<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Revised Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CATELLUS DEVELOPMENT CORPORATION
(Name of Registrant as Specified in its Charter)
CATELLUS DEVELOPMENT CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125
2) Form, Schedule or Registration Statement No.: Definitive 14A
3) Filing Party: Catellus Development Corporation
4) Date Filed: April 14, 1994
<PAGE> 2
[CATELLUS LETTERHEAD]
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Catellus Development Corporation which will be held at the Bank of America,
Giannini Auditorium, 555 California Street, San Francisco, California on
Thursday, June 23, 1994, at 10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to elect directors, to
amend the Company's Amended and Restated Executive Stock Option Plan and to
approve the issuance of Common Stock upon conversion of the Company's $3.625
Series B Cumulative Convertible Exchangeable Preferred Stock. Information about
these matters is contained in the attached Proxy Statement.
The Company's management would greatly appreciate your attendance at the
Annual Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
IT IS MOST IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly, please sign,
date and return the enclosed proxy card which will indicate your vote upon the
matters to be considered. If you do attend the meeting and desire to vote in
person, you may do so by withdrawing your proxy at that time.
I sincerely hope you will be able to attend the Annual Meeting and look
forward to seeing you on June 23, 1994.
Sincerely,
VERNON B. SCHWARTZ
Chairman, President and Chief
Executive Officer
May 2, 1994
<PAGE> 3
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 23, 1994
------------------------------
The Annual Meeting of Stockholders of Catellus Development Corporation (the
"Company") will be held on Thursday, June 23, 1994, at 10:00 a.m. (local time)
at the Bank of America, Giannini Auditorium, 555 California Street, San
Francisco, California for the following purposes:
(1) To elect eleven directors;
(2) To vote upon a proposal to amend the Company's Amended and Restated
Executive Stock Option Plan (the "Executive Plan");
(3) To vote upon a proposal to approve the issuance of Common Stock upon
conversion of the Company's $3.625 Series B Cumulative Convertible
Exchangeable Preferred Stock; and
(4) To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on April 29, 1994 will
be entitled to notice of, and to vote at, the Annual Meeting or at any
adjournment thereof. Each stockholder, even though he or she may presently
intend to attend the Annual Meeting, is requested to sign and date the enclosed
proxy card and return it without delay in the enclosed postage-paid envelope.
Any stockholder present at the Annual Meeting may withdraw his or her proxy card
and vote in person on each matter properly brought before the Annual Meeting.
Please sign, date and mail the enclosed proxy card promptly in the enclosed
envelope, so that your shares of stock may be represented at the meeting.
By Order of the Board of Directors,
Maureen Sullivan
Secretary
May 2, 1994
San Francisco, California
<PAGE> 4
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
------------------------------
PROXY STATEMENT
------------------------------
GENERAL
This Proxy Statement is furnished to the stockholders of Catellus
Development Corporation (the "Company") in connection with the solicitation of
proxies for use at the Company's Annual Meeting of Stockholders to be held on
Thursday, June 23, 1994 at 10:00 a.m. (local time) and at any adjournment
thereof. The Annual Meeting of Stockholders will be held at the Bank of America,
Giannini Auditorium, 555 California Street, San Francisco, California.
This solicitation is being made on behalf of the Board of Directors of the
Company, whose principal executive offices are located at 201 Mission Street,
San Francisco, California 94105, telephone (415) 974-4500. This Proxy Statement,
proxy card, Notice of Annual Meeting of Stockholders and the Company's 1993
Annual Report were first mailed to stockholders on or about May 2, 1994.
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the specifications made thereon.
Proxies on which no specification has been made by the stockholder will be voted
in favor of the nominees to the Board of Directors listed in this Proxy
Statement and for each of the proposals described herein.
Any shareholder may revoke his or her proxy at any time before it is voted
at the Annual Meeting by giving written notice of such revocation to the
Secretary of the Company at the address indicated above, which notice may be
given by the filing of a duly elected proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
Stockholders of record at the close of business on April 29, 1994 are
entitled to notice of and to vote at the Annual Meeting. On April 29, 1994, the
issued and outstanding voting securities of the Company consisted of 72,967,236
shares of Common Stock, each of which is entitled to one vote on all matters
which may properly come before the Annual Meeting or any adjournment thereof and
may properly be voted upon.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. The election of directors will require the affirmative vote
of a plurality of the shares of Common Stock voting in person or by proxy at the
Annual Meeting. Adoption of the proposals described herein to amend the
Executive Plan (the "Executive Plan Proposal") and to approve issuances of
Common Stock on conversion of the Company's Series B Preferred Stock (the
"Common Stock Proposal") will require the affirmative vote of a majority of the
votes cast for each proposal provided that the total votes cast on each proposal
represents over 50% in interest of all securities entitled to vote on the
matter.
The inspector of elections appointed by the Company will count all votes
cast in person or by proxy at the Annual Meeting. Abstentions will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but as unvoted for purposes of determining the approval of
any matter submitted for a vote of the stockholders. As a result, abstentions
will have the effect of being a vote against the Executive Plan Proposal and the
Common Stock Proposal. If a broker or nominee indicates on its proxy that it
does not have discretionary authority to vote on a particular matter as to
certain shares, those shares will be counted for general quorum purposes but
will not be considered as present and entitled to vote with respect to that
matter.
The Company anticipates that Bay Area Real Estate Investment Associates
L.P. ("BAREIA") and Olympia & York Developments Ltd. ("O&Y"), the Company's
principal stockholders, will vote in favor of the Executive Plan Proposal and
the Common Stock Proposal. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS -- Stockholders Agreement" and "ELECTION OF DIRECTORS -- Arrangements
Regarding Nominees" for additional information concerning BAREIA and certain
agreements relating to voting of shares by BAREIA and certain other entities.
The cost of this proxy solicitation will be borne by the Company. Brokers
and nominees should forward soliciting materials to the beneficial owners of the
stock held of record by such persons. The Company will reimburse such persons
for their reasonable forwarding expenses. In addition to the use of the mails,
proxies may be solicited by directors, officers and regular employees of the
Company, who will not receive additional compensation therefor, by personal
contact or by telephone or other means of communication.
<PAGE> 5
ELECTION OF DIRECTORS
Eleven directors are to be elected to serve until the Company's next Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. The following table presents information regarding each nominee to be
presented by the Board of Directors for election as a director of the Company at
the Annual Meeting. Each nominee has indicated his willingness to serve if
elected, but if any nominee should become unable to serve, the proxies solicited
hereby will be voted for the election of such other person or persons as the
Board of Directors, acting in accordance with the BAREIA Agreement described
below, shall select. The information below concerning each nominee has been
furnished to the Company by such nominee.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED A
NAME OF NOMINEE BUSINESS EXPERIENCE AGE DIRECTOR
- - ------------------------- ---------------------------------------------- ---- ----------
<S> <C> <C> <C>
Joseph F. Alibrandi...... Chairman since 1985, President, from 1970 to 65 1989
1985 and Chief Executive Officer since 1974,
of Whittaker Corporation (a diversified
company with business activities in the
aerospace field); Chairman since October 1991,
and Chief Executive Officer from October 1991
to October 1992, of BioWhittaker, Inc. (a
diversified company with business activities
in the biotechnology field). Also a director
of Whittaker Corporation, BioWhittaker, Inc.,
Jacobs Engineering Group, Santa Fe Pacific
Corporation, Bank of America NT & SA and
BankAmerica Corporation.
Darla Totusek Flanagan... Managing Director of JMB Institutional Realty 36 1989
Advisors, Inc. (a real estate investment
management firm) since 1991. Prior to that,
Senior Vice President of JMB Realty
Corporation from 1987; with JMB Realty
Corporation from May 1983.
Gary M. Goodman.......... Senior Executive of Reichmann International 51 1989
L.P. since October 1993. Prior to that, Senior
Vice President of O&Y from 1981 to April 1993.
Also a director of Trilon Financial
Corporation.
Robert D. Krebs.......... Chairman, President and Chief Executive 51 1989
Officer of Santa Fe Pacific Corporation
("SFP") (a holding company engaged in
transportation and natural resources) since
June 1988; formerly President and Chief
Executive Officer of SFP from July 1987. Prior
to that, President and Chief Operating Officer
of SFP. Also a director of SFP, Phelps Dodge
Corporation, Northern Trust Corporation, Santa
Fe Energy Resources, Inc., The Atchison,
Topeka and Santa Fe Railway Company ("ATSF")
and Santa Fe Pacific Pipelines, Inc.; Chairman
and Chief Executive Officer of ATSF since June
1989; President of ATSF since June 1991.
Judd D. Malkin........... Chairman of JMB Realty Corporation (a real 56 1990
estate manager and owner) since 1971. Also a
director of Urban Shopping Centers, Inc.
Vernon B. Schwartz(1).... Chairman, President and Chief Executive 43 1989
Officer and a Director of the Company since
December 1989. Prior to that, Executive Vice
President and Chief Operating Officer of The
Hahn Company (a commercial real estate
developer).
Joseph R. Seiger......... Since 1973, Founding Partner, Vintage 51 1993
Properties (a residential and commercial real
estate developer).
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED A
NAME OF NOMINEE BUSINESS EXPERIENCE AGE DIRECTOR
- - ------------------------- ---------------------------------------------- ---- ----------
<S> <C> <C> <C>
Jacqueline R. Slater..... Managing Director, Restructuring, Structured 41 1993
Finance and Securitization, Chemical Bank Real
Estate Finance. Senior Vice President of
Chemical Bank since 1983.
Thomas M. Steinberg...... Since September 1991, has managed and 37 (2)
supervised various investments for members of
the Laurence A. Tisch and Preston R. Tisch
Families. From June 1989 to August 1991, acted
as a real estate investor.
Tom C. Stickel........... Founder/Chairman of American Partners, Inc. (a 45 1993
corporation specializing in domestic steel
distribution and United States/Mexico business
development) since 1992. Prior to that,
Chairman and Chief Executive Officer of TCS
Enterprises (a financial holding company).
John E. Zuccotti......... President and Chief Executive Officer of 56 1989
Olympia & York Companies (USA), an affiliate
of O&Y, since January 1990. From January 1986
to December 1989, Mr. Zuccotti was a partner
in the law firm of Brown & Wood; counsel to
that firm from January 1990 to January 1994.
Also a director of Dreyfus California Tax
Exempt Money Market Fund, Inc., Dreyfus
Capital Value Fund, Inc., Dreyfus Insured
Municipal Bond Fund, Inc., Dreyfus Municipal
Money Market Fund, Inc., Dreyfus New Leaders
Fund, Inc., Dreyfus Strategic Municipal Bond
Fund, Inc., Dreyfus Strategic Municipals,
Inc., Dreyfus Municipal Bond Fund, Inc., and
Diversicare, Inc.
</TABLE>
- - ------------------
(1) Pursuant to the Agreement with Mr. Schwartz described under "COMPENSATION
AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION" below, Mr. Schwartz
has agreed to resign from the Board of Directors on June 30, 1994.
(2) First year up for election to the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES LISTED ABOVE.
ARRANGEMENTS REGARDING NOMINEES
BAREIA and the Company are parties to an agreement dated as of January 14,
1993 (as amended February 4, 1993, the "BAREIA Agreement") pursuant to which
BAREIA converted the Company's 13.5% Convertible Debenture due 1994 (the
"Debenture") into 18,989,899 shares of Common Stock and as a result of which
BAREIA now owns approximately 41.1% of the outstanding Common Stock.
Concurrently with the conversion, BAREIA purchased, in a private placement,
1,405,702 shares (approximately 40.7%) of the $3.75 Series A Cumulative
Convertible Preferred Stock ("Series A Preferred Stock") sold by the Company.
The balance of the Series A Preferred Stock was sold in a public offering. The
conversion and concurrent Series A Preferred Stock issuance were effected in
February 1993.
Until February 2003 (provided that the Company is publicly held and that
BAREIA owns at least 5% of the outstanding Common Stock), the BAREIA Agreement
requires BAREIA to vote its Common Stock so that the proportion of affiliates of
BAREIA serving as members of the Board (including nominees to the Board
designated by BAREIA and proposed by the Nominating Committee) is approximately
proportionate to BAREIA's percentage Common Stock ownership. However, if BAREIA
owns 50% or more of the outstanding Common Stock, its nominees may include
one-half of the total number of directors plus one; if that percentage is less
than 10% but at least 5%, BAREIA will be entitled to designate at least one
director. During this ten-year period, BAREIA will vote its Common Stock to
elect to the Board at least two individuals who are not employees of the Company
and are selected by the Nominating Committee of the
3
<PAGE> 7
Board, as well as the Chief Executive Officer of the Company. The nominees for
election of directors at the Annual Meeting include Ms. Flanagan, Mr. Malkin,
Mr. Seiger, Ms. Slater and Mr. Stickel as nominees of BAREIA.
The proportion of BAREIA nominees on the Nominating Committee may not
exceed BAREIA's percentage Common Stock ownership, except that one-half of the
Nominating Committee will consist of BAREIA nominees designated by BAREIA so
long as BAREIA retains at least 35% of the outstanding Common Stock (and has not
transferred beneficial ownership of any shares owned by it on February 11, 1993
(giving effect to the conversion of the Debenture and BAREIA's concurrent Series
A Preferred Stock purchase)).
The BAREIA Agreement also provides that, as long as BAREIA owns at least
10% of the outstanding Common Stock, it will have the right to purchase a
portion of any private equity offering of the Company equal to its then
percentage Common Stock ownership.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual fee of
$15,000, a fee of $1,250 for each meeting of the Board of Directors (the
"Board") attended (not including actions taken by written consent or, generally,
special meetings held by telephone conference call), and an annual fee of $1,000
for each Committee of which the director is a member. Directors are also
reimbursed for their out-of-pocket expenses for each Board or Committee meeting
attended.
Pursuant to the Executive Plan, each non-employee director receives an
option to purchase 5,000 shares of Common Stock upon his or her initial
appointment or election to the Board. Each option is exercisable in installments
on a cumulative basis at a rate of 20% each year beginning on the first
anniversary of the date of grant at an exercise price of 127.63% of the fair
market value of the Common Stock on the grant date, increasing 5% on each
anniversary of the date of grant commencing on the sixth anniversary of the
grant date, and may be exercised until the tenth anniversary of the date of
grant. See "EXECUTIVE PLAN AND EXECUTIVE PLAN PROPOSAL."
BOARD OF DIRECTORS MEETINGS
The Board held ten meetings during the Company's last full fiscal year. In
1993, each director attended at least 75% of the aggregate number of meetings of
the Board and of each Committee of which such director was a member, except that
Mr. Krebs attended 68% of such meetings and Mr. Zell (who resigned from the
Board of Directors effective November 16, 1993) attended 36% of such meetings.
BOARD COMMITTEES
The Board of Directors has established a Policy Committee, an Audit
Committee, a Compensation and Benefits Committee, a Finance Committee and a
Nominating Committee. No member of these Committees, other than the Finance
Committee, may be an employee of the Company.
The Policy Committee is composed of Ms. Slater and Messrs. Krebs, Malkin
and Neal. The function of the Policy Committee is to discuss major issues
confronting the Company and to search for a new Chief Executive Officer for the
Company. The Policy Committee was formed in February 1994 and is chaired by Mr.
Malkin.
The Audit Committee is composed of Ms. Flanagan and Messrs. Goodman, Krebs
and Stickel. The functions of the Audit Committee are to recommend to the Board
the independent public accountants to be engaged by the Company, and to review
the Company's general policies and procedures with respect to audits and
accounting and financial controls, the scope and results of the auditing
engagement, and the extent to which the Company has implemented changes
suggested by the internal audit staff and the independent public accountants. No
member of the Audit Committee is an employee of the Company. The Audit Committee
met four times in 1993. The Audit Committee is chaired by Mr. Goodman.
4
<PAGE> 8
The Compensation and Benefits Committee is composed of Messrs. Alibrandi,
Malkin, Seiger and Zuccotti. The functions of the Compensation and Benefits
Committee are to make recommendations to the Board with respect to compensation
of officers of the Company who are also members of the Board (the Board has the
sole power to set compensation levels for such officers), to exercise general
review authority over compensation levels of all other corporate officers and
key management personnel, to review, approve and recommend to the Board the
terms and conditions of proposed incentive bonus plans applicable to such
persons, to review annually compensation practices and salary administration
procedures and generally to review and approve changes in existing employee
benefit programs and adopt new programs. No member of the Compensation and
Benefits Committee is an employee of the Company. The Compensation and Benefits
Committee met four times in 1993. The Compensation and Benefits Committee is
chaired by Mr. Zuccotti.
The Finance Committee is composed of Ms. Slater and Messrs. Goodman, Neal,
Krebs and Schwartz. The function of the Finance Committee is to review financing
arrangements and related matters that must be considered between regularly
scheduled Board meetings. The Finance Committee met three times in 1993.
Currently, there is no chair of the Finance Committee.
The Nominating Committee is composed of Ms. Flanagan and Messrs. Alibrandi,
Goodman, Krebs, Malkin and Stickel. The function of the Nominating Committee is
to nominate persons for election to the Board. The Nominating Committee will
consider nominees recommended by other stockholders but has not established any
procedure therefor. The Nominating Committee met twice in 1993. Ms. Flanagan and
Messrs. Malkin and Stickel are designees of BAREIA to the Nominating Committee.
See "ELECTION OF DIRECTORS -- Arrangements Regarding Nominees". The Nominating
Committee is chaired by Mr. Krebs.
5
<PAGE> 9
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth, as of March 1, 1994, the number of
outstanding shares of Common Stock of the Company beneficially owned by each
director of the Company, by the named executive officers and by all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the persons indicated below have sole voting power and investment power with
respect to the Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
STOCK
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
------------------------------------------------------ --------- --------
<S> <C> <C>
Directors
Joseph F. Alibrandi................................... 2,384(1) (2)
Darla Totusek Flanagan................................ 2,000(1) (2)
Gary M. Goodman....................................... 2,000(1) (2)
Robert D. Krebs....................................... 33,664(1) (2)
Judd D. Malkin........................................ 37,759,342(1)(3) 46.8%
Vernon B. Schwartz.................................... 338,587(5) (2)
Joseph R. Seiger...................................... 1,000(4) (2)
Jacqueline R. Slater.................................. 1,000(4) (2)
Thomas M. Steinberg................................... 0 (2)
Tom C. Stickel........................................ 1,000(4) (2)
John E. Zuccotti...................................... 2,000(1) (2)
Named Executive Officers
Thomas W. Gille....................................... 0(6) (2)
Jeffrey K. Gwin....................................... 63,715(7) (2)
James G. O'Gara....................................... 4,461(8) (2)
David A. Smith (9).................................... 64,721(10) (2)
All directors and executive officers as a group (25
persons)............................................ 38,335,856 47.0%
(1)(3)(4)(5)(11)
</TABLE>
- - ------------------
(1) Includes 2,000 shares of Common Stock (12,000 shares in the aggregate)
which may be acquired upon the exercise of options granted to non-employee
directors in February 1992 pursuant to the Executive Plan.
(2) Except as otherwise described in these notes, each person has beneficial
ownership of less than 1% of the outstanding Common Stock. Beneficial
ownership and percent ownership are calculated in accordance with rules
promulgated by the Securities and Exchange Commission.
(3) Includes 29,999,605 shares of Common Stock and 7,757,737 shares of Common
Stock issuable upon conversion of the Series A Preferred Stock, owned
beneficially by BAREIA, as to which Mr. Malkin disclaims beneficial
ownership. Mr. Malkin might be considered a controlling person of an
affiliate of the general partner of BAREIA. See "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS" at Note 2.
(4) Includes 1,000 shares of Common Stock (4,000 shares in the aggregate) which
may be acquired upon the exercise of options granted to newly elected
non-employee directors in February 1993 pursuant to the Executive Plan.
(5) Includes 183,572 shares of Common Stock which may be acquired upon the
exercise of an option granted pursuant to the Company's Incentive Stock
Compensation Plan and 150,000 shares of Common Stock which may be acquired
upon the exercise of an option granted pursuant to the Executive Plan. Does
not include 268,000 shares of Common Stock which may be acquired upon the
exercise of an option granted pursuant to the Executive Plan. See Note 11
below for the terms of such option.
6
<PAGE> 10
(6) Does not include 50,000 shares of Common Stock which may be acquired upon
the exercise of an option granted pursuant to the Executive Plan. See Note
11 for the terms of such option.
(7) Includes 291 shares and 58,743 shares of Common Stock which may be acquired
upon the exercise of options granted pursuant to the Company's Incentive
Stock Compensation Plan. Does not include 90,000 shares of Common Stock
which may be acquired upon the exercise of an option granted pursuant to
the Executive Plan. See Note 11 for the terms of such option.
(8) Includes 265 shares and 4,196 shares of Common Stock which may be acquired
upon exercise of options granted pursuant to the Company's Incentive Stock
Compensation Plan. Does not include 90,000 shares of Common Stock which may
be acquired upon the exercise of an option granted pursuant to the
Executive Plan. See Note 11 for the terms of such option.
(9) Mr. Smith resigned from the Company on April 22, 1994.
(10) Includes (i) 5,078 shares of Common Stock which are beneficially held by
Mr. Smith in the Company's Profit Sharing & Savings Plan and Trust and (ii)
173 shares and 54,547 shares of Common Stock which may be acquired upon the
exercise of options granted pursuant to the Company's Incentive Stock
Compensation Plan. Does not include 50,000 shares of Common Stock which may
be acquired upon the exercise of an option granted pursuant to the
Executive Plan. See Note 11 for the terms of such option.
(11) Includes (i) 10,265 shares of Common Stock which are beneficially held by
executive officers in the Company's Profit Sharing & Savings Plan and
Trust, (ii) 352,256 shares which may be acquired by executive officers upon
the exercise of options granted pursuant to the Company's Incentive Stock
Compensation Plan and (iii) 2,000 shares which may be acquired by an
executive officer upon the exercise of options granted pursuant to the
Company's Stock Option Plan. Does not include 821,000 shares of Common
Stock which may be acquired upon the exercise of options granted to
employees pursuant to the Executive Plan; the options are exercisable in
full on February 27, 1997 at an exercise price of $13.78 per share,
increasing by 5% on each anniversary of the date of grant commencing
February 1998, and may be exercised until February 27, 2002.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following are the only persons known to the Company to be beneficial
owners of more than five percent of the Common Stock. Except as indicated below,
all information presented is as of April 1, 1994.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED(1) OF CLASS(1)
------------------------------------------------------- --------- -----------
<S> <C> <C>
Bay Area Real Estate Investment Associates L.P......... 37,757,342(2) 46.8%(2)
Mr. Judd D. Malkin
Mr. Neil G. Bluhm
c/o JMB Realty Corporation...........................
100 Bush Street
San Francisco, CA 94101
Olympia & York Developments Ltd........................ 4,100,000(3)(4) 5.6%
Suite 2900
2 First Canadian Place
Toronto, Ontario
M5X 1B5 Canada
</TABLE>
- - ------------------
(1) BAREIA's percent ownership gives effect to conversion only of the Series A
Preferred Stock held by BAREIA. The named stockholders are parties to a
Stockholders Agreement and have certain purchase rights if another party
proposes to sell any Common Stock. See "-- Stockholders Agreement" below.
(2) Includes 7,757,737 shares of Common Stock issuable to BAREIA upon conversion
of the Series A Preferred Stock held by it. The Series A Preferred Stock is
convertible at any time at a conversion price of $9.06 per share of Common
Stock.
JMB/Bay Area Partners, an Illinois general partnership, is the sole general
partner, and the California Public Employees' Retirement System, a unit of
an agency of the State of California ("CalPERS"), is the sole limited
partner, with a 99.8% interest, of BAREIA. Messrs. Malkin and Bluhm are the
Chairman
7
<PAGE> 11
and President, respectively, of the managing partner of JMB/Bay Area
Partners. Messrs. Malkin and Bluhm might be considered to be controlling
persons of JMB Realty Corporation, an affiliate of JMB/Bay Area Partners and
its managing general partner.
(3) O&Y has claimed sole voting and investment power with respect to the shares
of Common Stock shown as beneficially owned by it.
(4) O&Y is an indirect subsidiary of OYDL. All of the voting shares of OYDL are
beneficially owned, directly or indirectly, by members of the Reichmann
family. As a result of liquidity problems experienced by OYDL and its
affiliates, on May 14, 1992, OYDL, together with four of its affiliates
organized under the laws of Canada and several of its provinces (including
O&Y), filed voluntary petitions for protection under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court of the Southern
District of New York (Chapter 11 Case No. 92 B 42698 (JLG)), and on the same
date, OYDL and certain of its affiliates and related companies organized
under the laws of Canada and several of its provinces (including O&Y) filed
applications in the Ontario Court of Justice (General Division) (Court File
No. B125/92), which applications were granted, for authorization to file a
plan of compromise and arrangement under the Canadian Companies' Creditors
Arrangement Act, the restructuring provisions under Canadian law.
O&Y has advised the Company that the Common Stock owned by it is pledged to
secure the stockholder's obligations or those of its affiliates. O&Y has
further advised the Company that each pledgee of the Common Stock owned by
O&Y may (i) require the pledgor to use its best efforts to sell such pledged
shares or (ii) exercise any remedies which it has in respect of its pledge
of such shares, if (a) the market value of such shares is equal to or less
than the minimum price per share set out in the program for the disposition
of such shares prepared by O&Y, (b) the market value of such shares is equal
to or greater than the target price for such shares set out in such program
or (c) such pledgee provides to O&Y 30 days' prior written notice of its
intention to sell such shares.
STOCKHOLDERS AGREEMENT
The Company, BAREIA and O&Y are parties to a Stockholders Agreement
pursuant to which each party has agreed to certain restrictions on transfer of
its Common Stock. When a stockholder's ownership falls below 5% of the issued
and outstanding Common Stock, it ceases to be a party to the Stockholders
Agreement.
Subject to the exceptions referred to in the next paragraph, if a party
proposes to sell any of its Common Stock, such party must first offer such
securities to the other party, stating a proposed price and terms. The other
party may elect, within 30 days thereafter, to purchase its pro rata portion of
the securities so offered. If the original notice does not contain the price or
other terms of a proposed sale, it is to be treated as an "intent notice." If a
subsequent notice specifying price is given within 60 days after receipt of
notice from a party of an intention to purchase, the election purchase period is
reduced to 36 hours. In either case, if no party exercises its right to purchase
the securities or if not all of the offered securities are subscribed for, the
offering party is then free to sell such securities to a third party at the same
price and on the same terms for a period of 120 days.
The above described right of first refusal does not apply to certain
corporate transactions, such as mergers, spin-offs or other reorganizations
involving shares of Common Stock held by one of the stockholders, or to sales of
Common Stock by a party in unsolicited "brokers' transactions," as defined in
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), at
a price equal to the price generally prevailing in the market, provided that the
number of shares of Common Stock sold by a party during any three-month period
does not exceed the greater of 2% of the then outstanding Common Stock and the
trading volume limitations set forth in Rule 144(e)(1) or successor provisions.
In addition, any pledgee of Common Stock pursuant to a bona fide credit
arrangement and subsequent transferees of such pledgee will not be bound by the
Stockholders Agreement.
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<PAGE> 12
REGISTRATION RIGHTS AGREEMENT
The Company, BAREIA and O&Y are parties to a Registration Rights Agreement
(as amended, the "Registration Rights Agreement"). The Registration Rights
Agreement generally permits any person (a "Holder") owning Registrable
Securities (as defined below) to require the Company to file a registration
statement under the Securities Act, at the Company's expense, covering not less
than 20% of the Registrable Securities of such Holder (or a lesser percentage if
the aggregate offering price after subtraction of underwriting discounts and
commissions would exceed $40 million).
Each Holder may demand two such registrations (four in the case of BAREIA),
and may participate in registrations requested by any other Holder, subject to
certain volume limitations. In addition, if at any time the Company proposes to
register any Common Stock or other Company securities under the Securities Act
in connection with a public offering of such securities solely for cash, each
Holder has the right to request that any of its Registrable Securities be
included in such registration statement, subject to certain volume limitations.
The term "Registrable Securities" includes shares of Common Stock issued to
BAREIA in December 1989 and shares of Common Stock issued to O&Y in 1990 in
connection with the distribution by SFP to its stockholders of the Common Stock
held by SFP (the "Distribution"). The term also includes the Common Stock issued
upon conversion of the Debenture formerly held by BAREIA, any Common Stock
issued as a dividend or other distribution in connection with the foregoing
holdings of Common Stock, and any equity securities purchased by BAREIA pursuant
to the BAREIA Agreement (including the Series A Preferred Stock (and Common
Stock issued upon conversion thereof), but excluding shares of any class of
capital stock purchased pursuant to a private placement (or acquired upon
conversion) if that class of stock is not publicly traded at the time
registration is requested). Shares of Common Stock cease to be classified as
Registrable Securities once such shares have been registered under the
Securities Act, distributed pursuant to Rule 144 or otherwise transferred
without restriction upon subsequent transfer, or if such shares cease to be
outstanding.
COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
The Compensation and Benefits Committee of the Board of Directors (the
"Committee") is responsible for administering the Company's executive
compensation program. The Committee is composed of the independent non-employee
directors whose names appear at the end of this report.
The Committee has general review authority over compensation levels of all
corporate officers and key management personnel, administers employee benefit
and incentive compensation programs, and considers and recommends new benefit
programs to the Board. In addition, the Committee is responsible for reviewing
and recommending to the Board the compensation of Mr. Schwartz, who is the only
Company officer who is also a member of the Board; the Board has the sole
authority to set Mr. Schwartz' compensation. In reviewing the individual
performance of the executives whose compensation is detailed in this Proxy
Statement (other than Mr. Schwartz), the Committee takes into account the
observations and evaluations of Mr. Schwartz.
Pursuant to recently adopted rules designed to enhance disclosure of
companies' policies towards executive compensation, set forth below is a report
of the Committee addressing the Company's compensation policies for 1993 as they
affected Mr. Schwartz, the Company's Chief Executive Officer, and Messrs. Gille,
Gwin, O'Gara and Smith, the four executive officers (together with Mr. Schwartz,
the "Named Executives") other than Mr. Schwartz who, for 1993, were the
Company's most highly paid executives.
- - ---------------
* The Compensation and Benefits Report shall not be deemed "filed with the
Securities and Exchange Commission and is not incorporated by reference into any
filings of the Company pursuant to the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended.
9
<PAGE> 13
OVERALL POLICY
The key elements of the Company's executive compensation program consist of
base salary, annual bonus and long-term incentive opportunities. The program is
intended to enable the Company to attract, motivate and retain senior management
by providing a fully competitive total compensation package based on both
individual and corporate performance, taking into account both annual and
long-term performance goals, and recognizing individual initiative and
achievements. It includes what the Committee believes are competitive base
salaries which reflect individual performance; annual variable performance
incentive opportunities payable in cash; and programs contingent on the
Company's long-term performance. The Committee endorses the position that stock
ownership by management and stock-based performance compensation arrangements
aid in aligning management's and stockholders' interests in the enhancement of
stockholder value. Accordingly, these elements play an important role in the
total compensation packages for the Company's executive officers.
The compensation policy of the Company is that a substantial portion of the
annual compensation of each officer relates to and must be contingent upon the
performance of the Company, as well as the individual contribution by each
officer. As a result, much of an executive officers' annual compensation,
amounting to approximately 36% (56% in the case of Mr. Schwartz) of total cash
compensation if target bonus awards are paid in full, is variable and is based
on corporate and individual performance.
ANNUAL COMPENSATION PROGRAM
Annual total cash compensation for senior management consists of base
salary and awards under the Company's Annual Performance Bonus Program (the
"Performance Bonus Program").
Base salaries for new executive officers are determined initially by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executives,
including a comparison to base salaries for comparable positions at other
companies.
Annual salary adjustments are determined by evaluating the performance of
the Company and of each executive officer, and also take into account changing
responsibilities. Where appropriate, the Committee considers non-financial
performance measures, including such elements as the productivity of the
relevant working group or business unit, and contribution to corporate goals
regarding employee morale and team-building, efficient use of corporate
resources, promotion of favorable public opinion of the Company and its
corporate image, employee retention and leadership development, and successful
tenant and vendor relations.
The Company's senior management is eligible for annual cash bonuses under
the Performance Bonus Program. This Program provides for the establishment of
various annual performance goals which, if achieved, result in the payment of
additional cash compensation to participants for that year. The program is
intended to communicate and focus management attention on key business goals and
to identify and reward superior performance. Key executives and managers who
have substantial responsibility for the Company's performance are selected to
participate in the Performance Bonus Program with the approval of the Committee.
Goals under the program for 1993 generally included corporate performance
objectives (for 20% of the bonus) and individual performance objectives (for 80%
of the bonus). The amount of a participant's bonus compensation depends upon the
degree of achievement for each identified goal, with the maximum possible award
being an amount between 10% and 125% of the participant's regular salary,
depending upon the employee's position. Individual goals are established
annually by senior management and approved by the Chief Executive Officer. The
Named Executives and the executive officers as a group, excluding Mr. Schwartz,
realized on average 43% and 41%, respectively, of their individual performance
goals for 1993.
The Company's corporate goals are recommended each year by the Chief
Executive Officer and established by the Committee. The corporate performance
measure for 1993 was based on the Company's cash flow. The Committee determined
that, for 1993, 50% of the corporate performance bonus would be payable to
participants if the targeted cash flow was met, and 100% of the bonus would be
payable if the Company achieved 120% of the targeted level. For 1993, the
corporate performance goal was exceeded and each executive officer received the
full 20% share of his or her bonus attributable to corporate performance.
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<PAGE> 14
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for senior management consists of two types
of awards under the Amended and Restated Long-Term Incentive Compensation Plan
("LICP"), described under "EXECUTIVE PLAN AND EXECUTIVE PLAN
PROPOSAL -- Terminated Benefit Plan" below, and options granted under the
Executive Plan. All of the senior executive officers participate in these
long-term plans. The primary purpose of these plans is to offer an incentive for
long term performance of the Company over a five-year period.
The LICP provides a bonus based on the compound annual growth of the
Company's stockholders' equity (on a current value basis) for the five-year
period from January 1, 1992 through December 31, 1996. No awards are payable to
senior executive officers unless the annual compound growth in current value
stockholders' equity over the period exceeds 5%.
The Executive Plan (discussed in greater detail below) was intended to
complement the amended LICP, and to create a long term incentive to create
growth in stockholder value. The exercise price for all options granted to
senior executives in 1992 was the fair market value on the date of the grant,
increasing 5% on each anniversary of the grant date. Except under limited
circumstances in the event of termination of employment, these options do not
vest until the fifth anniversary of the grant date. These "premium priced"
options will have no realizable value to the optionees unless the market price
of the Common Stock increases more than 5% a year, compounded annually, over the
five-year period. The Company engaged an independent compensation consultant in
1993 to assist the Committee in evaluating its executive compensation program
and, in particular, to consider its long-term incentive compensation. The
consultant conducted a private survey of selected real estate companies to
supplement available public information on annual and long-term incentive
practices in the real estate industry.* Based upon the consultant's
recommendations and analysis by the Committee of the information provided by the
consultant, the Committee has adopted a management pay strategy effective for
1994 that targets total compensation at the top quartile (75th percentile) of
the market through a combination of below market (40th percentile) salaries,
continuation of the existing above average bonus opportunity, and an aggressive
long-term incentive program keyed to increases in stockholder value.
Implementation of this strategy will mean salary increases over two to three
years for those officers currently below target salary levels, a freeze of
salaries for those above the described target, and the introduction of a new
long-term incentive program designed to fill the "gap" between the top quartile
total compensation and target annual cash pay. The Committee concluded that the
new options under the Executive Plan described under "EXECUTIVE PLAN AND
EXECUTIVE PLAN PROPOSAL", coupled with the termination of the LICP, will more
closely align management's long-term incentive compensation with increased
stockholder value, as reflected in stock performance. The Committee concluded
that the vesting of the options based on increased Common Stock price, together
with the "front loading" of the options to senior executives (the grant of a
higher number of stock options with a longer vesting period, unless common stock
target prices are met, than a normal grant), would better align management's
interests with stockholder focus and the long-term horizons of a real estate
company.
Mr. Schwartz received a grant under the Executive Plan in March 1993 as
part of his bonus compensation for 1992. See "Agreement with Mr. Schwartz,"
below. Except for that grant, neither Mr. Schwartz nor any of the other Named
Executives received 1993 grants under the LICP or the Executive Plan. The
January 1994 grants under the Executive Plan, which are subject to stockholder
approval of the Executive Plan Proposal, are part of the Named Executives'
compensation arrangements for 1994.
AGREEMENT WITH MR. SCHWARTZ
Mr. Schwartz has agreed to resign from the Company effective June 30, 1994.
Pursuant to an agreement between the Company and Mr. Schwartz dated February 22,
1994, Mr. Schwartz has agreed to remain in the employ of the Company until June
30, 1994, and to serve as chief executive officer until that date, or such
- - ---------------
* Although some of the companies surveyed by the consultant overlap with
those used in the peer group described below, the consultant surveyed those
companies, based on such criteria as asset and sales size, which it determined
were an appropriate comparison for compensation purposes while the companies
used in the peer group are a more appropriate comparison for performance
purposes.
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<PAGE> 15
earlier date as the Board of Directors may designate. Mr. Schwartz received
$320,625 as his bonus under the Performance Bonus Program for 1993, representing
57% of his maximum bonus potential. This is approximately the same percentage as
that received by all employees as a group and reflects, in particular, the
Board's satisfaction with the capital restructuring accomplished in 1993 and the
improved results of the Company's industrial portfolio. Mr. Schwartz will be
paid $225,000 through June 30, 1994, and will be paid $654,375 upon termination
of his employment. Pursuant to the agreement, the Company accelerated the
vesting of the stock option granted to Mr. Schwartz in March, 1993 to purchase
150,000 shares of Common Stock at $7.425 per share and the option became
exercisable at any time through September 30, 1994. At the request of the
Committee, the Policy Committee negotiated Mr. Schwartz' severance compensation.
The Policy Committee recommended its final approval to the Board on the basis of
Mr. Schwartz' agreement to assist the Company in effecting an orderly management
transition, the decision that Mr. Schwartz would not be eligible to participate
in the Performance Bonus Program or to receive any long-term incentive
compensation potential for his services to the Company in 1994, and the fact
that the 1993 option grant to Mr. Schwartz was a part of his 1992 bonus
compensation.
EXECUTIVE PLAN
Recently enacted Section 162(m) of the Internal Revenue Code of 1986 as
amended (the "Code") limits the deductibility for federal income tax purposes of
certain compensation paid to "covered employees," which term includes the chief
executive officer and the four other most highly compensated officers of the
Company, as of the end of a performance year. The Company intends to take the
necessary steps to conform its compensation to comply with the limitations or,
if this is not feasible in any given circumstance, to mitigate the negative
impact of this Code provision on stockholders. For this reason, a proposed
amendment to the Executive Plan, included in the Executive Plan Proposal,
restricts the grants to any participant by setting a limit on the maximum number
of shares subject to grants that can be granted in a three-year period. If the
Executive Plan Proposal is approved by stockholders, the Executive Plan will
constitute a stockholder-approved performance-based plan for purposes of Code
Section 162(m).
Joseph F. Alibrandi Judd D. Malkin
Joseph R. Seiger John E. Zuccotti
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<PAGE> 16
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the fiscal years ended December
31, 1993, December 31, 1992 and December 31, 1991 to the Named Executives
indicated below.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------------------------------
--------------------------------------------- RESTRICTED SECURITIES
OTHER STOCK UNDERLYING
ANNUAL AWARDS OPTIONS/ ALL OTHER
YEAR SALARY $ BONUS($)(1) COMPENSATION($) ($)(2)(3) SARS(#)(2)(4) COMPENSATION($)(5)
---- -------- ----------- --------------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Vernon B. Schwartz......... 1993 450,000 320,625 -- -- -- 9,226
Chairman of the Board, 1992 450,000 408,500 -- -- 418,000(6) 8,952
Chief Executive Officer 1991 450,000 408,500 -- -- 183,572 8,693
and President
David A. Smith............. 1993 160,000 81,600 -- -- -- 7,709
Senior Vice President 1992 160,000 80,000 -- -- 50,000 7,575
and Chief Financial 1991 159,583 80,000 -- 25,362 54,720 7,441
Officer
James G. O'Gara............ 1993 150,000 54,000 -- -- -- 7,509
Senior Vice President 1992 150,000 80,700 -- -- 90,000 7,375
150,000 93,000 -- -- 4,461 7,249
1991
Thomas W. Gille............ 1993 150,000 81,000 -- -- -- 7,509
Vice President 1992 150,000 58,125 -- -- 50,000 7,375
Asset Management 1991 150,000 49,500 -- -- -- 7,249
Jeffrey K. Gwin............ 1993 150,000 22,500 -- -- -- 7,509
Vice President 1992 150,000 31,500 -- -- 90,000 7,375
Development 1991 150,000 61,875 -- 29,311 59,034 7,249
</TABLE>
- - ------------------
(1) Bonus amount for any year represents the amount earned for that fiscal year
pursuant to the Performance Bonus Program. This amount is paid in the
following fiscal year, and is excluded from the year of payment.
(2) 1991 awards represent restricted stock awards and options granted on March
5, 1991 under the Company's Incentive Stock Compensation Plan. These awards
were granted to provide substitute awards to employees who had awards under
the Santa Fe Pacific Incentive Stock Compensation Plan which lapsed as a
result of the Distribution of the Company's Common Stock to SFP Stockholders
in December 1990.
(3) The restricted share awards of 1,705 shares and 1,836 shares held by Mr.
Smith and Mr. Gwin, respectively, vested on March 5, 1992. There were no
restricted stock holdings at December 31, 1993. The amount reported in the
table represents the market value of the shares at the date of grant,
without giving effect to the diminution of value attributable to the
restrictions on such stock. No dividends were paid on the Common Stock
during the period referred to in this table.
(4) 1991 stock option awards vested on March 5, 1992, except for Mr. Schwartz'
which vested on May 1, 1992.
(5) Represents the amount of the Company's contributions for the year pursuant
to the Profit Sharing & Savings Plan and Trust.
(6) Includes a bonus stock option award granted on March 17, 1993 to purchase
150,000 shares of Common Stock under the Executive Plan.
Pursuant to an agreement with the Company dated February 22, 1994, Mr.
Schwartz received $320,625 as his bonus for 1993, will receive a salary of
$225,000 for the period through June 30, 1994 and will be paid $654,375 upon
termination of his employment. See "COMPENSATION AND BENEFITS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION -- Agreement with Mr. Schwartz."
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<PAGE> 17
EXECUTIVE PLAN AND EXECUTIVE PLAN PROPOSAL
BACKGROUND
The Executive Plan is intended to provide an incentive program that is
competitive in the real estate industry and that will reward and help retain
senior management whose performance will contribute to the long-term success and
growth of the Company. The Executive Plan is also intended to further the
convergence of interests of senior management and the directors of the Company
with those of the stockholders. A total of 15 members of senior management and
ten nonemployee directors of the Company are currently participants in the
Executive Plan.
Senior management and directors of the Company are eligible to participate
in the Executive Plan. The Executive Plan is administered by the Compensation
and Benefits Committee of the Board (or any other committee appointed by the
Board (the "Committee")), each member of which shall be a "disinterested person"
within the meaning of SEC Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended.
The Executive Plan was adopted by the Board of Directors of the Company and
was approved by the holders of a majority of the shares of Common Stock in 1992.
The Executive Plan authorizes grants with respect to a maximum of 1,250,000
shares of Common Stock, subject to adjustment in the event of stock dividends,
stock splits, reclassification of the Common Stock, recapitalization of the
Company or similar changes in the Company's capitalization. During 1993, the
Board adopted, and the holders of a majority of the shares of the Company's
Common Stock approved, an amendment to the Executive Plan to provide for the
automatic award of an option to purchase 5,000 shares of Common Stock to any
newly elected or appointed non-employee director. Options on all of the
1,250,000 shares of Common Stock originally subject to the Executive Plan have
been issued.
EXECUTIVE PLAN PROPOSAL
The Board has approved an amendment to the Executive Plan to increase the
number of shares subject to the Executive Plan from 1,250,000 to 4,250,000
shares of Common Stock. In addition, the Committee has approved an amendment to
the Executive Plan to limit the number of shares of Common Stock that may be
subject to grants to an individual participant under the Executive Plan so that
it will constitute a stockholder approved performance-based plan for purposes of
Code Section 162(m), and, assuming all other operational requirements are
satisfied, amounts taxable to the employee on exercise of options granted
thereunder should be deductible for federal income tax purposes. See "Proposed
Limitations on Grants", and "Federal Income Tax Consequences" discussed below.
These amendments to the Executive Plan are subject to approval by the holders of
a majority of the shares of Common Stock voting at the 1994 Annual Meeting. See
"General."
If the shareholders do not approve the Executive Plan Proposal, including
the amendment to increase the number of shares of Common Stock subject to the
Executive Plan, no further options under the Executive Plan may be issued as
options on all of the 1,250,000 shares of the Common Stock originally authorized
under the Executive Plan have been issued. If the Executive Plan Proposal is
approved, option grants to 15 of the Company's executive officers, excluding Mr.
Schwartz but including the other Named Executives, will be effective. These
options will be at an exercise price of $7.775. See "-- January 1994 Grants".
The following is a summary of the principal provisions of the Executive
Plan and the amendments thereto being presented for approval at the Annual
Meeting as the Executive Plan Proposal.
EXISTING PLAN
Except with respect to options granted to non-employee directors and
subject to the limits described in "Proposed Limitations on Grants" below, the
Committee has the sole authority to determine to whom options (a right to
purchase a stated number of shares at a specified price within a given period)
shall be granted under the Executive Plan, the type, amount and terms of the
options to be granted, the time when options are granted and the duration of the
exercise period of options. Grants pursuant to the Executive Plan take the
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<PAGE> 18
form of "nonstatutory stock options" (stock options that do not provide special
tax deferral benefits for federal income tax purposes).
No option granted pursuant to the Executive Plan is exercisable prior to
six months after the date of grant. Unless the Committee provides otherwise,
options granted under the Executive Plan to employees become exercisable in full
on the fifth anniversary from the date of grant (the "Vesting Date").
Notwithstanding anything else in the Executive Plan, the exercise price of an
option may not be less than the fair market value of the Common Stock on the
date of grant and, unless the Committee provides otherwise, the exercise price
for all options granted to employees are initially set at the fair market value
of the Common Stock on the date of grant and increase by 5% on each anniversary
of the grant date. Options granted to directors become exercisable in
installments on a cumulative basis at a rate of 20% each year beginning on the
first anniversary of the grant date; the exercise price for the options granted
to directors is 127.63% of the fair market value on the date of grant increasing
5% on each anniversary of the grant date commencing on the sixth anniversary.
A participant may exercise an option granted under the Executive Plan
during the option period at such time and in such amounts as he or she desires,
and may pay the exercise price in cash or such other consideration (which may be
other Common Stock) as the Committee may determine. Unless otherwise provided in
the option agreement, options are exercisable for a term of ten years from the
date of grant.
If an employee participant is terminated "for cause" (as defined in the
Executive Plan), or resigns prior to the Vesting Date, all outstanding options
shall be forfeited. Termination of a participant "for cause" after the Vesting
Date will also result in termination of the participant's options. Unless the
Committee provides otherwise, if an employee ceases to be an employee by reason
of his retirement at or after age 65, disability (as defined) or death prior to
the Vesting Date, a fraction of the option will vest, equal to the number of
months elapsed from date of grant divided by the number of months from date of
grant to the Vesting Date.
If a participant ceases to be an employee or director by reason of death,
any unexercised portion of the participant's options that is or becomes vested
upon his death will be exercisable for one year after such death. During such
one-year period, the participant's personal representative, or the person or
persons to whom the options shall have been transferred by will or by the laws
of descent and distribution, shall have the same rights to exercise the
unexercised portion of the options, to the extent so vested, as the participant
would have had if the participant were still an employee or director of the
Company. If an employee resigns or is terminated for any reason other than death
or "for cause" (after the Vesting Date), or if a director resigns or is not
re-elected, any unexercised portion of such person's options that is or becomes
vested upon such termination of employment, resignation or failure to be
re-elected will be exercisable for the three months following such termination,
to the extent so vested. Notwithstanding the foregoing, in no event will any
option be exercisable after its stated expiration date.
The Executive Plan may be amended, terminated or modified by the Committee
at any time (subject to certain limitations on frequency), except that it may
not amend the Executive Plan in any of the following respects without approval
by a vote of the stockholders of the Company (other than in the event of changes
in the Company's capitalization): (i) to increase the number of shares of Common
Stock for which options may be granted, (ii) to reduce the option price at which
options may be granted, (iii) to extend the period during which options may be
granted or exercised beyond the times originally prescribed; (iv) to materially
modify the requirements as to eligibility for participation in the Executive
Plan; or (v) to materially increase the benefits accruing to participants under
the Executive Plan.
PROPOSED LIMITATIONS ON GRANTS
Code Section 162(m) establishes certain requirements that must be met for
annual executive compensation exceeding $1 million to be deductible by the
employer corporation for federal income tax purposes, including stockholder
approval of certain compensation plan limitations and approval of such
compensation by the corporation's outside directors as defined under the
regulations issued under Code Section 162(m). In order to comply with the
Section 162(m) requirements, an amendment to the Executive Plan, as set forth in
the Executive Plan Proposal herein, provides for a limitation on total grants
under the Executive Plan so that no participant shall receive any grant of
shares of Common Stock under the Executive Plan which, together
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<PAGE> 19
with the number of shares of Common Stock subject to all other prior grants
under the Executive Plan during the three-year period ending on the date of the
grant would exceed 1,000,000 shares of Common Stock. Grants to any participant
may be less than 1,000,000 shares over the three-year period, but may never
exceed such amount.
FEDERAL INCOME TAX CONSEQUENCES
Under present Federal income tax regulations, there are no Federal income
tax consequences to either the participant or the Company upon the grant of any
option under the Executive Plan.
In general, upon the exercise of an option granted under the Executive
Plan, a participant recognizes ordinary income in an amount equal to the excess
of the fair market value of the Common Stock acquired upon exercise of the
option over the option exercise price. The Company receives a corresponding
deduction upon such exercise if the Company provides for appropriate withholding
of applicable participant taxes.
Upon a subsequent disposition of the Common Stock purchased on exercise of
an option, the participant's basis in the shares is the sum of the option
exercise price and the amount of any income recognized upon such exercise. If
the shares purchased on exercise of the option constitute a capital asset in the
hands of the participant, the participant's gain or loss is a capital gain or
loss, which is either long-term or short-term, depending upon the participant's
holding period.
EXISTING OPTION GRANTS
Pursuant to the Executive Plan, each director of the Company (other than
Mr. Schwartz) was granted an option to purchase 5,000 shares of Common Stock and
16 members of senior management were granted options to purchase an aggregate of
1,001,000 shares of Common Stock, of which options to purchase 821,000 shares
were outstanding at March 1, 1994. This includes options awarded to Mr. Schwartz
and the other Named Executives, as described in the "Summary Compensation Table"
above. In February 1993, each of the four newly elected directors was granted
options to purchase 5,000 shares of Common Stock. No existing director, in his
capacity as a director, is eligible to receive any further grants under the
Executive Plan. On March 17, 1993, Mr. Schwartz was granted an option to
purchase 150,000 shares of Common Stock at an exercise price of $7.425.
JANUARY 1994 GRANTS
Options to purchase 1,283,500 shares of Common Stock were granted to
officers of the Company effective January 31, 1994, subject to stockholder
approval of the Executive Plan Proposal and termination of their respective
awards under the LICP (see below). The exercise price of these options is $7.775
(which was the "fair market value" of the Common Stock as defined in the
Executive Plan on the grant date). Unlike other options previously granted under
the Executive Plan the exercise price does not increase by 5% on each
anniversary of the date of grant. These options expire January 31, 2004.
No portion of the award may vest for three years following the date of
grant except in the event of a participant's death, disability or retirement.
After three years have elapsed from the date of grant, all or part of the award
may vest in accordance with the following performance provisions:
- One-third of the award will vest if the closing sale price of the
Common Stock equals or exceeds $12 for at least ten consecutive
trading days beginning three years from the date of grant;
- An additional one-third of the award will vest if the closing sale
price of the Common Stock equals or exceeds $15 for at least ten
consecutive trading days beginning three years from the date of
grant; and
- The final one-third of the award will vest if the closing sale price
of the Common Stock equals or exceeds $20 for at least ten
consecutive trading days beginning three years from the date of
grant.
Upon a participant's death, disability or retirement, the options will vest
at the greater of 20% for each full year that has elapsed from the date of grant
or the amount already vested due to stock price performance.
16
<PAGE> 20
Upon certain changes of control, vesting remains tied to the original stock
price performance objectives, but, if a change of control occurs within the
first three years from the date of grant, the three-year vesting restriction is
waived to the extent that the Common Stock trading price would otherwise trigger
performance-based vesting. If no vesting acceleration occurs, the options vest
nine years and nine months from the date of grant.
TERMINATED BENEFIT PLAN
The following plan was terminated by the Board of Directors subject to the
termination of all outstanding awards by LICP participants. If the Executive
Plan Proposal is approved by stockholders, each LICP participant will be
required to agree to the termination of his or her LICP award before the January
1994 option award to him or her is effective.
Long-Term Incentive Compensation Plan
The LICP was adopted in 1990 and amended in February 1992. The LICP is an
unfunded program pursuant to which participants were to share a percentage of
the aggregate incremental value of the Company's stockholders' equity (on a
current value basis) over the five-year period from January 1, 1992 to December
31, 1996. The amount of the LICP award pool would range from one-quarter of one
percent of the incremental value (if the annual compound growth over the period
exceeded 5%) to 1% of the incremental value (if the annual compound growth
exceeded 20%); there would be no LICP award pool if the annual compound growth
were less than 5%.
The LICP is administered by the Committee. Up to 9% of the LICP award pool
(determined on an annual basis) may be allocated each year among corporate and
regional management (excluding executive officers). All other allocations under
the LICP were to be awarded to officers and other senior management as a
specified percentage of the total award pool, calculated on the basis of the
increase in stockholders' equity over the entire five-year period. Except for
partial awards payable on the retirement, death or disability of a participant,
awards under the LICP are payable only if the participant is employed by the
Company at December 31, 1996. Certain executive officers, who may be allocated
in the aggregate up to 85% of the LICP award pool, would receive a portion of
their awards in cash (equal to the amount of income tax payable on the award)
and the balance in the Company's Common Stock (the number of shares of Common
Stock to be based upon the then market value per share). The amount of the total
LICP award pool and the award payable to any participant is dependent upon the
future increase in stockholders' equity and each participant's continued
employment by the Company.
No LICP awards were granted in 1993.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE EXECUTIVE PLAN PROPOSAL.
17
<PAGE> 21
No options were granted to the Named Executives in 1993, other than the
option to purchase 150,000 shares of Common Stock awarded to Mr. Schwartz in
March 1993 as part of his 1992 bonus compensation. The following are the
benefits that will be received by the Named Executives indicated below and the
other indicated groups of persons if the Executive Plan Proposal is approved. No
benefits will accrue to any non-employee director or any employee who is not an
executive officer.
NEW PLAN BENEFITS UNDER THE EXECUTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION UNITS(1)
----------------------------------------------------------------- ---------
<S> <C>
Vernon B. Schwartz, President and Chief Executive Officer........ 0
David A. Smith, Senior Vice President and Chief Financial 162,000
Officer(2).....................................................
James G. O'Gara, Senior Vice President........................... 101,500
Thomas W. Gille, Vice President Asset Management................. 110,000
Jeffrey K. Gwin, Vice President Development...................... 68,500
Executive Group.................................................. 1,283,500
Non-Executive Director Group..................................... --
Non-Executive Officer Employee Group............................. --
</TABLE>
- - ------------------
(1) Represents new benefits under the Executive Plan. On April 28, 1994, the
closing price of the Company's Common Stock on the New York Stock Exchange
(the "NYSE") was $6.625. Each option granted has an exercise price of $7.775
(which represents "fair market value" as defined in the Executive Plan on
the date of grant (January 31, 1994)). Each option vests in installments
equal to one-third of the award when the Common Stock reaches specified
closing sale prices for ten consecutive trading days: 1/3 of the award vests
if the Common Stock trades at or above $12 per share; 1/3 of the award vests
if the Common Stock trades at or above $15 per share; and 1/3 of the award
vests if the Common Stock trades at or above $20 per share. These options
expire January 31, 2004.
(2) Mr. Smith resigned from the Company on April 22, 1994.
The following table presents information concerning the value of all
unexercised options held by each of the Named Executives at December 31, 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
VALUE AT FY-END($) AT FY-END($)
SHARES ACQUIRED REALIZED --------------- -------------
NAME ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
- - ----------------------------------------------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Vernon B. Schwartz.................... -0- -- 183,572/268,000 $48,750/0(2)
David A. Smith........................ -0- -- 54,720/50,000 $ 0/0
James G. O'Gara....................... -0- -- 4,461/90,000 $ 0/0
Thomas W. Gille....................... -0- -- 0/50,000 $ 0/0
Jeffrey K. Gwin....................... -0- -- 59,034/90,000 $ 0/0
</TABLE>
- - ------------------
(1) Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
(2) Options to acquire 150,000 shares of Common Stock at $7.425 per share vested
on February 22, 1994 pursuant to an agreement between the Company and Mr.
Schwartz dated that date. See "COMPENSATION AND BENEFITS COMMITTEE REPORT ON
EXECUTIVE COMPENSATION -- Agreement with Mr. Schwartz". On April 28, 1994,
the closing price of the Company's Common Stock on the NYSE was $6.625.
18
<PAGE> 22
COMPARISON OF CUMULATIVE TOTAL RETURNS*
The following is a comparison of the cumulative total stockholder return on
a $100 investment in the Company's Common Stock with the cumulative total
return, including reinvestment of dividends, of a $100 investment in the
Standard & Poor's 500 Composite Stock Index and in a peer group index for the
period from December 4, 1990 (the day the Common Stock commenced trading). The
total return on the Company's Common Stock is measured by dividing the
difference between the Common Stock price at the end and the beginning of the
measurement period by the Common Stock price at the beginning of the measurement
period.
INDEXED MONTHLY STOCKHOLDER RETURN ANALYSIS
(DECEMBER 4, 1990 TO DECEMBER 31, 1993)
<TABLE>
<CAPTION>
Date Index Company Group
---- ------- ------- -----
<S> <C> <C> <C>
12/4/90 100.00 100.00 100.00
5/1/91 118.93 131.25 132.11
10/1/91 121.75 93.75 113.26
2/1/92 128.96 112.50 120.20
7/1/92 134.58 67.50 96.51
11/1/92 137.89 63.75 95.05
4/1/93 142.64 62.50 118.85
8/1/93 151.30 73.75 120.98
12/1/93 154.32 77.50 127.66
</TABLE>
Base Date: December 4, 1990. The dates indicated on the chart are for ease of
reference only.
(1) The peer group index includes the following companies: American Real Estate
Partners L.P., The Arlen Corp., Bradley Real Estate Trust SBI, Catellus
Development Corporation, EQK Green Acres, L.P., Forest City Enterprises,
Inc., First Union Real Estate Equity & Mortgage Investments SBI, Koger
Properties, Inc., National Realty, L.P., The Newhall Land and Farming
Company, Presidential Realty Corp. and The Rouse Company.
- - ---------------
* This section of the proxy statement shall not be deemed "filed" with the
Securities and Exchange Commission and is not incorporated by reference into any
filings of the Company pursuant to the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended.
19
<PAGE> 23
THE COMMON STOCK PROPOSAL
BACKGROUND
The Company entered into a Placement Agreement, dated October 28, 1993 (the
"Placement Agreement"), with Morgan Stanley & Co. Incorporated (the "Placement
Agent") under which the Company issued 3,000,000 shares of the $3.625 Series B
Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock") on November 4, 1993 in a private placement. Net
proceeds to the Company from the Series B Preferred Stock offering were
approximately $143.5 million. The Series B Preferred Stock was sold by the
Placement Agent to qualified institutional buyers and other institutional
accredited investors. The Series B Preferred Stock is convertible at the option
of the holders thereof at any time after 60 days following the date of initial
issuance and prior to maturity, at an initial conversion price of $9.80 per
share, subject to adjustment from time to time upon the occurrence of certain
events. If all of the Series B Preferred Shares were converted, 15,306,000
shares of Common Stock would be issued. It is expected that approximately $123.5
million of the net proceeds from the sale of the Series B Preferred Stock will
be used over time to repay certain of the Company's indebtedness scheduled to
mature in 1994 and through 1997 and the remainder will be used for general
corporate purposes.
The Series B Preferred Stock is redeemable at any time on or after November
15, 1996 at the option of the Company, in whole or in part, initially at a
redemption price of $52.5375 per share, and thereafter at prices declining to
$50 per share on or after November 15, 2003, plus dividends accrued and unpaid
to the redemption date. Dividends on the Series B Preferred Stock will be
cumulative from the date of issuance and are payable quarterly out of funds
legally available therefor on February 15, May 15, August 15 and November 15 of
each year, commencing February 15, 1994. The cumulative and preferred nature of
the Series B Preferred Stock has the general effect of reducing the amount of
funds legally available to pay dividends to common stockholders. The Series B
Preferred Stock is also exchangeable in whole or in part (but in no more than
two parts) at the option of the Company on any dividend payment date beginning
November 15, 1995, for the Company's 7 1/4% Convertible Subordinated Debentures
due November 15, 2018, (the "Debentures") at the rate of $50 principal amount of
Debentures for each share of Series B Preferred Stock. The Debentures will
contain conversion and optional redemption provisions substantially identical to
those of the Series B Preferred Stock. The liquidation preference of the Series
B Preferred Stock is $50 per share.
THE NYSE APPROVAL REQUIREMENT
The Series B Preferred Stock was issued in accordance with Delaware
corporate law and pursuant to the authority conferred upon the Board by the
Company's stockholders in the Company's Restated Certificate of Incorporation,
as amended (the "Charter"). The Board approved the issuance of the Series B
Preferred Stock because the Board believed such issuance would provide the
Company with needed additional capital to fund the Company's business strategy
at a reasonable cost while minimizing the dilutive effect of the issuance of
additional stock on the Company's existing stockholders (as reflected in the
premium represented by the conversion price ($9.80 per share) over the closing
market price ($7.875 per share) on October 28, 1993, the date of the Placement
Agreement).
It is the policy of the NYSE, on which the Company's outstanding Common
Stock is listed for trading, to require stockholder approval of the issuance,
other than in a public offering, of common stock or securities convertible into
Common Stock if such common stock (including Common Stock issuable upon
conversion of such convertible securities) has, or would have upon issuance,
voting power equal to or in excess of 20% of the voting power outstanding before
such issuance. If all of the shares issuable upon conversion of the Series B
Preferred Stock were outstanding on October 28, 1993, and if the Series A
Preferred Stock had not been converted, such shares would represent
approximately 21% of the Common Stock outstanding immediately prior to such
issuance. Giving effect to the prior conversion of all of the Series A Preferred
Stock, which is convertible at $9.06 per share, the shares issuable upon
conversion of the Series B Preferred Stock would represent approximately 17% of
the outstanding Common Stock. If all of the Series B Preferred Stock were
converted, but none of the Series A, the voting power of the existing holders of
the Common Stock would be diluted by approximately 21%.
20
<PAGE> 24
The stockholders are being asked to approve the Common Stock Proposal in
response to the policy of the NYSE. The affirmative vote of a majority of the
outstanding shares of Common Stock is required to approve the Common Stock
Proposal. If the required affirmative vote by the stockholders is not obtained,
the Series B Preferred Stock will remain outstanding in accordance with its
terms, including the right to convert the Series B Preferred Stock into Common
Stock.
Because of the importance of maintaining a market for the trading of the
Company's Common Stock on the NYSE, the Board recommends that the stockholders
vote FOR the Common Stock Proposal. Although BAREIA, which owned approximately
41.1% of the shares entitled to vote as of the record date for the Annual
Meeting, has informed the Company that it intends to vote its shares for the
Proposal, if the required stockholder approval were not obtained, the NYSE could
commence delisting proceedings. In such an event, the Company would seek another
exchange or market for the trading of its Common Stock.
CONVERSION RIGHT
Shares of the Series B Preferred Stock are convertible at any time at the
option of the holder thereof into such number of whole shares of Common Stock as
is equal to the aggregate liquidation preference of the shares of Series B
Preferred Stock surrendered for conversion divided by the conversion price of
$9.80 per share of Common Stock, subject to adjustment as described below.
The initial conversion price of $9.80 per share of Common Stock is subject
to adjustment (under formulae set forth in the Certificate of Designation for
the Series B Preferred Stock) in certain events, including: (i) the issuance of
Common Stock as a dividend or distribution on Common Stock of the Company; (ii)
certain subdivisions and combinations of the Common Stock; (iii) the issuance to
all holders of Common Stock of certain rights or warrants to purchase Common
Stock; (iv) the distribution to all holders of Common Stock of shares of capital
stock of the Company (other than Common Stock) or evidences of indebtedness of
the Company or assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to above and dividends and
distributions in connection with the liquidation, dissolution or winding up of
the Company or paid in cash); (v) distributions consisting of cash, excluding
(x) any quarterly cash dividend on the Common Stock to the extent that the
aggregate cash dividend per share of Common Stock in any quarter does not exceed
the greater of (A) the amount per share of Common Stock of the next preceding
quarterly cash dividend on the Common Stock to the extent that such preceding
quarterly dividend did not require an adjustment of the conversion price
pursuant to this clause (v) (as adjusted to reflect subdivisions or combinations
of the Common Stock), and (B) 3.75 percent of the Current Market Price (as
defined in the Certificate of Designation) of the Common Stock on the Trading
Day (as defined in the Certificate of Designation) immediately prior to the date
of declaration of such dividend, and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company; and
(vi) payment in respect of a tender or exchange offer by the Company or any
subsidiary of the Company for the Common Stock to the extent that the cash and
value of any other consideration included in such payment per share of Common
Stock exceeds the current market price per share of Common Stock on the trading
day next preceding the date on which the Company becomes irrevocably obligated
to make such payment.
To the extent permitted by law, the Company from time to time may reduce
the conversion price by any amount for any period of at least 20 days, if the
Board has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive. In the event
of certain extraordinary corporation transactions, a holder may receive
significantly different consideration upon conversion.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the
21
<PAGE> 25
"Commission") and the NYSE. These persons are required by regulation of the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the fiscal year
ended December 31, 1993, except as described in the next sentence, the Company's
officers, directors and greater than ten percent beneficial owners complied with
all applicable Section 16(a) filing requirements. Mr. O'Gara failed to timely
file a Form 4 to report the sale of all of his shares of Common Stock.
CERTAIN TRANSACTIONS
Prior to the Distribution, the Company and SFP and its affiliates had from
time to time entered into intercompany transactions and agreements incident to
their respective businesses. Substantially all such intercompany transactions
were terminated in December 1989 upon the sale of Common Stock to BAREIA. The
Company entered into several other agreements with SFP or its affiliates
described below at the time of the sale of Common Stock to BAREIA. The Company's
management believes that such transactions, as well as the other transactions
described below, are on terms at least as favorable to the Company as it could
obtain from third parties.
TRANSACTIONS WITH SFP AND ITS AFFILIATES
SFP LEASE. Pursuant to a lease entered into in October 1988, and amended
on February 11, 1994, SFP leases approximately 250,000 feet of office space in
Chicago from the Company for an annual rental of approximately $6 million. The
lease expires in September 1998 but SFP has the right to terminate the lease
after April 1, 1995. SFP's rental obligation is reduced to the extent that the
space is sublet to third parties.
PROPERTY MANAGEMENT AGREEMENT. In November 1989, the Company entered into
a Management Agreement with ATSF pursuant to which the Company agreed to act as
exclusive management and selling agent for ATSF's non-operating railroad
property located in Arizona, California, Colorado, Illinois, Iowa, Kansas,
Louisiana, Missouri, Nebraska, New Mexico, Oklahoma and Texas. The Management
Agreement, which was amended and restated in December 1990, continues in effect
until December 31, 1994, subject to termination upon 180 days' notice. ATSF has
agreed to pay certain management fees and sales commissions to the Company with
respect to the managed properties and fees for consulting services. The Company
earned $4.8 million in 1993 for fees and commissions under the Management
Agreement.
EXPLORATION AGREEMENT WITH SANTA FE PACIFIC MINERALS CORPORATION. The
Company entered into an Exploration Agreement and Option to Lease (the
"Exploration Agreement") with Santa Fe Pacific Minerals Corporation ("SFP
Minerals"), a wholly-owned subsidiary of SFP, pursuant to which the Company
granted to SFP Minerals the exclusive use of any and all rights the Company may
have to conduct all activities relating to the discovery and evaluation of
minerals on the Company's mountain and desert property in Utah and Nevada and
certain desert property in California (the "Subject Lands"). The Company has the
right to terminate the Exploration Agreement as to any Subject Lands at the time
it sells or exchanges such land, subject to SFP Minerals' right of first refusal
to purchase any Subject Lands on the same terms and conditions as are contained
in a third party offer. SFP Minerals is obligated to spend one dollar per acre
per year on exploration activities on the Subject Lands. The Company also
granted to SFP Minerals an exclusive continuing option to acquire mining leases
as to all or any portions of the Subject Lands. These leases can be acquired on
SFP Minerals' own behalf or on behalf of an unaffiliated third party, provided
that SFP Minerals remains fully liable to the Company for all obligations under
the leases. The Exploration Agreement continues through December 31, 2014. No
payments were made to the Company by SFP Minerals under the Exploration
Agreement in 1993.
22
<PAGE> 26
TRANSACTION WITH AFFILIATE OF BAREIA
In 1989, the Company entered into a joint venture with an affiliate of the
general partner of BAREIA to own, develop and operate a 387-unit apartment
complex in San Diego, California. Prior to the formation of the joint venture,
the Company sold a 50% undivided interest in a parcel of land to the affiliate.
Both parties subsequently contributed their respective 50% interests in this
parcel of land to the joint venture for 50% equity interests in the joint
venture. An affiliate of the general partner has been hired to perform leasing
and property management services for the apartment complex. The total paid for
leasing and property management services for 1993 was $61,000 and $134,000,
respectively.
In addition, an affiliate of the general partner of BAREIA functioned as a
broker to place the Company's property and earthquake insurance for 1993 and was
paid commissions of approximately $89,000 in 1993 for its services.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1993,
including financial statements, is being sent to stockholders of record as of
the close of business on April 29, 1994 together with this Proxy Statement. The
Company will furnish, without charge, a copy of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 as filed with the Commission to any
stockholder who submits a written request to the Vice President Corporate
Communications, at the Company's offices, 201 Mission Street, San Francisco,
California 94105.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse, the Company's independent public accountants, has
examined the Company's financial statements for the fiscal year ended December
31, 1993. The Company expects representatives of Price Waterhouse to be present
at the Annual Meeting and to be available to respond to appropriate questions
from stockholders. The Price Waterhouse representatives will be given an
opportunity to make a statement if they desire.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than January 2, 1995 for inclusion in the Company's
proxy statement and form of proxy relating to the meeting.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action by
the stockholders at the Annual Meeting other than those described in this Proxy
Statement. Unless otherwise indicated, if any other matter is properly brought
before the meeting and may be properly acted upon, the persons named in the
accompanying form of proxy will be authorized by such proxy to vote the proxies
thereon in accordance with their best judgment.
23
<PAGE> 27
CATELLUS DEVELOPMENT CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Vernon B. Schwartz and Maureen Sullivan or
either of them, with full power of substitution, as proxies to vote at the
Annual Meeting of Stockholders of Catellus Development Corporation (the
"Company") to be held on June 23, 1994 at 10:00 a.m., local time, and at any
adjournment or adjournments thereof, hereby revoking any proxies heretofore
given, to vote all shares of common stock of the Company held or owned by the
undersigned as directed below, and in their discretion upon such other matters
as may come before the meeting.
(To be Signed on Reverse Side)
See Reverse
Side
<PAGE> 28
Please mark your
X votes as in this 9350
example
The shares represented hereby will be voted in accordance with the
directions given by the shareholder. If not otherwise directed, the shares
represented by the proxy will be voted FOR the matters described below.
1. Election of Directors FOR / / WITHHOLD / /
Nominees:
Joseph F. Alibrandi, Darla Totusek Flanagan, Gary M. Goodman, Robert D. Krebs,
Judd D. Malkin, Vernon B. Schwartz, Joseph R. Seiger, Jacqueline R. Slater,
Thomas M. Steinberg, Tom C. Stickel, John E. Zuccotti.
For, except vote withheld from the following nominee(s):
- - --------------------------------------------------------------------------------
2. Approval and adoption of an amendment to the Catellus Development
Corporation (the "Company") Amended and Restated Executive Stock Option
Plan. The Board of Directors recommends a vote FOR the amendment.
FOR / / AGAINST / / ABSTAIN / /
3. Approval and adoption of an amendment for issuance of Common Stock upon
conversion of the Company's $3.625 Series B Cumulative Convertible
Exchangeable Preferred Stock. The Board of Directors recommends a vote FOR
the amendment.
FOR / / AGAINST / / ABSTAIN / /
The undersigned hereby acknowledges
receipt of the accompanying Notice of
Meeting and Proxy Statement and hereby
revokes any proxy or proxies heretofore
given.
Please sign exactly as name(s) appear
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
---------------------------------------
---------------------------------------
SIGNATURE(S) DATE
