or an Affiliate and a
Participant. The Trust or an Affiliate and each of the Participants continue to
have the right to terminate the employment or service relationship at any time
for any reason, except as provided in a written contract. The Trust or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Trust or an Affiliate reserves the same
rights to terminate the Participant's employment or service as existed prior to
the individual becoming a Participant in this Plan.
12.6 Awards in Substitution for Awards Granted by Other Corporations.
---------------------------------------------------------------
Awards may be granted under this Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Awards so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.
12.7 Procedure for Adoption. Any Affiliate of the Trust may by resolution
----------------------
of such Affiliate's board of directors or trustees, as the case may be, with the
consent of the Board of Trustees and subject to such conditions as may be
imposed by the Board of Trustees, adopt the Plan for the benefit of its
employees as of the date specified in the board resolution.
12.8 Procedure for Withdrawal. Any Affiliate which has adopted the Plan
------------------------
may, by resolution of the board of directors or trustees, as the case may be, of
such Affiliate, with the consent of the Board of Trustees and subject to such
conditions as may be imposed by the Board of Trustees, terminate its adoption of
the Plan. If the Participant disposes of Shares acquired pursuant to an
Incentive Option in any
24
<PAGE>
transaction considered to be a disqualifying transaction under the Code, the
Participant must give written notice of such transfer and the Trust shall have
the right to deduct any taxes required by law to be withheld from any amounts
otherwise payable to the Participant.
12.9 Delay. If at the time a Participant incurs a Termination of
-----
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Share Appreciation Right as provided in
the Agreement, whichever is shorter. The Trust shall have the right to suspend
or delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Trust, an Affiliate or a shareholder of the
Trust until such time as the action required or permitted shall not constitute a
violation of law or result in liability to the Trust, an Affiliate or a
shareholder of the Trust. The Committee shall have the discretion to suspend
the application of the provisions of the Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
the Plan.
12.10 Headings. The headings contained in this Plan are for reference
--------
purposes only and shall not affect the meaning or interpretation of this Plan.
12.11 Severability. If any provision of this Plan shall for any reason be
------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
12.12 Successors and Assigns. This Plan shall inure to the benefit of and
----------------------
be binding upon each successor and assign of the Trust. All obligations imposed
upon a Participant, and all rights granted to the Trust hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.
12.13 Entire Agreement. This Plan and the Agreement constitute the entire
----------------
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,693,000
<SECURITIES> 0
<RECEIVABLES> 3,771,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,464,000
<PP&E> 125,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,589,000
<CURRENT-LIABILITIES> 167,000
<BONDS> 0
0
0
<COMMON> 1,653,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,589,000
<SALES> 64,000
<TOTAL-REVENUES> 64,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 560,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (502,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (502,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (502,000)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
