<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CATELLUS DEVELOPMENT CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
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
Wednesday, May 22, 1996, at 10:00 A.M. (local time).
At the Annual Meeting, stockholders will be asked to elect nine directors
and to vote upon a proposal to approve the 1996 Performance Award Plan.
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 May 22, 1996.
Sincerely,
/s/ Nelson C. Rising
Nelson C. Rising
President and Chief Executive Officer
April 5, 1996
<PAGE> 3
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1996
The Annual Meeting of Stockholders of Catellus Development Corporation (the
"Company") will be held on Wednesday, May 22, 1996 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 nine directors;
(2) To vote upon the proposal to approve the 1996 Performance Award Plan;
and
(3) To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on March 29, 1996 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,
/s/ Maureen Sullivan
Maureen Sullivan
Secretary
April 5, 1996
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
Wednesday, May 22, 1996, 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 and Notice of Annual Meeting of Stockholders and the Company's 1995
Annual Report are being mailed to stockholders on or about April 5, 1996.
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 received by the Company 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 in favor of the proposal to approve the 1996
Performance Award Plan (the "1996 Plan") as described herein.
Any stockholder 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 of the Company indicated above, which
notice may be given by the filing of a duly executed proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
Stockholders of record at the close of business on March 29, 1996 are
entitled to notice of and to vote at the Annual Meeting. On March 29, 1996 the
issued and outstanding voting securities of the Company consisted of 74,498,115
shares of Common Stock, each of which is entitled to one vote with respect to
the election of directors, the proposal to approve the 1996 Plan and on any
other matters which may properly come before the Annual Meeting or any
adjournment thereof.
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 for the transaction of any business at the Annual Meeting.
Assuming the presence of a quorum, the election of directors will require the
affirmative vote of a plurality of the votes cast in person or by proxy at the
Annual Meeting. Approval of the proposal described herein to approve the 1996
Plan (the "Plan Proposal") will require the affirmative vote of holders of a
majority of the shares having voting power present or represented by proxy at
the meeting, provided that the votes cast with respect to the Plan Proposal
represent over 50% in interest of the shares entitled to vote on the Plan
Proposal.
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 will not be treated as votes cast for purposes of
determining the approval of any matter submitted for a vote of the stockholders.
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 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
<PAGE> 5
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.
ELECTION OF DIRECTORS
Nine 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 or her 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 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
1985, and Chief Executive Officer from 1974
to 1994, of Whittaker Corporation (a
diversified company with business activities
in the aerospace field); and 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). Director of Whittaker Corporation,
BioWhittaker, Inc., Jacobs Engineering Group,
Burlington Northern Santa Fe Corporation,
Bank of America NT & SA and BankAmerica
Corporation. 67 1989
Daryl J. Carter Co-Chairman of Carter Primo Chesterton, L.P.
(a real estate investment management company)
since 1992. From 1990 to 1992, President of
Carter Property Company (a real estate asset
management company). From 1985 to 1990, Vice
President of Westinghouse Credit Corporation
(a real estate investment company). 40 1995
Christine Garvey Executive Vice President, Corporate Real
Estate, OREO Sales and Property Management of
Bank of America NT & SA since 1992. Senior
Vice President (OREO Division) of Security
Pacific National Bank from 1991 to 1992.
Senior Vice President (Manager, Corporate
Real Estate Department) of Wells Fargo Bank
from 1986 to 1991. 50 1995
Nelson C. Rising President and Chief Executive Officer of the
Company since September 15, 1994. From 1984
to September 1994, Senior Partner of Maguire
Thomas Partners, Inc. (a commercial real
estate developer). 54 1994
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED A
NAME OF NOMINEE BUSINESS EXPERIENCE AGE DIRECTOR
- - ----------------------------- --------------------------------------------- --- ---------
<S> <C> <C> <C>
Joseph R. Seiger Chairman of the Board of Directors of the
Company since July 1994. Since 1973, Founding
Partner of Vintage Properties (a residential
and commercial real estate developer). 53 1993
Jacqueline R. Slater Managing Director, Portfolio Disposition,
Structured Finance, Commercial Mortgage and
Securitization of Chemical Bank Real Estate
Finance since 1990. Senior Vice President,
Corporate Finance of Chemical Bank since
1983. 43 1993
Thomas M. Steinberg Managing Director of Tisch Family Interests
(manages and supervises various investments
for members of the Laurence A. Tisch and
Preston R. Tisch families) since September
1991. From June 1989 to August 1991, acted as
a real estate investor. 39 1994
Tom C. Stickel Founder/Chairman of American Partners Capital
Group (a corporation specializing in pension
fund investments design and development)
since 1994. Founder and, from 1992 to 1994,
Chairman of American Partners (a corporation
specializing in Latin American business
development). From 1983 to 1992, Chairman and
Chief Executive Officer
of TCS Enterprises, Inc. (a financial holding
company). Director of San Diego Gas and
Electric Company, O'Connor Group/RPT Trust
and Del Mar Thoroughbred Club. 47 1993
Beverly Benedict Thomas Principal of UT Strategies Inc. (a public
affairs firm). From 1991 to 1995, Assistant
Treasurer of State of California. From 1984
to 1992, Partner of Unger Thomas (a
development consulting firm). 53 1995
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES LISTED ABOVE. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED
UNLESS A CONTRARY CHOICE IS INDICATED.
ARRANGEMENTS REGARDING NOMINEES
Bay Area Real Estate Investment Associates L.P. ("BAREIA") and the Company
entered into an agreement dated as of January 14, 1993 (as amended February 4,
1993, the "BAREIA Agreement") that entitled BAREIA to designate such number of
directors (and required BAREIA to vote its Common Stock) so that the proportion
of affiliates of BAREIA serving as members of the Board of Directors was
approximately equal to BAREIA's percentage of Common Stock ownership. Mr.
Seiger, Ms. Slater and Mr. Stickel were nominated and elected to the Board of
Directors as nominees of BAREIA in 1993, 1994 and 1995.
In November 1995, JMB/Bay Area Partners withdrew as the sole general
partner of BAREIA. In connection with the dissolution and winding up of BAREIA,
29,999,605 shares of the Common Stock and 1,405,702 shares of the Company's
Series A Preferred Stock were distributed to the California Public Employees'
Retirement System ("CalPERS"). A letter agreement dated November 14, 1995,
between CalPERS and the Company, confirmed the termination of the BAREIA
Agreement. Accordingly, Mr. Seiger, Ms. Slater and Mr. Stickel are no longer
serving as nominees of BAREIA.
3
<PAGE> 7
Under the terms of Mr. Rising's employment agreement with the Company, the
Board of Directors is required, through December 31, 2000, to use its best
efforts to cause Mr. Rising to continue to be elected as a member of the Board
of Directors. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr. Rising."
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer
fee of $15,000, a fee of $1,250 for each meeting of the Board of Directors
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 Company's Amended and Restated Executive Stock Option Plan
(the "Executive Stock Option 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 of Directors. Each option is exercisable in
installments on a cumulative basis at a rate of 20% each year, commencing on the
first anniversary of the date of grant. Each option has an exercise price of
127.63% of the Fair Market Value (as defined in the Executive Stock Option Plan)
of the Common Stock on the grant date, which increases by 5%, compounded
annually, on each anniversary of the date of grant, commencing on the sixth
anniversary of the grant date. Each option expires on the tenth anniversary of
the date of grant.
If the 1996 Plan is approved, no further grants to non-employee directors
would be made pursuant to the Executive Stock Option Plan. Instead, under the
1996 Plan, each non-employee director who is first elected or appointed after
the 1996 Annual Meeting of Stockholders would receive an automatic initial grant
of an option to purchase 5,000 shares of Common Stock. In addition, promptly
following the date of each Annual Meeting of Stockholders (including the 1996
meeting), each non-employee director elected by the stockholders (including the
current nominees) would receive an additional automatic grant of an option to
purchase 5,000 shares of Common Stock; provided, however, that no non-employee
director will receive more than one such automatic grant in any calendar year.
The exercise price for grants to non-employee directors will be 100% of the Fair
Market Value (as defined in the 1996 Plan) of the Common Stock on the date of
grant. Fair Market Value for purposes of the 1996 Plan means the average of the
closing prices of the Common Stock for the five trading days immediately
preceding the date of grant. Each such option will expire ten years from the
grant date (subject to earlier termination). Each option will become exercisable
in accordance with a schedule based upon the achievement of certain price levels
for the Common Stock as follows: if the average price of the Common Stock
(calculated on an average price basis over 30 consecutive trading days) is (a)
125% or more of the exercise price, then the option shall be exercisable as to
25% of the option shares; (b) 150% or more of the exercise price, then the
option shall be exercisable as to 50% of such shares; (c) 175% or more of the
exercise price, then the option shall be exercisable as to 75% of such shares;
and (d) 200% or more of the exercise price, then the entire option shall be
exercisable. Notwithstanding the foregoing, the option will vest on the eighth
anniversary of the grant date as to the entire number of shares without regard
to the price of the Common Stock. See "CATELLUS DEVELOPMENT CORPORATION 1996
PERFORMANCE AWARD PLAN -- Options Granted to Non-Employee Directors."
Mr. Seiger serves as Chairman of the Board. In addition to the annual
retainer fee and meeting fees described above, during 1995 Mr. Seiger received
$150,000 as compensation for serving as Chairman of the Board. For 1996, Mr.
Seiger chose to receive an option to purchase 47,319 shares of Common Stock
pursuant to the Executive Stock Option Plan in lieu of cash compensation for
serving as Chairman of the Board. The option has a term of ten years and an
exercise price equal to the Fair Market Value (as defined in the Executive Stock
Option Plan) on the date of grant. The option becomes exercisable in accordance
with a schedule based upon the achievement of certain price levels for the
Common Stock (the "Pricing Schedule"), limited by the expiration of various time
periods. The Pricing Schedule operates as follows: if the average price of the
Common Stock (calculated on an average price basis over 30 consecutive trading
days) is (a) $8.50 or more, then the option shall be exerciseable as to 25% of
the option shares; (b) $10.50 or more, then the option shall be exercisable as
to 50% of such shares; (c) $12.50 or more, then the option shall be exercisable
as to 75% of such shares; and (d) $15.00 or more, then the entire option shall
be exercisable. No portion of the
4
<PAGE> 8
option may vest prior to January 1, 1997. Assuming the conditions of the Pricing
Schedule are met, 25% of the option shall vest on January 1, 1997, 50% of the
option shall vest on January 1, 1998, 75% of the option shall vest on January 1,
1999 and the entire option shall vest on January 1, 2000. Notwithstanding the
foregoing, the option will vest on January 1, 2004 as to the entire number of
shares without reference to the Pricing Schedule. The option is subject to
accelerated vesting in the event of Mr. Seiger's termination of service as a
director in certain circumstances, including a "change of control." For purposes
of the award agreement, "change of control" has the same meaning as in Mr.
Rising's amended and restated employment agreement. For a description of the
definition of "change of control," see "EMPLOYMENT AGREEMENTS -- Agreement with
Mr. Rising."
In addition, the Company and Mr. Seiger entered into an amended and
restated award agreement, dated as of March 22, 1996, with respect to the option
to purchase 100,000 shares of Common Stock previously granted to Mr. Seiger in
1994. Prior to the amendment, the option had an initial exercise price equal to
the Fair Market Value of the Common Stock on the date of grant, which increased
by 5%, compounded annually, on January 1 of each year, commencing January 1,
1996. The option was exercisable in full as of July 27, 1995. The amended and
restated award agreement eliminates the 5% escalator with respect to the
exercise price and changes the vesting schedule. Under the revised vesting
schedule, the option becomes exercisable in accordance with the Pricing Schedule
or on July 27, 2002 as to the entire number of shares without reference to the
Pricing Schedule. The Pricing Schedule operates as follows: if the average price
of the Common Stock (calculated on an average price basis over 30 consecutive
trading days) is (a) $8.50 or more, then the option shall be exerciseable as to
25% of the option shares; (b) $10.50 or more, then the option shall be
exercisable as to 50% of such shares; (c) $12.50 or more, then the option shall
be exercisable as to 75% of such shares; and (d) $15.00 or more, then the entire
option shall be exercisable. The option is subject to accelerated vesting in the
event of Mr. Seiger's termination of service as a director in certain
circumstances, including a "change of control." For a description of the
definition of "change of control," see "EMPLOYMENT AGREEMENTS -- Agreement with
Mr. Rising."
BOARD OF DIRECTORS MEETINGS
The Board of Directors held seven meetings during the Company's last full
fiscal year. In 1995, 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 (other than Mr. Steinberg who attended 71.4% of such meetings).
BOARD COMMITTEES
The Board of Directors has established a Policy Committee, an Audit
Committee, a Compensation and Benefits Committee (the "Compensation Committee"),
a Finance Committee and a Nominating Committee. No member of these Committees,
other than the Policy Committee and the Finance Committee, may be an employee of
the Company.
The Policy Committee is presently composed of Messrs. Rising, Seiger and
Steinberg and Ms. Slater. The function of the Policy Committee is to discuss
major issues confronting the Company. The Policy Committee met three times in
1995. The Policy Committee was chaired by Mr. Malkin, who resigned from the
Board of Directors on November 14, 1995.
The Audit Committee is presently composed of Ms. Garvey and Messrs. Carter,
Seiger 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 independent public accountants. The Audit Committee met three
times in 1995. The Audit Committee is chaired by Ms. Garvey.
The Compensation Committee is presently composed of Messrs. Alibrandi,
Carter and Stickel and Ms. Garvey. The functions of the Compensation 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
5
<PAGE> 9
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. The Compensation
Committee met seven times in 1995. The Compensation Committee is chaired by Mr.
Alibrandi.
The Finance Committee is presently composed of Messrs. Rising and Steinberg
and Mses. Garvey, Slater and Thomas. 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 1995. The Finance Committee is chaired by Ms. Slater.
The Nominating Committee is presently composed of Ms. Thomas and Messrs.
Alibrandi, Steinberg and Stickel. The function of the Nominating Committee is to
nominate persons for election or re-election to the Board. The Nominating
Committee met two times in 1995. The Nominating Committee is chaired by Mr.
Stickel.
The Nominating Committee will consider stockholder suggestions of persons
to be considered as nominees to fill future vacancies on the Board. Such
suggestions should be sent in writing to the Secretary at the Company's address
and must be accompanied by detailed biographical and occupational data on the
prospective nominee, along with the written consent of the prospective nominee
for consideration of his or her name by the Nominating Committee.
6
<PAGE> 10
CATELLUS DEVELOPMENT CORPORATION
1996 PERFORMANCE AWARD PLAN
GENERAL
The Board of Directors has approved the 1996 Plan, subject to stockholder
approval. If so approved by the stockholders, the 1996 Plan will become
effective as of March 20, 1996. A copy of the full text of the 1996 Plan is set
forth in Appendix A to this Proxy Statement and the following description is
qualified in its entirety by reference to Appendix A.
All employees of the Company and its subsidiaries (226 persons as of March
29, 1996), including the executive officers, will be eligible to receive awards
under the 1996 Plan, subject to the discretion of the Compensation Committee to
determine the particular individuals who, from time to time, will be selected to
receive awards. In addition, stock option awards will be granted automatically
to directors who are not employees of the Company (eight persons as of March 29,
1996) pursuant to the terms set forth in the 1996 Plan. Except as set forth
below with respect to non-employee directors, neither the individuals who are to
receive awards, the number of awards that will be granted to any individual or
group of individuals, nor the amounts payable with respect to awards, have been
determined at this time. The 1996 Plan will remain in existence as to all
outstanding awards until all such awards are either exercised, converted or
terminated; provided, however, no award can be made after March 19, 2006.
AWARDS GRANTED TO EMPLOYEES
Awards to employees under the 1996 Plan may be in the form of nonqualified
stock options, incentive stock options, stock appreciation rights (SARs), and
other share-based incentive awards, or cash-based incentive awards, such as
performance units. Awards may be granted singly or in combination with other
awards. Each award will be evidenced by an award agreement entered into between
the Company and the recipient setting forth the specific terms and conditions
applicable to that award. Awards under the 1996 Plan that are not vested or
exercised generally will be nontransferable by a holder (other than by will, the
laws of descent and distribution or a qualified domestic relations order) and
rights thereunder generally will be exercisable, during the holder's lifetime,
only by the holder, subject to such exceptions as (consistent with applicable
legal considerations) may be authorized from time to time by the Compensation
Committee.
Options. Stock options authorized under the 1996 Plan are rights to
purchase a specified number of shares of Common Stock at a set price during a
specified period. As of March 28, 1996, the closing price of a share of Common
Stock on the New York Stock Exchange was $7.625. Unless the Compensation
Committee provides otherwise, and such provision is reflected in the award
agreement, the exercise price of an option may not be less than the Fair Market
Value of the Common Stock on the grant date. Fair Market Value for purposes of
the 1996 Plan means the average of the closing prices of the Common Stock for
the five trading days immediately preceding the grant date. Stock options that
are granted as incentive stock options will be granted with such additional
terms as are necessary to satisfy the applicable requirements of Section 422 of
the Internal Revenue Code of 1986, as amended from time to time (the "Code").
The fair market value of the Common Stock for which incentive stock options are
exercisable for the first time by an optionee during any calendar year may not
exceed $100,000 (measured as of the grant date) under current tax law. Other
awards are not limited in this manner.
SARs. SARs entitle the recipient to receive, upon exercise of the SAR, an
amount (payable in cash and/or Common Stock or other property) based on the
appreciation in the value of a share of Common Stock on the date the SAR is
exercised (or some lesser ceiling amount) over the base price of the Common
Stock established in an award agreement.
Other Share-Based Awards. Other share-based incentive awards might include
phantom stock or units, performance stock or units, bonus stock or units,
dividend equivalent units, or similar securities or rights and other awards
payable in or with a value derived from or a price related to the Fair Market
Value of the Common Stock, payable on such terms as the Compensation Committee
may approve. Such awards may be granted, become vested or be payable based upon
the continued employment of a participant, or upon the attainment of specified
corporate or individual performance goals (as in the case of performance stock
or units).
7
<PAGE> 11
Cash-Based Awards. The 1996 Plan also provides for the grant of long-term
incentive awards that are not denominated nor payable in and do not have a value
derived from the value of or a price related to shares of Common Stock and are
payable only in cash ("Cash-Based Awards"). Under certain federal tax laws
("Section 162(m)"), the Company may not deduct certain compensation in excess of
$1,000,000 in any year to the Chief Executive Officer or one of the four other
most highly compensated executive officers of the Company ("Executive Officers")
unless, among other things, this compensation qualifies as "performance-based
compensation" under Section 162(m), and the material terms of the plan for such
compensation are approved by stockholders. Cash-Based Awards are intended to
satisfy the requirements for performance-based compensation under Section
162(m).
All employees of the Company and its subsidiaries are eligible to receive
Cash-Based Awards. Cash-Based Awards granted to Executive Officers may be
granted only in accordance with the requirements of Section 162(m). Cash-Based
Awards to other employees may or may not be limited by the requirements of
Section 162(m), but will in any event be based on the performance goals
described below.
The performance goals for Cash-Based Awards under the 1996 Plan are any one
or a combination of Earnings Per Share (EPS), Return on Equity (ROE), Total
Stockholder Return and Net Cash Flow (each as defined in the 1996 Plan). These
goals will be applied over either consecutive or rolling cycles of more than one
but not more than five fiscal years. Specific cycles, weightings of more than
one performance goal and target levels of performance upon which actual payments
will be based, as well as the award levels payable upon achievement of specified
levels of performance, will be determined by the Compensation Committee not
later than the applicable deadline under Section 162(m) and in any event at a
time when achievement of such targets is substantially uncertain. These
variables may change from cycle to cycle. Appropriate adjustments to the
performance goals and targets in respect of Cash-Based Awards may be made by the
Compensation Committee based upon objective criteria in the case of significant
acquisitions or dispositions by the Company, extraordinary gains or losses,
material changes in accounting principles or practices, or certain other events
that were not anticipated (or the effects of which were not anticipated) at the
time goals were established, in order to neutralize the effect of such events on
the Cash-Based Awards.
The Compensation Committee must certify the achievement of the applicable
performance goals and the actual amount payable to each participant under the
Cash-Based Awards prior to payment. Cash-Based Awards generally will be paid
following the completion of each cycle. The Compensation Committee may retain
discretion to reduce, but not increase, the amount payable under a Cash-Based
Award to any participant, notwithstanding the achievement of targeted
performance goals. Cash-Based Awards may be accelerated in the event of a Change
of Control (as defined below). The maximum amount payable to any participant
under all Cash-Based Awards under the 1996 Plan during any calendar year will be
$2,000,000. There is no maximum aggregate dollar amount of Cash-Based Awards
under the 1996 Plan.
Other Performance-Based Awards. Other types of awards under the 1996 Plan
may also be granted to qualify as performance-based compensation under Section
162(m). Stock options and SARs that are granted at a fair market value exercise
price are intended to qualify as performance-based compensation. In addition,
other share-based awards (such as performance units) may qualify as
performance-based compensation. All employees of the Company and its
subsidiaries are eligible to receive such share-based awards, and the
performance goals are any one or a combination of Earnings Per Share (EPS),
Return on Equity (ROE), Total Stockholder Return and Net Cash Flow. The
certification and payout procedures and nature of Compensation Committee
discretion with respect to the other share-based awards are substantially the
same as for the Section 162(m) Cash-Based Awards. The maximum number of shares
(or share units) of Common Stock that may be subject to all qualifying
share-based awards, including stock options and SARs, that are granted to any
participant under the 1996 Plan during any calendar year will not exceed
1,000,000 shares (or share units), either individually or in the aggregate.
The Compensation Committee also has the authority to grant awards under the
1996 Plan in substitution for or assumption of stock incentive awards held by
employees of other entities who become employees of the Company or a subsidiary
as a result of a merger or acquisition of the entity.
Awards may be granted in connection with the surrender or cancellation of
previously granted awards, or may be amended, under such terms and conditions,
including numbers of shares and exercise price,
8
<PAGE> 12
exercisability or termination, that are the same as or different from the
existing awards, all as the Compensation Committee may approve.
OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS
The 1996 Plan provides that each non-employee director who is first elected
or appointed after the 1996 Annual Meeting of Stockholders would receive an
automatic initial grant of an option to purchase 5,000 shares of Common Stock.
In addition, promptly following the date of each Annual Meeting of Stockholders
(including the 1996 meeting), each non-employee director elected by the
stockholders (including the current nominees) would receive an additional
automatic grant of an option to purchase 5,000 shares of Common Stock; provided,
however, that no non-employee director will receive more than one such automatic
grant in any calendar year. The exercise price for grants to non-employee
directors will be 100% of the Fair Market Value of the Common Stock on the date
of grant. Each such option will expire ten years from the grant date (subject to
earlier termination). Each option will become exercisable in accordance with a
schedule based upon the achievement of certain price levels for the Common Stock
as follows: if the average price of the Common Stock (calculated on an average
price basis over 30 consecutive trading days) is (a) 125% or more of the
exercise price, then the option shall be exercisable as to 25% of the option
shares; (b) 150% or more of the exercise price, then the option shall be
exercisable as to 50% of such shares; (c) 175% or more of the exercise price,
then the option shall be exercisable as to 75% of such shares; and (d) 200% or
more of the exercise price, then the entire option shall be exercisable.
Notwithstanding the foregoing, the option will vest on the eighth anniversary of
the grant date as to the entire number of shares without regard to the price of
the Common Stock. If a non-employee director's service terminates by reason of
death, disability, inability to perform his or her duties or retirement, the
options will immediately become and remain fully exercisable for one year after
the date of such termination or until the expiration date of such option,
whichever occurs first. If a non-employee director's service terminates for any
other reason, that portion of the option that is not exercisable at such time
shall terminate and any portion then exercisable may be exercised until the
earlier of three months after the date of termination or the expiration date of
the option. In the event of a Change of Control (as defined below), each option
granted to a non-employee director will become immediately exercisable.
The table below sets forth the determinable benefits that would be granted
under the 1996 Plan if the stockholders approve the 1996 Plan.
1996 PERFORMANCE AWARD PLAN
NEW PLAN BENEFITS(1)
<TABLE>
<CAPTION>
NUMBER
POSITION DOLLAR VALUE OF UNITS
--------------------------------------------------------------- ------------ --------
<S> <C> <C>
Non-Employee Directors(2)...................................... (3) 40,000
</TABLE>
- - ---------------
(1) Awards to employees, including Executive Officers, are subject to the
discretion of the Compensation Committee and neither the individuals to
receive awards, the number of awards granted to any individual or group nor
amounts payable with respect to awards have been determined at this time.
(2) Assumes re-election to the Board of Directors.
(3) Dollar value is not determinable. Option exercise price will be 100% of Fair
Market Value of the Common Stock on the grant date.
ADMINISTRATION; CHANGE OF CONTROL
The 1996 Plan will be administered by the Compensation Committee,
constituted so as to permit the 1996 Plan to comply with the "disinterested
administration" requirements of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the "outside director" requirements of
Section 162(m). The Compensation Committee will have the authority within the
terms and limitations of the 1996 Plan to designate recipients of awards,
determine or modify the form, amount, terms, conditions, restrictions, and
limitations of awards, including vesting provisions, terms of exercise of an
award, expiration dates and the treatment of an award in the event of the
retirement, disability, death or other termination of a participant's
9
<PAGE> 13
employment with the Company and to construe and interpret the 1996 Plan. Such
authority includes the discretion to accelerate and extend outstanding awards
but does not include the ability to reduce by amendment the exercise or purchase
price of an outstanding award.
The Compensation Committee is authorized to include specific provisions in
award agreements relating to the treatment of awards in the event of a "Change
of Control" of the Company (as defined in the 1996 Plan) and is authorized to
take certain other actions in such an event. A "Change of Control" is defined
generally to include the following: (i) certain acquisitions of 25% or more of
the combined voting power of the then outstanding shares of Common Stock and any
other securities of the Company entitled to vote generally in the election of
directors, or (ii) the failure of persons currently serving on the Board of
Directors, together with persons nominated by at least a majority of the
continuing directors, to constitute at least a majority of the Board, or (iii)
approval by the Company's stockholders of any reorganization, merger or
consolidation of the Company in which the beneficial owners of the Common Stock
and other voting securities of the Company immediately prior to such transaction
fail to beneficially own at least 50% of the combined voting power of all
securities entitled to vote generally in the election of directors following any
such transaction, or (iv) approval by the Company's stockholders of any complete
liquidation or dissolution of the Company, or of any sale or other disposition
of all or substantially all of the Company's assets.
The Compensation Committee may delegate to the officers or employees of the
Company and its subsidiaries the authority to execute and deliver such
instruments and documents and to take actions necessary, advisable or convenient
for the effective administration of the 1996 Plan. It is intended generally that
the share-based awards under the 1996 Plan and the 1996 Plan itself comply with
and (as to share-based awards) be interpreted in a manner that, in the case of
participants who are subject to Section 16 of the Exchange Act and for whom (or
whose awards) the benefits of Rule 16b-3 are intended, satisfy the applicable
requirements of Rule 16b-3, so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under that Section. In general,
the Cash-Based Awards will not be subject to Section 16. The 1996 Plan provides
that neither the Company nor any member of the Board of Directors or of the
Compensation Committee shall have any liability to any person for any action
taken or not taken in good faith under the 1996 Plan.
AMENDMENT AND TERMINATION
The Board of Directors will have the authority to amend, suspend or
discontinue the 1996 Plan at any time, provided that no such action will affect
any outstanding award in any manner adverse to the participant without the
consent of the participant. The 1996 Plan may be amended by the Board of
Directors without further stockholder approval, and no guidelines have been
established relating to the nature of the amendments that may be made to the
1996 Plan without stockholder approval. Such approval, however, may be required
(e.g., in the case of amendments that materially increase the available number
of shares under the 1996 Plan) to preserve the qualifying status of the 1996
Plan under Rule 16b-3, to satisfy tax rules applicable to performance-based
compensation under Section 162(m) or to subsequent grants of incentive stock
options, or to satisfy other applicable legal requirements. Amendments made
without stockholder approval could increase the costs to the Company under the
1996 Plan, although the amount thereof is not determinable. Because the
Compensation Committee will retain the discretion to set and change the specific
targets for each performance period under a performance-based award intended to
be exempt from Section 162(m), stockholder ratification of the performance goals
will be required, in any event, at five-year intervals in the future to exempt
awards granted under the 1996 Plan from the limitations on deductibility.
AUTHORIZED SHARES; OTHER PROVISIONS; NON-EXCLUSIVITY
The number of shares of Common Stock that may be issued in respect of
awards under the 1996 Plan will not exceed 4,000,000 shares. An equal number of
share units representing share-based awards exercisable for or payable in cash
will also be available. Shares of Common Stock subject to share-based awards
payable in cash or stock (whether at the discretion of the Company or the
participant) will initially be counted against each of the share limit and the
share unit limit. When payment is ultimately made in respect of the award in
either shares or cash, a number of shares or share units relating to the
alternative form of consideration not so paid will be recredited to the
applicable limit. The 4,000,000 figure for each of the number of shares and the
10
<PAGE> 14
number of units to be available under the Plan is based on an estimate of the
number of shares and units that will be subject to awards granted during the
first five years of the term of the Plan.
The number and kind of shares available for grant and the shares subject to
outstanding awards (as well as individual share and share unit limits on awards,
performance targets and exercise prices of awards) may be adjusted to reflect
the effect of a stock dividend, split, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares, extraordinary dividend or
other distribution or other similar transaction. Any unexercised or
undistributed portion of any expired, cancelled, terminated or forfeited award,
or any alternative form of consideration under an award that is not paid in
connection with the settlement of any portion of an award, will again be
available for award under the 1996 Plan, whether or not the participant has
received benefits of ownership (such as dividends or dividend equivalents or
voting rights) during the period in which the participant's ownership was
restricted or otherwise not vested. Although shares subject to cancelled options
or SARs will be counted against the individual share-based award limits to the
extent required by Section 162(m), only shares actually issued or share units
actually paid will be charged against the aggregate share or share unit limits,
respectively, under the 1996 Plan. Upon approval of the 1996 Plan by the
stockholders, the Company intends to register under the Securities Act of 1933,
as amended (the "Securities Act") the number of shares of Common Stock reserved
for issuance under the 1996 Plan.
Full payment for shares purchased on exercise of any option, along with
payment of any required tax withholding, must be made at the time of such
exercise in cash or, if permitted by the Compensation Committee, in exchange for
a promissory note in favor of the Company, in shares of stock having a fair
market value equivalent to the exercise price and withholding obligation, or any
combination thereof, or pursuant to such "cashless exercise" procedures as may
be permitted by the Compensation Committee. Any payment required in respect of
other awards may be in such amount and in any lawful form of consideration as
may be authorized by the Compensation Committee.
The 1996 Plan generally does not impose any minimum vesting periods on
options or other awards. However, shares of stock acquired after exercise of an
option may not, in the ordinary course, be sold before the expiration of six
months from the date of grant. The maximum term of an option or any other award
is ten years.
The 1996 Plan is not exclusive and does not limit the authority of the
Board of Directors or its committees to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority. The 1996 Plan is not expected to be the exclusive cash
incentive plan for eligible persons (including Executive Officers) of the
Company and its subsidiaries; other cash incentive plans (such as short-term or
operating entity specific plans) may be retained and/or developed to implement
the Company's broader-based compensation objectives and policies. Approval of
the 1996 Plan by the stockholders of the Company will not be deemed to
constitute an approval of any such other compensation, plan or authority.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of Federal income tax consequences
to participants and the Company relating to nonqualified and incentive stock
options and certain other awards that may be granted under the 1996 Plan. This
discussion does not purport to cover all tax consequences relating to stock
options and other awards.
An optionee will not recognize income upon the grant of a nonqualified
stock option to purchase shares of Common Stock. Upon exercise of the option,
the optionee will recognize ordinary compensation income equal to the excess of
the fair market value of the Common Stock on the date the option is exercised
over the option price for such stock. The tax basis of the option stock in the
hands of the optionee will equal the option price for the stock plus the amount
of ordinary compensation income the optionee recognizes upon exercise of the
option, and the holding period for the stock will commence on the day the option
is exercised. An optionee who sells option stock will recognize capital gain or
loss measured by the difference between the tax basis of the stock and the
amount realized on the sale. Such gain or loss will be long-term if the stock is
held for more than one year after exercise. The Company or a subsidiary will be
entitled to a deduction equal to the amount of ordinary compensation income
recognized by the optionee. The deduction will be allowed at the same time the
optionee recognizes the income.
11
<PAGE> 15
An optionee will not recognize income upon the grant of an incentive stock
option to purchase shares of Common Stock and will not recognize income upon
exercise of the option, provided such optionee was an employee of the Company or
a subsidiary at all times from the date of grant until three months prior to
exercise (or one year prior to exercise in the event of death or disability).
Generally, the amount by which the fair market value of the Common Stock on the
date of exercise exceeds the option price will be includable in alternative
minimum taxable income for purposes of determining alternative minimum tax and
such amount will be added to the tax basis of such stock for purposes of
determining alternative minimum taxable income in the year the stock is sold.
Where an optionee who has exercised an incentive stock option sells the shares
acquired upon exercise more than two years after the grant date and more than
one year after exercise, long-term capital gain or loss will be recognized equal
to the difference between the sales price and the option price. An optionee who
sells such shares within two years after the grant date or within one year after
exercise will recognize ordinary compensation income in an amount equal to the
lesser of the difference between (a) the option price and the fair market value
of such shares on the date of exercise or (b) the option price and the sales
proceeds. Any remaining gain or loss will be treated as a capital gain or loss.
The Company or a subsidiary will be entitled to a deduction equal to the amount
of ordinary compensation income recognized by the optionee in this case. The
deduction will be allowable at the same time the optionee recognizes the income.
The current federal income tax consequences of other awards authorized
under the plan generally follow certain basic patterns: SARs are taxed and
deductible in substantially the same manner as nonqualified stock options;
performance awards and dividend equivalents generally are subject to tax at the
time of payment; unconditional stock bonuses are generally subject to tax
measured by the value of the payment received; and Cash-Based Awards generally
are subject to tax at the time of payment; in each of the foregoing cases, the
Company or a subsidiary will generally have (at the time the participant
recognizes income) a corresponding deduction.
If, as a result of a Change of Control, a participant's options or SARs or
other rights become immediately exercisable, or cash, shares or other benefits
covered by another type of award are immediately vested or issued, the
additional economic value, if any, attributable to the acceleration or issuance
may be deemed a "parachute payment" under Section 280G of the Code. In such
case, the participant may be subject to a 20% non-deductible excise tax as to
all or a portion of such economic value, in addition to any income tax payable.
The Company or a subsidiary will not be entitled to a deduction for that portion
of any parachute payment that is subject to the excise tax.
Notwithstanding any of the foregoing discussion with respect to the
deductibility of compensation under the 1996 Plan, Section 162(m) would render
non-deductible to the Company certain compensation in excess of $1,000,000 in
any year to certain Executive Officers of the Company, unless such excess
compensation is "performance-based" (as defined) or is otherwise exempt from
Section 162(m). The applicable conditions of an exemption for a
performance-based compensation plan include, among others, a requirement that
the stockholders approve the material terms of the plan. Stock options, SARs and
certain (but not all) other types of awards that may be granted to Executive
Officers as contemplated by the 1996 Plan are intended to qualify for the
exemption for performance-based compensation under Section 162(m). However, in
light of the ambiguities in Section 162(m) and uncertainties regarding its
ultimate interpretation and application in these circumstances, no assurances
can be given that compensation paid under the 1996 Plan to any Executive Officer
will in fact be deductible if it should, together with other non-exempt
compensation paid to such Executive Officer, exceed $1,000,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE CATELLUS
DEVELOPMENT CORPORATION 1996 PERFORMANCE AWARD PLAN. ALL CURRENT DIRECTORS AND
OFFICERS AND ALL NOMINEES WILL RECEIVE OR ARE ELIGIBLE TO RECEIVE BENEFITS UNDER
THE 1996 PLAN AND WILL HAVE AN INTEREST IN THE 1996 PLAN.
Approval of the 1996 Plan will require the affirmative vote of holders of a
majority of the shares having voting power present or represented at the
meeting, provided the votes cast with respect to the proposal to approve the
1996 Plan represent over 50% in interest of the shares entitled to vote on the
proposal. Proxies received by the Company will be voted for approval of the 1996
Plan unless a contrary choice is indicated.
12
<PAGE> 16
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 25, 1996, information with
respect to the number of outstanding shares of Common Stock of the Company
beneficially owned by each director of the Company, each nominee for director,
each of the named executive officers and all directors and executive officers of
the Company as a group. Unless otherwise indicated, and except as such powers
may be shared with their spouses under applicable law, the persons indicated
below have sole voting power and investment power with respect to the shares of
Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
(c)
NUMBER OF
(a) SHARES OF
NUMBER OF COMMON STOCK
SHARES OF UNDERLYING
COMMON UNEXERCISABLE
STOCK (b) OPTIONS
BENEFICIALLY PERCENT AND
BENEFICIAL OWNER OWNED(1) OF CLASS(2) RIGHTS(3)
---------------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Directors and Nominees
Joseph F. Alibrandi..................... 4,384(4) (5) 1,000
Daryl J. Carter......................... 0 0% 5,000
Christine Garvey........................ 0 0% 5,000
Nelson C. Rising........................ 3,571(6) (5) 1,000,000
Joseph R. Seiger........................ 3,000(7) (5) 149,319
Jacqueline R. Slater.................... 3,000(7) (5) 2,000
Thomas M. Steinberg..................... 42,675(8) (5) 4,000
Tom C. Stickel.......................... 3,408(9) (5) 2,000
Beverly Benedict Thomas................. 0 0% 5,000
Named Current Executive Officers
Stephen P. Wallace...................... 1,091(10) (5) 500,000(11)
Timothy J. Beaudin...................... 2,840(12) (5) 250,000(13)
Donald M. Parker........................ 33,333(14) (5) 116,667(15)
Named Former Executive Officers
Jeffrey K. Gwin......................... 5,000 (5) 0(16)
Theodore L. Tanner...................... 4,042(17) (5) 142,496(18)
All current Directors and Executive
Officers as a group (18 persons)...... 104,166(19) (5) 2,644,749
</TABLE>
- - ---------------
(1) Reflects shares of Common Stock with respect to which the named individuals
or members of the specified group are deemed to be the beneficial owners as
of the date indicated under rules promulgated by the Securities and
Exchange Commission ("SEC").
(2) Beneficial and percentage ownership are determined in accordance with
applicable SEC rules and do not take into account shares of Common Stock
reported in column (c) above.
(3) Reflects shares of Common Stock with respect to which the rights of the
named individuals or members of the specified group to acquire beneficial
ownership (i.e., through the exercise of an option or other right, the
conversion of a security, the revocation or termination of a trust, or
otherwise) first arise more than sixty days after the date indicated.
Except as otherwise noted, column (c) reflects shares of Common Stock that
may be acquired upon the exercise of stock options granted pursuant to the
Company's Incentive Stock Compensation Plan or the Executive Stock Option
Plan.
(4) Includes 4,000 shares of Common Stock which may be acquired upon the
exercise of options granted to non-employee directors in February 1992
pursuant to the Executive Stock Option Plan.
(5) Each person or group of persons has beneficial ownership of less than 1% of
the outstanding Common Stock.
(6) Includes 3,571 shares of Common Stock held for the benefit of Mr. Rising by
the Trustee of the Profit Sharing & Savings Plan and Trust.
13
<PAGE> 17
(7) Includes 3,000 shares of Common Stock which may be acquired upon the
exercise of options granted to non-employee directors in February 1993
pursuant to the Executive Stock Option Plan.
(8) Includes (i) 4,856 shares of Common Stock issuable upon conversion of 880
shares of the Company's Series A Preferred Stock beneficially owned by Mr.
Steinberg, (ii) 24,282 shares of Common Stock issuable upon conversion of
4,400 shares of Series A Preferred Stock held by and for a charitable
remainder unitrust of which Mr. Steinberg is the trustee, (iii) 11,037
shares of Common Stock issuable upon conversion of 2,000 shares of Series A
Preferred Stock held in a joint account by Mr. Steinberg and (iv) 1,000
shares of Common Stock which may be acquired upon the exercise of options
granted to non-employee directors in June 1994 pursuant to the Executive
Stock Option Plan. Mr. Steinberg disclaims beneficial ownership of the
4,400 shares of Series A Preferred Stock held by the trust and the 2,000
shares of Series A Preferred Stock held in the joint account.
(9) Includes 408 shares of Common Stock issuable upon conversion of 74 shares
of the Company's Series A Preferred Stock beneficially owned by Mr. Stickel
and 3,000 shares of Common Stock which may be acquired upon the exercise of
options granted to non-employee directors in February 1993 pursuant to the
Executive Stock Option Plan.
(10) Includes 1,091 shares of Common Stock held for the benefit of Mr. Wallace
by the Trustee of the Profit Sharing & Savings Plan and Trust.
(11) Includes 330,000 shares of Common Stock and 170,000 shares of Common Stock
which may be acquired upon the exercise of options granted in 1995 and
1996, respectively, pursuant to the Executive Stock Option Plan.
(12) Includes 2,840 shares of Common Stock held for the benefit of Mr. Beaudin
by the Trustee of the Profit Sharing & Savings Plan and Trust.
(13) Includes 100,000 shares of Common Stock and 150,000 shares of Common Stock
which may be acquired upon the exercise of options granted in 1995 and
1996, respectively, pursuant to the Executive Stock Option Plan.
(14) Includes 33,333 shares of Common Stock which may be acquired upon the
exercise of options granted pursuant to the Executive Stock Option Plan.
(15) Includes 66,667 shares of Common Stock and 50,000 shares of Common Stock
which may be acquired upon the exercise of options granted in 1995 and
1996, respectively, pursuant to the Executive Stock Option Plan.
(16) Mr. Gwin resigned as an executive officer and as an employee of the Company
effective February 23, 1996. All of Mr. Gwin's options expired or were
terminated by agreement before March 25, 1996.
(17) Includes 44 shares of Common Stock held for the benefit of Mr. Tanner by
the Trustee of the Profit Sharing & Savings Plan and Trust and 3,998 shares
of Common Stock which may be acquired upon the exercise of options granted
pursuant to the Executive Stock Option Plan. Mr. Tanner resigned as an
executive officer and as an employee of the Company effective December 31,
1995. All of Mr. Tanner's options expired on April 1, 1996.
(18) Mr. Tanner resigned as an executive officer and as an employee of the
Company effective December 31, 1995. All of Mr. Tanner's options expired on
April 1, 1996.
(19) Includes (i) 40,175 shares of Common Stock issuable upon conversion of
7,280 shares of the Company's Series A Preferred Stock held or administered
by Mr. Steinberg (see Note 8 above), (ii) 408 shares of Common Stock
issuable upon conversion of 74 shares of Series A Preferred Stock held by
Mr. Stickel, (iii) 8,751 shares of Common Stock held for the benefit of the
executive officers by the Trustee of the Profit Sharing & Savings Plan and
Trust, and (iv) 52,748 shares of Common Stock which may be acquired by
directors and executive officers upon the exercise of options granted
pursuant to the Incentive Stock Compensation Plan or the Executive Stock
Option Plan.
Except as described below, as of March 25, 1996, no director or executive
officer of the Company beneficially owned shares of the Company's Series A
Preferred Stock or Series B Preferred Stock. As of March 25, 1996, Mr. Steinberg
beneficially owned 7,280 shares (representing less than 1% of the outstanding
shares) of the Series A Preferred Stock. As set forth above, Mr. Steinberg has
sole voting and investment power with respect to 880 of the shares, holds 2,000
of the shares in a joint account and acts as trustee for the benefit of a
charitable remainder unitrust with respect to 4,400 of the shares. Mr. Steinberg
disclaims beneficial ownership of the 4,400 shares held by the trust and the
2,000 shares held in the joint account. As of March 25, 1996, Mr. Stickel
beneficially owned 74 shares (representing less than 1% of the outstanding
shares) of the Series A Preferred Stock.
14
<PAGE> 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following are the only persons or entities known to the Company to be
the beneficial owner of more than 5% of the Common Stock. All information
presented is as of March 25, 1996.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED(1) CLASS(1)
--------------------------------------------------- ------------ -----------
<S> <C> <C>
California Public Employees' Retirement System..... 37,757,342(2) 45.90%(2)
Lincoln Plaza, 400 P Street
Sacramento, California 95814
Merrill Lynch & Co., Inc.(3)....................... 4,266,288(4) 5.41%(4)
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
</TABLE>
- - ---------------
(1) Beneficial and percentage ownership are determined in accordance with
applicable SEC rules.
(2) Includes 7,757,737 shares of Common Stock issuable to CalPERS upon
conversion of 1,405,702 shares of the Company's Series A Preferred Stock.
The Series A Preferred Stock is convertible at any time at a conversion
price of $9.06 per share of Common Stock.
(3) Merrill Lynch & Co., Inc. and its subsidiaries, Merrill Lynch Group Inc. and
Princeton Services, Inc., are parent holding companies of Merrill Lynch
Asset Management, L.P. and Fund Asset Management, L.P. (collectively,
"Merrill Lynch"). Merrill Lynch may be deemed to be the beneficial owner of
certain of the Company's securities by virtue of its activities as an
investment advisor. Merrill Lynch has disclaimed any beneficial ownership of
the Company's securities.
(4) Includes 4,265,306 shares of Common Stock issuable to Merrill Lynch upon
conversion of 836,000 shares of the Company's Series B Preferred Stock. The
Series B Preferred Stock is convertible at any time at a conversion price of
$9.80 per share of Common Stock.
REGISTRATION RIGHTS AGREEMENT
The Company, BAREIA, Olympia & York SF Holdings Corporation ("O&Y
Holdings") and Itel Corporation were 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 Holdings in
1990 in connection with the distribution by Santa Fe Pacific Corporation ("SFP")
to its stockholders of the Common Stock held by SFP (the "Distribution"). The
term also includes the Common Stock issued upon conversion of a 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 shares of the Company's Series A Preferred Stock (and shares of the
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.
On November 14, 1995, JMB/Bay Area Partners withdrew as the sole general
partner of BAREIA. In connection with the dissolution and winding up of BAREIA,
CalPERS received a distribution of BAREIA's shares of Common Stock and Series A
Preferred Stock. CalPERS and the Company executed a letter agreement dated
November 14, 1995, which confirmed that CalPERS is the Holder of the Registrable
Securities under the Registration Rights Agreement and is entitled to the
benefits thereof.
15
<PAGE> 19
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 four 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. Nelson C. Rising, the
Company's Chief Executive Officer, who is the only Company officer who is also a
member of the Board. The Board has the sole authority to set Mr. Rising's
compensation. The Committee also reviews the individual performance of the other
executives whose compensation is detailed in this Proxy Statement. The Committee
takes into account the observations and subjective evaluations presented by Mr.
Rising and, in general, confirms the recommendations for salary adjustments for
the executives proposed by Mr. Rising.
Set forth below is a report of the Committee addressing the Company's
compensation policies for 1995 as they affected Mr. Rising, the Company's Chief
Executive Officer, and Messrs. Beaudin, Gwin, Parker, Wallace and Tanner, the
six executive officers (the "Named Executives") who for 1995 were the Company's
six most highly paid executive officers.
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 consists of financial incentives based upon performance and
stock options with price vesting provisions. The Committee endorses the position
that performance-based cash compensation 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 requires that a 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 officer's annual compensation is
variable and is based on individual performance.
ANNUAL COMPENSATION PROGRAM
Annual total cash compensation for senior management consists of base
salary and awards under the Company's Annual Performance-Based Cash Bonus
Program (the "Bonus Program").
Base salaries for executive officers are determined 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 real estate
holding and development companies. Annual salary adjustments are determined by
evaluating the financial performance of the Company and by subjectively
evaluating the performance of each executive officer, and also by taking into
account changing responsibilities. Where appropriate, the Committee considers
non-financial performance
- - ---------------
* The Compensation and Benefits Committee Report shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filings of the Company pursuant to the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended,
except to the extent the Company specifically incorporates this Report by
reference therein, and shall not be deemed soliciting material or otherwise
deemed filed under either of such Acts.
16
<PAGE> 20
measures, including such elements as the productivity of the relevant working
group or business unit, 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 Committee, however, does not apply any specific quantitative
formula in making compensation decisions.
The Bonus Program consists of cash payments based upon a percentage of an
executive's salary. The amount of the bonus awards are determined by evaluating
the performance of the executive as compared against predetermined goals and
objectives, a portion of which relates to non-financial performance measures and
a portion of which relates to the contributions to the financial performance of
the Company. During 1995, the Company's annual cash bonus awards to executives
were in amounts ranging from 20% to up to 100% of an individual's base salary.
Commencing in 1996, the maximum annual cash bonus award for which executives may
be eligible under the Bonus Program was increased by the Committee to up to 200%
of an individual's base salary.
The salary and bonus paid during 1995 to Mr. Rising were based on the terms
of his employment agreement with the Company (as amended). Mr. Rising received
$350,000, the maximum annual bonus award under the Bonus Program for 1995,
constituting an amount equivalent to 100% of his annual base salary. The 1995
bonus award was made in recognition of Mr. Rising's creation of a new strategic
plan for the Company, the recruitment of a new senior executive and operating
team, cost reductions and innovative leadership. Under a 1995 amendment to Mr.
Rising's employment agreement, his maximum bonus was increased from up to 75% of
his base salary to up to 200% of his base salary. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising."
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for senior management consists solely of
the use of stock options. All of the senior executive officers participate in
this long-term program. The primary purpose of the program is to offer an
incentive for the improvement of the long-term performance of the Company and
promote growth in stockholder value.
Options may be granted under the stock option program to senior managers of
the Company at the discretion of the Committee. Unless otherwise provided for by
the Committee, the exercise price for all options granted to senior managers is
the fair market value on the date of the grant. (Under the option program, fair
market value is deemed to be the average of the closing prices of the Common
Stock for the five trading days immediately preceding the applicable date of
grant.)
The Committee has concluded that the use of stock options more closely
aligns management's long-term incentive compensation with increased stockholder
value, as reflected in stock performance, as compared to a long-term cash bonus
program. The Committee has also concluded that the "front loading" of the
options to senior managers (i.e., the grant of a higher number of stock options
with a longer vesting period than a normal grant and a price vesting feature),
better aligns management's interests with stockholder focus and the long-term
horizons of a real estate company.
Pursuant to the terms of his employment agreement with the Company, Mr.
Rising received an option grant under the Executive Stock Option Plan in July
1994 as part of his compensation for 1994. He also received an option in 1995 to
further encourage his achievement of long-term corporate goals. (See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising and "COMPENSATION OF EXECUTIVE
OFFICERS"). All of the executive officers named in the Summary Compensation
Table also received stock option grants in 1995.
In the fall of 1995, the Committee retained an independent compensation
consulting firm to review senior executive compensation. After reviewing that
firm's report, the Committee, and later the Board, approved a revision of the
Company's executive compensation program as follows: (1) all stock option awards
previously issued to the Company's executives shall be modified and restated
(subject to each recipient's approval) so as to: (a) eliminate any 5% exercise
price escalator in the stock option agreements, (b) provide for vesting over a
four-year period at the rate of 25% per year, but only if the Company's stock
price has also achieved the following benchmarks (calculated on an average price
basis over 30 consecutive trading days): $8.50 (as to the
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<PAGE> 21
first 25% increment); $10.50 (as to the second 25% increment); $12.50 (as to the
third 25% increment); and $15.00 (as to the final 25% increment); (c) provide
that the earliest vesting date for new options be January 1, 1997; (d) provide
that outstanding stock option awards that have a three-year vesting schedule
would retain a three-year vesting schedule as provided therein, but with the new
stock price benchmarks; (e) provide that all options would vest in the eighth
year from the date of grant, regardless of the stock price (except for those
options with seven-year terms which would vest in the sixth year from the date
of grant); and (f) provide that all other terms of the stock option, including
the initial exercise price, would remain the same; and (2) except as may
otherwise be authorized by the Committee, all future stock option award
agreements for the Company's executives shall contain provisions consistent with
the foregoing. The Committee also considered expanding the type of equity
incentive arrangements that could be provided to officers, directors and
employees as well as increasing the number of shares issuable under incentive
plans and increasing the number of incentive plan shares to be received by any
one plan participant.
As a result of these actions and such consideration, the Board is
recommending that stockholders approve the 1996 Plan. See "CATELLUS DEVELOPMENT
CORPORATION 1996 PERFORMANCE AWARD PLAN".
TAX MATTERS
The Code limits the deductibility for federal income tax purposes of
certain compensation paid to "covered employees," which term ordinarily includes
at least 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.
<TABLE>
<S> <C>
Joseph F. Alibrandi, Chairman Christine Garvey
Daryl J. Carter Tom C. Stickel
</TABLE>
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<PAGE> 22
EMPLOYMENT AGREEMENTS
AGREEMENT WITH MR. RISING
The Company and Mr. Rising entered into an Amended and Restated Employment
Agreement (the "Rising Agreement") dated as of November 29, 1995, pursuant to
which Mr. Rising extended his agreement to serve as President and Chief
Executive Officer of the Company through December 31, 2000. The Rising Agreement
supersedes the Employment Agreement dated July 27, 1994 between Mr. Rising and
the Company. The Rising Agreement requires the Board of Directors, through
December 31, 2000, to use its best efforts to cause Mr. Rising to be elected as
a member of the Board of Directors.
The Rising Agreement provides for a minimum base salary of $350,000 per
year, to be increased by 5% in 1996 and by an additional 5% each year thereafter
(compounded annually), as well as an annual maximum bonus of 200% of his then
salary. Mr. Rising is also entitled under the Rising Agreement to receive four
weeks of paid vacation each year and payment of life insurance premiums. In
addition, Mr. Rising will receive employment benefits (including but not limited
to pension, medical insurance and disability benefits) and perquisites on terms
no less favorable than those made available by the Company from time to time to
other members of the Company's senior management.
The Rising Agreement provides for the grant to Mr. Rising of an option to
purchase 300,000 shares of Common Stock (the "1995 Grant") pursuant to the
Executive Stock Option Plan (in addition to the options covering 700,000 shares
previously granted to Mr. Rising in 1994). The option has a term of ten years
and an exercise price equal to the Fair Market Value of the Common Stock on the
grant date. The option becomes exercisable in accordance with a schedule based
upon the achievement of certain price levels for the Common Stock (the "Pricing
Schedule"), limited by the expiration of various time periods. The Pricing
Schedule operates as follows: if the average price of the Common Stock
(calculated on an average price basis over 30 consecutive trading days) is (a)
$8.50 or more, then the option shall be exercisable as to 25% of the option
shares; (b) $10.50 or more, then the option shall be exercisable as to 50% of
such shares; (c) $12.50 or more, then the option shall be exercisable as to 75%
of such shares; and (d) $15.00 or more, then the entire option shall be
exercisable. No portion of the option may vest prior to November 29, 1996.
Assuming the conditions of the Pricing Schedule are met, 25% of the option shall
vest on November 29, 1996, 50% of the option shall vest on November 29, 1997,
75% of the option shall vest on November 29, 1998 and the entire option shall
vest on November 29, 1999. Notwithstanding the foregoing, the option will vest
on November 29, 2003 as to the entire number of shares without reference to the
Pricing Schedule. The option is subject to accelerated vesting upon certain
events relating to termination of Mr. Rising's employment as described below.
The Rising Agreement also provides for the amendment of the terms of Mr.
Rising's existing options to purchase an aggregate of 700,000 shares of Common
Stock. The first option has a term of ten years and the second has a term of
seven years. Each option is for 350,000 shares and, prior to the amendments
described below, became exercisable in three equal annual installments
commencing January 1, 1996, with full vesting occurring on January 1, 1998. The
options had an initial exercise price equal to the Fair Market Value of the
Common Stock on the date of grant, which increased by 5%, compounded annually,
on January 1 of each year, commencing January 1, 1996. The Company and Mr.
Rising entered into amended and restated award agreements, each dated March 22,
1996, which eliminate the 5% escalator with respect to the exercise price and
change the vesting schedule. Under the revised vesting schedule, each option
becomes exercisable in accordance with a schedule based upon the achievement of
certain price levels for the Common Stock, limited by the expiration of various
time periods. The Pricing Schedule operates as follows: if the average price of
the Common Stock (calculated on an average price basis over 30 consecutive
trading days) is (a) $8.50 or more, then each option shall be exercisable as to
25% of the option shares; (b) $10.50 or more, then each option shall be
exercisable as to 50% of such shares; (c) $12.50 or more, then each option shall
be exercisable as to 75% of such shares; and (d) $15.00 or more, then each
option shall be exercisable as to the entire number of shares. No portion of the
options may vest prior to January 1, 1996. Assuming the conditions of the
Pricing Schedule are met, one third of each option shall vest on January 1,
1996, two thirds of each option shall vest on January 1, 1997 and each option
shall vest as to the entire number of shares on January 1, 1998. Notwithstanding
the foregoing, the seven year option will vest on July 27, 2000 as to the entire
number of
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<PAGE> 23
shares and the ten year option will vest on July 27, 2002 as to the entire
number of shares, in each case without reference to the Pricing Schedule.
The Rising Agreement expires on December 31, 2000 (the "Expiration Date")
unless earlier terminated as described below. The Company may unilaterally elect
to terminate the Rising Agreement prior to such date, without financial
obligations to Mr. Rising, only on account of Mr. Rising's death, "permanent
disability" (as defined in the Rising Agreement) or otherwise for "cause"
(defined in the Rising Agreement to include the willful and continued failure by
Mr. Rising to perform his material duties or the engaging by Mr. Rising in
egregious misconduct involving serious moral turpitude). Mr. Rising may elect to
terminate the Rising Agreement upon 30 days advance written notice to the
Company. In the event of any termination of Mr. Rising's employment prior to the
Expiration Date, Mr. Rising is entitled to receive his salary through the date
of termination, an amount in respect of any unused vacation days (as determined
in accordance with effective Company policy) and any other amounts or benefits
payable under the Company's employee benefit plans. In all cases, other than a
termination for cause or on account of Mr. Rising's resignation, Mr. Rising is
also entitled to receive a pro rata share of his target bonus payment for the
year in which the termination occurs. If the Company terminates Mr. Rising's
employment without cause, or if Mr. Rising is "constructively discharged"
(defined in the Rising Agreement to include (among other things) the assignment
of duties inconsistent with the position of President and Chief Executive
Officer, the failure to be elected to such offices or as a member of the Board
of Directors, a reduction in salary or bonus potential or certain geographic
relocations), then in addition to the amounts described above, Mr. Rising will
also be entitled to receive an amount equal to the product obtained by
multiplying the average of Mr. Rising's annual salary and annual bonus for the
prior two years (or if Mr. Rising has not served for 24 months then the average
annual salary and average annual bonus for such shorter period) times two and
his stock options will become immediately exercisable in full.
In the event Mr. Rising is constructively discharged or terminated without
cause within 12 months after the occurrence of a "change of control" of the
Company, then in lieu of the benefits described above, Mr. Rising shall be
entitled to receive a lump sum payment in an amount which is equal to three
times the "base amount" as such term is defined in Section 280G of the Code
(subject to certain limitations contained in such section). In addition, the
stock options granted to Mr. Rising shall become immediately exercisable in
full. For purposes of the Rising Agreement, a "change of control" is defined
generally to include the following: (i) certain acquisitions of 25% or more of
the combined voting power of the then outstanding shares of Common Stock and any
other securities of the Company entitled to vote generally in the election of
directors, or (ii) the failure of persons currently serving on the Board of
Directors, together with persons nominated by at least a majority vote of the
continuing directors, to constitute at least a majority of the Board, or (iii)
approval by the Company's stockholders of any reorganization, merger or
consolidation of the Company in which the beneficial owners of the Common Stock
and other voting securities of the Company immediately prior to such transaction
fail to beneficially own at least 50% of the combined voting power of all
securities entitled to vote generally in the election of directors following any
such transaction, or (iv) approval by the Company's stockholders of any complete
liquidation or dissolution of the Company, or of any sale or other disposition
of all or substantially all of the Company's assets.
AGREEMENT WITH MR. WALLACE
The Company and Mr. Wallace entered into an Employment Agreement dated as
of July 24, 1995, pursuant to which Mr. Wallace serves as Senior Vice President
and Chief Financial Officer of the Company.
The Employment Agreement provides for a minimum base salary of $285,000 for
fiscal year 1995, subject to annual review, as well as an annual target bonus of
between 30% and 60% of base salary. Effective 1996, the Compensation Committee
increased the maximum annual cash bonus awards for which executives (including
Mr. Wallace) may be eligible under the Bonus Program to up to 200% of an
individual's base salary. See "COMPENSATION AND BENEFITS COMMITTEE REPORT ON
EXECUTIVE COMPENSATION." Mr. Wallace also received a signing bonus of $62,500
prior to commencing employment with the Company. Mr. Wallace received a lump sum
payment of $45,000 to cover relocation expenses, the use of an apartment in San
Francisco for up to 120 days (or until he found permanent housing in Northern
California) and $2,000 for routine repairs in connection with the sale of his
residence. The Company agreed to pay up to $10,000 of legal fees incurred by Mr.
Wallace in connection with the negotiation and preparation of his
20
<PAGE> 24
Employment Agreement. The Employment Agreement provides that Mr. Wallace will
receive employment benefits (including but not limited to pension, medical
insurance and disability benefits) and perquisites appropriate for executives
with comparable duties. Mr. Wallace is also entitled under the Employment
Agreement to receive three weeks of paid vacation each year, provided that for
the period from July 21, 1995 through June 30, 1996, Mr. Wallace is entitled to
five weeks of paid vacation.
The Employment Agreement also provides for the grant to Mr. Wallace of an
option to purchase 330,000 shares of Common Stock pursuant to the Executive
Stock Option Plan. The option has a term of ten years and, prior to the
amendments described below, became exercisable in three equal annual
installments commencing July 24, 1996, with full vesting occurring on July 24,
1998, subject to accelerated vesting upon certain events relating to termination
of Mr. Wallace's employment as described below. The option had an initial
exercise price equal to the Fair Market Value of the Common Stock on the date of
grant, which increased by 5%, compounded annually, on July 24 of each year,
commencing July 24, 1996.
On March 22, 1996, the Company and Mr. Wallace entered into an amended and
restated award agreement which eliminates the 5% escalator with respect to the
exercise price and changes the vesting schedule. Under the revised vesting
schedule, the option becomes exercisable in accordance with a schedule based
upon the achievment of certain price levels for the Common Stock, limited by the
expiration of various time periods. The Pricing Schedule operates as follows: if
the average price of the Common Stock (calculated on an average price basis over
30 consecutive trading days) is (a) $8.50 or more, then the option shall be
exerciseable as to 25% of the option shares; (b) $10.50 or more, then the option
shall be exercisable as to 50% of such shares; (c) $12.50 or more, then the
option shall be exercisable as to 75% of such shares; and (d) $15.00 or more,
then the entire option shall be exercisable. No portion of the option may vest
prior to July 24, 1996. Assuming the conditions of the Pricing Schedule are met,
one third of the option shall vest on July 24, 1996, two thirds of the option
shall vest on July 24, 1997 and the entire option shall vest on July 24, 1998.
Notwithstanding the foregoing, the option will vest on July 24, 2003 as to the
entire number of shares without reference to the Pricing Schedule.
The Employment Agreement expires on June 30, 1998 unless earlier terminated
as described below; provided, however, that unless the Company gives notice of
termination to Mr. Wallace by June 30, 1997, the term of the Employment
Agreement shall automatically extend for an additional 12 months. The Company
may unilaterally elect to terminate the Employment Agreement prior to such date
only on account of Mr. Wallace's death, "disability" (as defined in the
Employment Agreement) or otherwise for "cause" (defined in the Employment
Agreement to include the willful and continued misconduct by the executive to
substantially perform his duties other than any such failure resulting from his
incapacity due to physical or mental illness after the issuance of a notice as
provided for in the Employment Agreement); provided that prior to terminating
Mr. Wallace for "cause" the Company must provide Mr. Wallace with a notice of
the proposed termination, including a written explanation of the grounds, an
opportunity to confer with the Chief Executive Officer of the Company and 60
days after receipt of such notice to cure any alleged non-performance of his
duties. If the Company terminates Mr. Wallace's employment without cause or if
Mr. Wallace terminates his employment with the Company for "good reason" (as
defined below), he is entitled to receive benefits equal to (a) the number of
full months remaining in the Employment Agreement multiplied by Mr. Wallace's
monthly base salary (determined without regard to amounts payable under any
bonus program or other forms of extraordinary compensation) as of the date of
termination, (b) the number of full months remaining in the Employment Agreement
multiplied by Mr. Wallace's target annual bonus for the year in which the
termination occurred divided by 12, and (c) unpaid salary with respect to any
vacation days accrued but not taken as of the date of termination (provided that
such benefits are not subject to set-off or mitigation). "Good reason" is
defined in Mr. Wallace's Employment Agreement to exist if without Mr. Wallace's
express consent any of the following occurs: a reduction in Mr. Wallace's annual
base salary as in effect on the date of the Employment Agreement or as the same
may be increased from time to time, a demotion from the position or title of
chief financial officer or the assigning of duties to Mr. Wallace that are
inconsistent in any substantial respect or are a reduction in any substantial
respect from the position, authority or responsibilities associated with the
position of chief financial officer or the relocation of the Company's
headquarters or a requirement that Mr. Wallace be based anywhere other than 50
miles from the site of the
21
<PAGE> 25
current headquarters of the Company or the failure of the Company to perform its
obligations under the Employment Agreement.
In the event Mr. Wallace is terminated by the Company without cause within
12 months after the occurrence of a "change of control" of the Company or
following the execution of an agreement providing for a "change of control" of
the Company, he will be entitled to receive a lump sum payment in an amount
which is equal to three times the base amount as such term is defined in Section
280(g) of the Code (subject to certain limitations contained in such section).
In addition, Mr. Wallace's options will become immediately exercisable in full.
For purposes of Mr. Wallace's Employment Agreement, "change of control" has the
same meaning as in Mr. Rising's employment agreement. See "Agreement with Mr.
Rising" above.
AGREEMENT WITH MR. BEAUDIN
The Company and Mr. Beaudin entered into an Employment Agreement dated as
of February 10, 1995, pursuant to which Mr. Beaudin initially served as Vice
President, Property Operations of the Company. On January 30, 1996, Mr. Beaudin
was appointed Senior Vice President, Property Operations of the Company.
The Employment Agreement provides for a minimum base salary of $185,000 for
fiscal year 1995, subject to annual review, as well as an annual target bonus of
between 30% and 60% of base salary through December 31, 1995; provided, however,
that for the period of service from February 10, 1995 through December 31, 1995,
Mr. Beaudin would receive a guaranteed bonus of $50,000. Though no bonuses are
guaranteed for 1996 or 1997, Mr. Beaudin's target bonus for such years is 30% of
his base salary, with a maximum annual bonus of 60% of the base salary.
Effective 1996, the Compensation Committee increased the maximum annual cash
bonus awards for which executives (including Mr. Beaudin) may be eligible under
the Bonus Program to up to 200% of an individual's base salary. See
"COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION." Mr.
Beaudin also received a signing bonus of $50,000 prior to commencing employment
with the Company. The Company made a lump sum payment of $25,000 to Mr. Beaudin
to cover relocation expenses. Mr. Beaudin is entitled under the Employment
Agreement to receive employment benefits (including but not limited to pension,
medical, insurance and disability benefits) and perquisites appropriate for
executives with comparable duties and three weeks of paid vacation per year.
The Employment Agreement also provides for the grant to Mr. Beaudin of
options to purchase an aggregate of 100,000 shares of Common Stock pursuant to
the Executive Stock Option Plan. The first option has a term of ten years and
the second has a term of seven years. Each option is for 50,000 shares and,
prior to the amendments described below, became exercisable in three equal
annual installments commencing January 1, 1996, with full vesting occurring on
January 1, 1998, subject to accelerated vesting upon certain events relating to
termination of Mr. Beaudin's employment as described below. Each of the options
had an initial exercise price equal to the Fair Market Value of the Common Stock
on the date of grant, which increased by 5%, compounded annually, on January 1
of each year, commencing January 1, 1996.
On March 22, 1996, the Company and Mr. Beaudin entered into amended and
restated award agreements which eliminate the 5% escalator with respect to the
exercise price and change the vesting schedule. Under the revised vesting
schedule, each option becomes exercisable in accordance with a schedule based
upon the achievement of certain price levels for the Common Stock, limited by
the expiration of various time periods. The Pricing Schedule operates as
follows: if the average price of the Common Stock (calculated on an average
price basis over 30 consecutive trading days) is (a) $8.50 or more, then each
option shall be exerciseable as to 25% of the option shares; (b) $10.50 or more,
then each option shall be exercisable as to 50% of such shares; (c) $12.50 or
more, then each option shall be exercisable as to 75% of such shares and (d)
$15.00 or more, then each option shall be exercisable as to the entire number of
shares. No portion of the options may vest prior to January 1, 1996. Assuming
the conditions of the Pricing Schedule are met, one third of each option shall
vest on January 1, 1996, two thirds of each option shall vest on January 1, 1997
and each option shall vest as to the entire number of shares on January 1, 1998.
Notwithstanding the foregoing, the seven year option will vest on February 10,
2001 as to the entire number of shares and the ten year option will
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<PAGE> 26
vest on February 10, 2003 as to the entire number of shares, in each case
without reference to the Pricing Schedule.
The Employment Agreement expires on February 9, 1998 (the "Expiration
Date") unless earlier terminated as described below. The Company may
unilaterally elect to terminate the Employment Agreement prior to the Expiration
Date on the same terms and conditions as provided for in Mr. Wallace's
employment agreement except the Company is not required to give a written notice
and opportunity to cure. If the Company terminates Mr. Beaudin's employment
without cause or if Mr. Beaudin terminates his employment with the Company for
"good reason" (defined in Mr. Beaudin's Employment Agreement to include a
reduction in base salary except for across-the-board reductions similarly
affecting all management personnel or the failure of the Company to fulfill its
obligations under the Employment Agreement), he is entitled to receive the same
benefits as set forth in Mr. Wallace's employment agreement. In the event of any
termination of Mr. Beaudin's employment prior to the Expiration Date, Mr.
Beaudin shall continue to be treated as an employee for purposes of the
Company's group health and dental programs and shall receive benefits
substantially comparable to those in effect on the day before the date of
termination. In addition, if Mr. Beaudin terminates his employment with the
Company for "good reason" or if the Company terminates Mr. Beaudin's employment
without "cause" or if Mr. Beaudin is terminated without cause within 12 months
following a "change of control", Mr. Beaudin's options will become immediately
exercisable in full. For purposes of Mr. Beaudin's award agreements, "change of
control" has the same meaning as in Mr. Rising's employment agreement. See
"Agreement with Mr. Rising" above.
AGREEMENT WITH MR. PARKER
The Company and Mr. Parker entered into a Letter of Understanding dated as
of March 24, 1995, pursuant to which Mr. Parker serves as Vice President Bay
Area Development of the Company. The Letter of Understanding provides for an
annual base salary of $200,000 per year as well as a guaranteed bonus of $60,000
for the period of service from March 24, 1995 through December 31, 1995 and a
performance bonus of up to an additional $60,000 for the year ending December
31, 1995.
The Letter of Understanding also provides for the grant to Mr. Parker of
options to purchase an aggregate of 100,000 shares of Common Stock pursuant to
the Executive Stock Option Plan. The first option has a term of ten years and
the second has a term of seven years. Each option is for 50,000 shares and
becomes exercisable in three equal annual installments commencing March 24,
1996, with full vesting occurring on March 24, 1998, subject to accelerated
vesting upon certain events relating to termination of Mr. Parker's employment
as described below. Each of the options has an initial exercise price equal to
the Fair Market Value of the Common Stock on the date of grant, which increases
by 5%, compounded annually, on March 24 of each year, commencing March 24, 1996.
If the Company terminates Mr. Parker's employment for any reason other than as a
result of retirement, death, disability or for cause or if Mr. Parker is
terminated at any time within 12 months following a "change of control" Mr.
Parker's options will become immediately exercisable in full. For purposes of
Mr. Parker's award agreements, "change of control" has the same meaning as in
Mr. Rising's employment agreement. See "Agreement with Mr. Rising" above.
AGREEMENTS WITH MR. GWIN
The Company and Mr. Gwin entered into a Memorandum of Understanding dated
February 16, 1996, pursuant to which Mr. Gwin resigned, effective February 23,
1996, as an executive officer and employee of the Company. Pursuant to the
Memorandum of Understanding, Mr. Gwin is entitled to receive $27,077.64 as
payment of accrued salary and benefits and $143,000 as severance benefits. In
addition, the Company agreed to pay health insurance premiums until the earlier
of the date upon which group health insurance coverage is available to Mr. Gwin
or 18 months from the resignation date.
In addition, the Company and Mr. Gwin entered into a Consulting Agreement
dated as of February 25, 1996, pursuant to which Mr. Gwin serves as a consultant
to the Company. The Consulting Agreement is effective from February 26, 1996 and
terminates on May 31, 1996. Pursuant to the Consulting Agreement Mr. Gwin is
entitled to receive a monthly fee of $15,000 (commencing March 1, 1996) and a
fee of $2,000 for service during February 1996.
23
<PAGE> 27
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the fiscal years ended December
31, 1995, December 31, 1994 and December 31, 1993 to the Named Executives
indicated below.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
YEAR ($) ($)(2) ($)(3) (#) ($)(4)
---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current Executive Officers(1)
Nelson C. Rising...................... 1995 350,000 350,000 -- 300,000 7,632
Chief Executive Officer 1994 134,857 77,576 197,422(5) 700,000 --
Stephen P. Wallace.................... 1995 124,231 148,000(6) 61,096(7) 330,000 17,960(8)
Senior Vice President and Chief
Financial Officer
Timothy J. Beaudin.................... 1995 164,721 151,750(9) 46,223(10) 100,000 5,550
Senior Vice President
Property Operations
Donald Parker......................... 1995 154,615 120,000 -- 100,000 152,597(11)
Vice President Bay Area Development
Former Executive Officers
Jeffrey K. Gwin....................... 1995 154,125 41,715 -- 9,224 7,632
Vice President 1994 150,000 51,000(12) -- 68,500 7,632
Development 1993 150,000 22,500 -- -- 7,509
Theodore J. Tanner.................... 1995 133,575 80,340 -- 7,994 96,143(13)
Vice President 1994 130,000 15,600 -- 103,500 7,232
Development 1993 130,000 32,500 -- 6,872
</TABLE>
- - ---------------
(1) Mr. Rising commenced employment with the Company in September 1994, Mr.
Beaudin commenced employment with the Company in February 1995, Mr. Parker
commenced employment with the Company in March 1995 and Mr. Wallace
commenced employment with the Company in July 1995.
(2) Unless otherwise noted, the amount for any year represents the amount
earned for that fiscal year pursuant to the Bonus Program.
(3) Except in the case of Messrs. Rising, Wallace and Beaudin (see notes 5, 7
and 10 below), Other Compensation in the form of the value of certain
perquisites and other personal benefits did not, in the aggregate, exceed
the lower of $50,000 or 10% of the aggregate salary and bonus compensation
earned by any of the Named Executives during any of the applicable
reporting periods.
(4) Unless otherwise noted, the amounts listed represent the amount of the
Company's contributions for the year pursuant to the Profit Sharing &
Savings Plan and Trust.
(5) Includes payment to Mr. Rising of $175,000 in lieu of relocation benefits
and payment of $19,797 for legal and compensation consulting services
rendered to Mr. Rising in connection with the negotiation and preparation
of his employment agreement with the Company. The Company also provided Mr.
Rising with an automobile allowance of $2,625. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising."
(6) Includes a signing bonus of $62,500.
(7) Includes payment to Mr. Wallace of $45,000 for relocation expenses, $2,000
for repairs to his residence in connection with relocation and $10,000 in
legal fees. The Company also provided Mr. Wallace with an automobile
allowance of $4,096. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr.
Wallace."
(8) Includes payment to Mr. Wallace of $17,960 (exclusive of ordinary expenses
reimbursable to Mr. Wallace) in connection with a consulting agreement
between the Company and Mr. Wallace prior to Mr. Wallace's employment with
the Company.
24
<PAGE> 28
(9) Includes a signing bonus of $50,000.
(10) Includes payment to Mr. Beaudin of $25,000 for relocation expenses and
payment of $12,974 for living expenses. The Company also provided Mr.
Beaudin with an automobile allowance of $8,249. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Beaudin."
(11) Includes payment to Mr. Parker and Donald Martin Parker, Inc. of $146,597
in connection with a consulting agreement between the Company and Donald
Martin Parker, Inc. prior to Mr. Parker's employment with the Company.
(12) Mr. Gwin resigned as an executive officer and employee of the Company
effective February 23, 1996. Includes a special bonus of $15,000 for Mr.
Gwin's role in restructuring the Company.
(13) Mr. Tanner resigned as an executive officer and employee of the Company
effective December 31, 1995. Amount of All Other Compensation includes
$66,950 as severance payable in connection with the termination of Mr.
Tanner's employment and $21,889 as payment in lieu of unused vacation and
unused personal leave.
STOCK OPTIONS
The following table presents information concerning the options granted to
each of the Named Executives during 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - ------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS EXERCISE GRANT
OPTIONS GRANTED TO OR BASE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE(2) VALUE(3)
- - -------------------------------- ---------- ---------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current Executive Officers
Nelson C. Rising................ 300,000(4) 30.3 6.00 11/29/05 $ 984,000
Stephen P. Wallace.............. 330,000(5) 33.3 6.325 07/24/05 1,181,400
Timothy J. Beaudin.............. 50,000(6) 5.0 5.75 02/10/02 144,500
50,000(6) 5.0 5.75 02/10/05 175,000
Donald M. Parker................ 50,000(7) 5.0 5.475 03/24/02 99,500
50,000(7) 5.0 5.475 03/24/05 121,500
Former Executive Officers
Jeffrey K. Gwin................. 9,224(8) .9 5.575 02/01/05 31,454
Theodore J. Tanner.............. 7,994(9) .8 5.575 02/01/05 27,260
</TABLE>
- - ---------------
(1) All options reflected in the table were granted pursuant to the terms of the
Executive Stock Option Plan. The Executive Stock Option Plan is administered
by the Compensation Committee, which has full power to adopt and amend rules
to implement the terms of the Executive Stock Option Plan, including the
power to reprice options. Options granted under the Executive Stock Option
Plan are exercisable for cash or any other property (including already owned
shares of Common Stock) deemed acceptable by the Compensation Committee.
(2) Options are subject to earlier termination in certain events either upon or
following termination of employment. To the extent that stock options
awarded to an executive officer under the Executive Stock Option Plan have
become exercisable prior to the officer's resignation or termination of
employment with the Company (other than for cause or in the event of death
or disability), such options remain exercisable in accordance with their
terms for up to three months following the officer's termination date.
However, if such officer engages in activity in competition with the
Company, divulges confidential information or otherwise is terminated for
cause, such unexercised options are immediately forfeited. All options which
have not yet become exercisable prior to the officer's termination date
automatically terminate on such
25
<PAGE> 29
date. In the event employment is terminated by reason of death, any
unexercised portion of the option that is or becomes vested upon death will
remain exercisable for a period of one year following the date of death. If
the officer retires at or after age 65, or ceases to be an employee due to
disability or in the event of death prior to the vesting date, the number of
shares deemed vested shall equal the number of option shares multiplied by a
fraction, the numeration of which is the number of months elapsed from the
date of grant and the denominator of which is the number of months from the
date of grant to the final vesting date.
(3) As permitted under SEC rules, the Black-Scholes option pricing model was
chosen to estimate the grant date present value of the options set forth in
the table. The Company's use of this model should not be construed as an
endorsement of its accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model, require a prediction about the
future movement of the stock price. Each of the values reported in the table
is calculated on the assumption that the option is exercised at the end of
the option term. The following additional assumptions have been made for
purposes of calculating the grant date present value for the options shown
in the table: (i) with respect to Mr. Rising's option, volatility at 28.41%
and a risk free rate of return at 6.01%; (ii) with respect to Mr. Wallace's
option, volatility at 28.12% and a risk free rate of return at 6.67%; (iii)
with respect to Mr. Beaudin's options, volatility at 30.26% and a risk free
rate of return at 7.62% for the seven-year option and 7.75% for the 10-year
option; (iv) with respect to Mr. Parker's options, volatility at 30.44% and
a risk free rate of return at 2.08% for the seven-year option and 2.31% for
the 10-year option; and (v) with respect to Mr. Gwin's and Mr. Tanner's
options, volatility at 30.26% and a risk free rate of return at 7.78%. A
dividend yield at 0% was assumed for all options.
(4) The option is exercisable in accordance with the Pricing Schedule described
above. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr. Rising." In the
event Mr. Rising is "constructively discharged" (as defined in the Rising
Agreement) or terminated without cause or within 12 months following a
"change of control" (as defined in the Rising Agreement), the option will
vest as to the entire number of shares. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising."
(5) The option is exercisable in accordance with the Pricing Schedule described
above. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr. Wallace." In the
event Mr. Wallace terminates his employment for "good reason" (as defined in
his employment agreement), or involuntarily ceases to be an employee for any
reason other than as a result of retirement, death, disability or for
"cause" or is terminated at any time within 12 months following a "change of
control," the option will vest as to the entire number of shares. In
addition, Mr. Wallace's award agreement provides that if Mr. Wallace's
employment is terminated following the execution of an agreement providing
for a "change of control" the option will vest as to the entire number of
shares. For purposes of the option, "change of control" has the same meaning
as in the Rising Agreement. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr.
Rising."
(6) The options are exercisable in accordance with the Pricing Schedule
described above. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr. Beaudin."
In the event Mr. Beaudin terminates his employment for "good reason" (as
defined in his employment agreement), or involuntarily ceases to be an
employee for any reason other than as a result of retirement, death,
disability or for "cause" or is terminated at any time within 12 months
following a "change of control," the option will vest as to the entire
number of shares. For purposes of the option, "change of control" has the
same meaning as in the Rising Agreement. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising."
(7) The options are exercisable in accordance with the vesting schedule
described above. See "EMPLOYMENT AGREEMENTS -- Agreement with Mr. Parker."
The initial exercise price of $5.475 per share increases by 5%, compounded
annually, on March 24 of each year, commencing March 24, 1996. On March 24,
1996, the exercise price increased to $5.75 per share. In the event Mr.
Parker involuntarily ceases to be an employee of the Company for any reason
other than as a result of retirement, disability, death or for "cause" or is
terminated at any time within 12 months following a "change of control," the
option will vest as to the entire number of shares. For purposes of the
option, "change of control" has
26
<PAGE> 30
the same meaning as in the Rising Agreement. See "EMPLOYMENT
AGREEMENTS -- Agreement with Mr. Rising."
(8) Mr. Gwin resigned as an executive officer and employee of the Company
effective February 23, 1996. All of Mr. Gwin's options expired or were
terminated by agreement before March 25, 1996.
(9) Mr. Tanner resigned as an executive officer and employee of the Company
effective December 31, 1995. All of Mr. Tanner's options expired on April 1,
1996.
None of the Named Executives exercised options during 1995. The following
table sets forth the number of unexercised options and in-the-money options
(divided between exercisable and unexercisable options)held by the Named
Executives as of December 31, 1995.
FISCAL YEAR-END OPTION HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Current Executive Officers
Nelson C. Rising........................... 0 1,000,000 0 0
Stephen P. Wallace......................... 0 330,000 0 0
Timothy J. Beaudin......................... 0 100,000 0 $ 12,500.00
Donald M. Parker........................... 0 100,000 0 40,000.00
Former Executive Officer
Jeffrey K. Gwin(1)......................... 59,034 167,724 0 2,767.20
Theodore L. Tanner(2)...................... 2,000 144,494 0 2,398.20
</TABLE>
- - ---------------
(1) Mr. Gwin resigned as an executive officer and employee of the Company
effective February 23, 1996. All of Mr. Gwin's options expired or were
terminated by agreement before March 25, 1996.
(2) Mr. Tanner resigned as an executive officer and employee of the Company
effective December 31, 1995. All of Mr. Tanner's options expired on April 1,
1996.
27
<PAGE> 31
COMPARISON OF CUMULATIVE TOTAL RETURNS*
The following is a comparison of the cumulative total stockholder return on
a $100 investment in the 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 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.
In previous years the Company used a peer group index that included the
following companies: American Real Estate Partners, L.P., The Arlen Corp.,
Bradley Real Estate Trust SBI, Catellus Development Corporation, Arbor Property
Trust, Forest City Enterprises, Inc., First Union Real Estate Equity & Mortgage
Investments SBI, Koger Equity, National Reality, L.P., The Newhall Land and
Farming Company, L.P., Presidential Realty Corp. and Rouse Company.
In 1995, the Company initiated a new strategic plan which shifted the focus
of its business. Accordingly, the Company decided to alter its peer group index
to reflect the change in the Company's business focus, including the Company's
diversification into the residential market (in addition to its industrial,
retail and office interests) and increased emphasis on generating income through
real estate management services.
The Company's new peer group index includes the following companies:
Atlantic Gulf Communities, Duke Realty Investments, First Industrial Realty
Trust, First Union Real Estate Equity & Mortgage Investments SBI, Forest City
Enterprises, Inc, The Newhall Land and Farming Company, L.P., Rouse Company,
Security Capital Industrial Trust, Spieker Properties, Standard Pacific Corp.
and Washington REIT.
The new peer group index is intended to provide a relevant comparison of
total annual return. The new peer group includes companies involved in
diversified real estate operations such as industrial, retail and office as well
as companies involved in fee management services and residential real estate.
The companies selected for the new peer group have a market capitalization close
to that of the Company. In 1995, the average market capitalization for the
Company and those companies selected for the peer group was $442 million and
$500 million, respectively.
CATELLUS DEVELOPMENT CORPORATION
COMPARISON OF CUMULATIVE TOTAL RETURN
DECEMBER 4, 1990 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
CATELLUS DE-
MEASUREMENT PERIOD VELOPMENT PREVIOUS PEER NEW PEER
(FISCAL YEAR COVERED) CORPORATION S&P 500 GROUP INDEX GROUP INDEX
<S> <C> <C> <C> <C>
12/4/90 100 100 100 100
12/31/90 118 102 90 99
12/31/91 115 128 108 125
12/31/92 79 137 103 122
12/31/93 91 148 118 141
12/30/94 69 150 113 134
12/29/95 69 195 127 155
</TABLE>
* This section of the Proxy Statement shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filings of the Company pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934, as amended, except to the extent
the Company specifically incorporates the section by reference therein, and
shall not be deemed soliciting material or otherwise deemed filed under either
of such Acts.
28
<PAGE> 32
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. These persons are
required by regulation of the SEC 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, 1995, except as described in the following sentence, the
Company's officers, directors and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements. Mr. Steinberg failed to
timely file a Form 4 relating to the purchase of 530 shares of the Company's
Series A Preferred Stock.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH BNSF AND ITS AFFILIATES
Robert D. Krebs, who was a director of the Company until May 31, 1995, is
the President and Chief Executive Officer of Burlington Northern Sante Fe
Corporation ("BNSF"). Mr. Krebs also serves as Chairman, President and Chief
Executive Officer and a director of Sante Fe Pacific Corporation ("SFP") and The
Atchison, Topeka and Santa Fe Railway Company ("ATSF"), two subsidiaries of
BNSF. The Company, BNSF, SFP, ATSF, and their respective affiliates have entered
into agreements from time to time. Mr. Alibrandi, who currently serves as a
director of the Company and a member of the Compensation Committee, is a
director of BNSF. For a description of agreements with BNSF and its affiliates,
see "Compensation Committee Interlocks and Insider Participation" below.
Mr. Krebs is also a director of Santa Fe Pacific Gold Corporation ("SFP
Gold"). In 1989, the Company entered into an Exploration Agreement and Option to
Lease (the "Exploration Agreement") with SFP Gold (formerly Santa Fe Pacific
Minerals Corporation). Under the Exploration Agreement, the Company granted to
SFP Gold 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 Gold's right of first refusal to purchase
such Subject Land. SFP Gold is obligated to spend one dollar per acre per year
on exploration activities on the Subject Lands. The Company also granted SFP
Gold an exclusive continuing option to acquire mining leases as to all or any
portion of the Subject Lands, pursuant to which SFP Gold would pay a flat
royalty and, if any minerals are mined and marketed, a production royalty to the
Company. The Exploration Agreement continues through December 31, 2014. As of
December 31, 1995, approximately 21,000 acres of the Company's land were subject
to the Exploration Agreement. No payments were made to the Company by SFP Gold
under the Exploration Agreement in 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, Messrs. Alibrandi, Carter and
Stickel and Ms. Garvey served as members of the Compensation Committee. None of
these members is an employee or officer of the Company.
Ms. Garvey is an executive officer of Bank of America NT & SA ("Bank of
America"). During 1995, the Company and its subsidiaries had banking
relationships with Bank of America. Such relationships, pursuant to which funds
are deposited with and borrowed from Bank of America on terms which the Company
believes are competitive, reasonable and customary, may continue in 1996. The
total amount paid by the Company and its subsidiaries to Bank of America during
1995 pursuant to such arrangements was approximately $7,333,741.00. Such amount
includes interest, commitment fees and other banking fees paid to Bank of
America as principal and/or in its capacity as agent for other lenders
participating in the syndicate, together with certain third-party expenses
incurred by Bank of America which were reimbursed by the Company. Mr. Alibrandi
is a director of Bank of America and a director and member of the compensation
committee of
29
<PAGE> 33
BankAmerica Corporation, the holding company of Bank of America. Mr. Alibrandi
and Ms. Garvey have abstained from all votes of the Board of Directors with
respect to matters involving Bank of America.
Mr. Alibrandi is also a director of BNSF. The Company and BNSF and their
respective affiliates have entered into agreements from time to time as
described below.
LEASES. SFP and ATSF leased approximately 250,000 square feet of office
space in Chicago from the Company under a lease that terminated in April 1995.
The subleases existing at the time of the termination will remain in place and
the subtenants will pay rent directly to the Company. In connection with the SFP
and ATSF leases and their termination, SFP and ATSF paid a total of $497,916.40
(net of sublease income) to the Company in 1995. ATSF also separately leases
approximately 1,080 square feet of office space from the Company for which it
paid the Company $20,381.22 in 1995.
PROPERTY MANAGEMENT AGREEMENTS. In December 1990, Catellus Management
Corporation ("CMC"), a wholly owned subsidiary of 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 ATSF
Management Agreement was negotiated and extended in 1994. Under the ATSF
Management Agreement, ATSF agreed to pay certain management fees and sales
commissions to the Company with respect to the managed properties and fees for
consulting services. In 1995, CMC earned $3,270,083.44 for fees and commissions
under the ATSF Management Agreement.
The ATSF Management Agreement expired on December 31, 1995. CMC and BNSF
entered into a new Management Agreement which became effective December 31,
1995. Under the BNSF Management Agreement, CMC agreed to act as exclusive
management and selling agent for BNSF's railroad property located in 28 states
and two Canadian provinces. The BNSF Management Agreement terminates on December
31, 2000, subject to cancellation by BNSF with 90 days prior written notice and
the payment of a termination fee. Under the BNSF Management Agreement, BNSF
agreed to pay certain management fees and sales commissions to CMC beginning in
1996.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1995,
including financial statements, is being sent to stockholders of record as of
the close of business on March 29, 1996 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, 1995 as filed with the Commission to any
stockholder who submits a written request to Corporate Communications, at the
Company's offices, 201 Mission Street, San Francisco, California 94105.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP ("Price Waterhouse"), the Company's independent public
accountant, has examined the Company's financial statements for the fiscal year
ended December 31, 1995. 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.
30
<PAGE> 34
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than December 6, 1996 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.
31
<PAGE> 35
APPENDIX A
CATELLUS DEVELOPMENT CORPORATION
1996 PERFORMANCE AWARD PLAN
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Purpose................................................................ A-1
SECTION 2. Definitions; Rules of Construction..................................... A-1
SECTION 3. Eligibility............................................................ A-3
SECTION 4. Awards................................................................. A-3
SECTION 5. Shares of Stock and Share Units Available Under Plan................... A-5
SECTION 6. Award Agreements....................................................... A-6
SECTION 7. Adjustments; Change in Control; Acquisitions........................... A-8
SECTION 8. Administration......................................................... A-10
SECTION 9. Non-Employee Director Options.......................................... A-11
SECTION 10. Amendment and Termination of Plan...................................... A-13
SECTION 11. Miscellaneous.......................................................... A-13
</TABLE>
A-i
<PAGE> 37
CATELLUS DEVELOPMENT CORPORATION
1996 PERFORMANCE AWARD PLAN
SECTION 1. PURPOSE.
The purpose of this Plan is to benefit the Corporation's stockholders by
encouraging high levels of performance by individuals who contribute to the
success of the Corporation and its Subsidiaries and to enable the Corporation
and its Subsidiaries to attract, motivate, retain and reward talented and
experienced individuals. This Plan is also intended to enable the Corporation to
attract, motivate and retain experienced and knowledgeable independent directors
through the benefits provided under Section 9.
SECTION 2. DEFINITIONS; RULES OF CONSTRUCTION.
(a) DEFINED TERMS. The terms defined in this Section shall have the
following meanings for purposes of this Plan:
"AWARD" means an award granted pursuant to Section 4 or Section 9.
"AWARD AGREEMENT" means an agreement described in Section 6 or Section 9
entered into between the Corporation and a Participant, setting forth the terms
and conditions of an Award granted to a Participant.
"BENEFICIARY" means a person or persons (including a trust or trusts)
validly designated by a Participant or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution, to receive the
benefits specified in the Award Agreement and under this Plan in the event of a
Participant's death.
"BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the
Corporation.
"CASH-BASED AWARDS" means Awards, as described in Section 4(a)(5), that, if
paid, must be paid in cash and that are neither denominated in nor have a value
derived from the value of, nor an exercise or conversion privilege at a price
related to, shares of Stock.
"CHANGE OF CONTROL" is defined in Section 7(c).
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMITTEE" means the Committee described in Section 8.
"CORPORATION" means Catellus Development Corporation.
"EMPLOYEE" means any employee (whether or not also a director) of the
Corporation or any of its Subsidiaries, but excludes, in the case of an
Incentive Stock Option, an Employee of any Subsidiary that is not a "subsidiary
corporation" of the Corporation as defined in Code Section 424(f).
"EPS" means earnings per common share on a fully diluted basis determined
by dividing (i) net earnings, less dividends on preferred stock of the
Corporation by (ii) the weighted average number of common shares and common
share equivalents outstanding.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXECUTIVE OFFICER" means executive officer as defined in Rule 3b-7 under
the Exchange Act, provided that, if the Board has designated the executive
officers of the Corporation for purposes of reporting under the Exchange Act,
the designation shall be conclusive for purposes of this Plan.
"FAIR MARKET VALUE" means the average of the closing prices of the relevant
security for the five trading days immediately preceding the applicable date as
reported on the composite tape of New York Stock Exchange issues (or, if the
security is not so listed, the principal national stock exchange on which the
security is then listed or, if the security is not listed on any national stock
exchange, such other reporting system as shall be selected by the Committee).
The Committee shall determine the Fair Market Value of any security that is not
publicly traded using criteria as it shall determine, in its sole discretion, to
be appropriate for the valuation.
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"FOR CAUSE" means (i) the continued failure by the Participant to
substantially perform his or her duties with the Corporation or a Subsidiary
(other then any such failure resulting from his or her incapacity due to
physical or mental illness), or (ii) the engaging by the Participant in conduct
which is materially injurious to the Corporation, monetarily or otherwise, in
either case as determined by the Committee.
"INSIDER" means any person who is subject to Section 16(b) of the Exchange
Act.
"NET CASH FLOW" means cash and cash equivalents derived from either (i) net
cash flow from operations or (ii) net cash flow from operations, financings and
investing activities, as determined by the Committee at the time an Award is
granted.
"NON-EMPLOYEE DIRECTOR" means a member of the Board of Directors of
Catellus who is not also an Employee.
"OFFICER" means any officer (whether or not also an employee) of the
Corporation or any of its Subsidiaries, but excludes, in the case of an
Incentive Stock Option, an Officer of any Subsidiary that is not a "subsidiary
corporation" of the Corporation as defined in Code Section 424(f).
"OPTION" means a Nonqualified Stock Option or an Incentive Stock Option, as
described in Section 4(a)(1) or (2).
"PARTICIPANT" means any Employee, any Officer or any Non-Employee Director
who is granted an Award pursuant to this Plan that remains outstanding.
"PERFORMANCE-BASED AWARDS" is defined in Section 4(b).
"PERFORMANCE GOAL" means EPS or ROE or Net Cash Flow or Total Stockholder
Return, and "PERFORMANCE GOALS" means any combination thereof.
"QDRO" means a qualified domestic relations order as defined in Section
414(p) of the Code or Title I, Section 206(d)(3) of the Employee Retirement
Income Security Act of 1974, as amended from time to time (to the same extent as
if this Plan was subject thereto), or the applicable rules thereunder.
"ROE" means consolidated net income of the Corporation (less preferred
dividends) divided by the average consolidated common stockholders equity.
"RULE 16B-3" means Rule 16b-3 under Section 16 of the Exchange Act, as
amended from time to time.
"SHARE-BASED AWARDS" means Awards, as described in Sections 4(a)(1) through
(4), that are payable or denominated in or have a value derived from the value
of, or an exercise or conversion privilege at a price related to, shares of
Stock.
"SHARE UNITS" means the number of units under a Share-Based Award payable
solely in cash or is actually paid in cash, determined by reference to the
number of shares of Stock by which the Share-Based Award is measured.
"STOCK" means shares of Common Stock of the Corporation, par value $.01 per
share, subject to adjustments made under Section 7 or by operation of law.
"STOCK TRADING PRICE" means the average of the closing prices of the
relevant security for 30 consecutive trading days as reported on the composite
tape of New York Stock Exchange issues (or, if the security is not so listed,
the principal national stock exchange on which the security is then listed or,
if the security is not listed on any national stock exchange, such other
reporting system as shall be selected by the Committee). The Committee shall
determine the Fair Market Value of any security that is not publicly traded
using criteria as it shall determine, in its sole discretion, to be appropriate
for the valuation.
"SUBSIDIARY" means, as to any person, any corporation, association,
partnership, joint venture or other business entity of which 50% or more of the
voting stock or other equity interests (in the case of entities other than
corporations) is owned or controlled (directly or indirectly) by that entity, or
by one or more of the Subsidiaries of that entity, or by a combination thereof.
"TOTAL STOCKHOLDER RETURN" means, with respect to the Corporation or other
entities (if measured on a relative basis), the (i) change in the market price
of its common stock (as quoted in the principal market on which it is traded as
of the beginning and ending of the period) plus dividends and other
distributions paid, divided by (ii) the beginning quoted market price, all of
which is adjusted for any changes in equity structure including, but not limited
to, stock splits and stock dividends.
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(b) FINANCIAL AND ACCOUNTING TERMS. Except as otherwise expressly provided
or the context otherwise requires, financial and accounting terms, including
terms defined herein as Performance Goals, are used as defined for purposes of,
and shall be determined in accordance with, generally accepted accounting
principles and as derived from the audited consolidated financial statements of
the Corporation, prepared in the ordinary course of business.
(c) RULES OF CONSTRUCTION. For purposes of this Plan and the Award
Agreements, unless otherwise expressly provided or the context otherwise
requires, the terms defined in this Plan include the plural and the singular,
and pronouns of either gender or neuter shall include, as appropriate, the other
pronoun forms.
SECTION 3. ELIGIBILITY.
Any one or more Awards may be granted to any Employee who is designated by
the Committee to receive an Award. Non-Employee Directors shall not be eligible
to receive any Awards except for the Non-Qualified Stock Options granted
automatically without action of the Committee under the provisions of Section 9.
SECTION 4. AWARDS.
(a) TYPE OF AWARDS. The Committee may grant any of the following types of
Awards, either singly, in tandem or in combination with other Awards:
(1) Nonqualified Stock Options. A Nonqualified Stock Option is an Award in
the form of an option to purchase Stock that is not intended to comply with the
requirements of Code Section 422. Unless the Committee provides otherwise, and
such provision is reflected in the Award Agreement, the exercise price of each
Nonqualified Stock Option granted under this Plan shall be not less than the
Fair Market Value of the Stock on the date that the Option is granted. All
Nonqualified Stock Options granted at an exercise price not less than Fair
Market Value on the date of grant shall be treated as Performance-Based Awards
subject to the applicable restrictions of Section 4(b).
(2) Incentive Stock Options. An Incentive Stock Option is an Award in the
form of an option to purchase Stock that is intended to comply with the
requirements of Code Section 422 or any successor section of the Code. The
exercise price of each Incentive Stock Option granted under this Plan shall be
not less than the Fair Market Value of the Stock on the date that the Option is
granted; provided, however, that the exercise price of any Incentive Stock
Option granted to a Participant who owns more than 10% of the total combined
voting power of all classes of stock of the Corporation or any Subsidiary shall
not be less than 110% of such Fair Market Value. In addition, the Committee
shall include such other terms of any Incentive Stock Option as it deems
necessary or desirable to qualify the Option as an incentive stock option under
the provisions of Section 422 of the Code. To the extent that the aggregate
"fair market value" of Stock with respect to which one or more incentive stock
options first become exercisable by a Participant in any calendar year exceeds
$100,000, taking into account both Stock subject to Incentive Stock Options
under this Plan and stock subject to incentive stock options under all other
plans of the Corporation or of other entities referenced in Code Section
422(d)(1), the Options shall be treated as Nonqualified Stock Options. All
Incentive Stock Options granted at an exercise price not less than Fair Market
Value on the date of grant shall be treated as Performance-Based Awards subject
to the applicable restrictions of Section 4(b).
(3) Stock Appreciation Rights. A Stock Appreciation Right is an Award in
the form of a right to receive, upon surrender of the right, but without other
payment, an amount based on appreciation in the value of Stock over a base price
established in the Award, payable in cash, Stock or such other form or
combination of forms of payout, at times and upon conditions (which may include
a Change of Control), as may be approved by the Committee. Unless the Committee
provides otherwise, and such provision is reflected in the Award Agreement, the
minimum base price of a Stock Appreciation Right granted under this Plan shall
be not less than the lowest of the Fair Market Value of the underlying Stock on
the date the Stock Appreciation Right is granted or, in the case of a Stock
Appreciation Right related to an Option (whether already outstanding or
concurrently granted), the exercise price of the related Option. All Stock
Appreciation Rights
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granted at a base price not less than Fair Market Value on the date of grant
shall be treated as Performance-Based Awards subject to the applicable
restrictions of Section 4(b).
(4) Other Share-Based Awards. The Committee may from time to time grant
Awards under this Plan that provide Participants with Stock or the right to
purchase Stock, or provide other incentive Awards (including, but not limited
to, phantom stock or units, performance stock or units, bonus stock, dividend
equivalent units, or similar securities or rights) that have a value derived
from the value of, or an exercise or conversion privilege at a price related to,
or that are otherwise payable in shares of Stock. The Awards shall be in a form
determined by the Committee, provided that the Awards shall not be inconsistent
with the other express terms of this Plan. Awards under this Section 4(a)(4) to
Executive Officers that are either granted or become vested, exercisable or
payable based on attainment of one or more Performance Goals shall only be
granted as Performance-Based Awards under Section 4(b). Restricted stock may not
be issued under this Plan.
(5) Cash-Based Awards. Cash-Based Awards are Awards that provide
Participants with the opportunity to earn a cash payment based upon the level of
performance of the Corporation relative to one or more Performance Goals
established by the Committee for an award cycle of more than one but not more
than five years. For each award cycle, the Committee shall determine the size of
the Awards, the Performance Goals, the performance targets as to each of the
Performance Goals, the level or levels of achievement necessary for award
payments and the weighting of the Performance Goals, if more than one
Performance Goal is applicable. Cash-Based Awards to Executive Officers that are
either granted or become vested, exercisable or payable based on attainment of
one or more Performance Goals shall only be granted as Performance-Based Awards
under Section 4(b).
(b) SPECIAL PERFORMANCE-BASED AWARDS. Without limiting the generality of
the foregoing, any of the types of Awards listed in Section 4(a) may be granted
as awards that satisfy the requirements for "performance-based compensation"
within the meaning of Code Section 162(m) ("PERFORMANCE-BASED AWARDS"), the
grant, vesting, exercisability or payment of which depends on the degree of
achievement of the Performance Goals relative to preestablished targeted levels
for the Corporation on a consolidated basis. Notwithstanding anything contained
in this Section 4(b) to the contrary, any Option or Stock Appreciation Right
with an exercise price or a base price not less than Fair Market Value on the
date of grant shall be subject only to the requirements of clauses (1) and
(3)(A) below in order for such Awards to satisfy the requirements for
Performance-Based Awards under this Section 4(b) (with such Awards hereinafter
referred to as a "QUALIFYING OPTION" or a "QUALIFYING STOCK APPRECIATION RIGHT",
respectively). With the exception of any Qualifying Option or Qualifying Stock
Appreciation Right, an Award that is intended to satisfy the requirements of
this Section 4(b) shall be designated as a Performance-Based Award at the time
of grant.
(1) Eligible Class. The eligible class of persons for Awards under this
Section 4(b) shall be all Employees.
(2) Performance Goals. The performance goals for any Awards under this
Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation
Rights) shall be, on an absolute or relative basis, one or more of the
Performance Goals. The specific performance target(s) with respect to
Performance Goal(s) must be established by the Committee in advance of the
deadlines applicable under Code Section 162(m) and while the performance
relating to the Performance Goal(s) remains substantially uncertain.
(3) Individual Limits.
(A) Share-Based Awards. The maximum number of shares of Stock or Share
Units that are issuable under Options, Stock Appreciation Rights or other
Share-Based Awards (described under Section 4(a)(4)) that are granted as
Performance-Based Awards during any calendar year to any Participant under this
Plan shall not exceed 1,000,000, either individually or in the aggregate,
subject to adjustment as provided in Section 7. Awards that are cancelled during
the year shall be counted against this limit to the extent required by Code
Section 162(m).
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(B) Cash-Based Awards. The aggregate amount of compensation to be paid to
any Participant under this Plan in respect of Cash-Based Awards that are granted
during any calendar year as Performance-Based Awards shall not exceed
$2,000,000.
(4) Committee Certification. Before any Performance-Based Award under this
Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation
Rights) is paid, the Committee must certify in writing (by resolution or
otherwise) that the applicable Performance Goal(s) and any other material terms
of the Performance-Based Award were satisfied; provided, however, that a
Performance-Based Award may be paid without regard to the satisfaction of the
applicable Performance Goal in the event of a Change of Control as provided in
Section 7(b).
(5) Terms and Conditions of Awards; Committee Discretion to Reduce
Performance Awards. The Committee shall have discretion to determine the
conditions, restrictions or other limitations, in accordance with the terms of
this Plan and Code Section 162(m), on the payment of individual
Performance-Based Awards under this Section 4(b). To the extent set forth in an
Award Agreement, the Committee may reserve the right to reduce the amount
payable in accordance with any standards or on any other basis (including the
Committee's discretion) as the Committee may impose.
(6) Adjustments for Material Changes. In the event of (i) a change in
corporate capitalization, a corporate transaction or a complete or partial
corporate liquidation, or (ii) any extraordinary gain or loss or other event
that is treated for accounting purposes as an extraordinary item under generally
accepted accounting principles, or (iii) any material change in accounting
policies or practices affecting the Corporation and/or the Performance Goals or
targets, then, to the extent any of the foregoing events (or a material effect
thereof) was not anticipated at the time the targets were set, the Committee may
make adjustments to the Performance Goals and/or targets, applied as of the date
of the event, and based solely on objective criteria, so as to neutralize, in
the Committee's judgment, the effect of the event on the applicable
Performance-Based Award.
(7) Interpretation. Except as specifically provided in this Section 4(b),
the provisions of this Section 4(b) shall be interpreted and administered by the
Committee in a manner consistent with the requirements for exemption of
Performance-Based Awards granted to Executive Officers as "performance-based
compensation" under Code Section 162(m) and regulations and other
interpretations issued by the Internal Revenue Service thereunder.
(c) MAXIMUM TERM OF AWARDS. No Award that contemplates exercise or
conversion may be exercised or converted to any extent, and no other Award that
defers vesting, shall remain outstanding and unexercised, unconverted or
unvested more than ten years after the date the Award was initially granted.
SECTION 5. SHARES OF STOCK AND SHARE UNITS AVAILABLE UNDER PLAN.
(a) AGGREGATE SHARE LIMIT. The maximum number of shares of Stock that may
be issued pursuant to all Share-Based Awards (including Incentive Stock Options)
is 4,000,000, subject to adjustment as provided in this Section 5 or Section 7.
(b) AGGREGATE SHARE UNIT LIMIT. The maximum number of Share Units that may
be paid pursuant to all Share-Based Awards is 4,000,000, subject to adjustment
as provided in this Section 5 or Section 7. Notwithstanding the foregoing, if a
Share-Based Award paid or payable in Share Units satisfies the requirements for
an exclusion from the definition of a derivative security under Rule 16a-1(c)
that does not require that the Award be made under a Rule 16b-3 plan, the Share
Units that may be paid under the Award shall not be counted against the Share
Unit limit of this Section 5(b).
(c) REISSUE OF SHARES AND SHARE UNITS. Any unexercised, unconverted or
undistributed portion of any expired, cancelled, terminated or forfeited Award,
or any alternative form of consideration under an Award that is not paid in
connection with the settlement of an Award or any portion of an Award, shall
again be available for Award under Section 5(a) or 5(b), as applicable, whether
or not the Participant has received benefits of ownership (such as dividends or
dividend equivalents or voting rights) during the period in which the
Participant's ownership was restricted or otherwise not vested. Shares of Stock
that are issued pursuant to
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Awards and subsequently reacquired by the Corporation pursuant to the terms and
conditions of the Awards shall be available for reissuance under the Plan. If
the Corporation withholds shares of Stock pursuant to Section 5(g), the number
of shares that would have been deliverable with respect to an Award but that are
withheld may in effect not be issued but the aggregate number of shares issuable
with respect to the applicable Award shall be reduced by the number of shares
withheld and such shares shall be available for additional Awards under this
Plan.
(d) INTERPRETIVE ISSUES. Additional rules for determining the number of
shares of Stock or Share Units authorized under this Plan may be adopted by the
Committee, as it deems necessary or appropriate.
(e) TREASURY SHARES; NO FRACTIONAL SHARES. The Stock which may be issued
(which term includes Stock reissued or otherwise delivered) pursuant to an Award
under this Plan may be treasury or authorized but unissued Stock or Stock
acquired, subsequently or in anticipation of a transaction under this Plan, in
the open market or in privately negotiated transactions to satisfy the
requirements of this Plan. No fractional shares shall be issued but fractional
interests may be accumulated. The Committee, however, may determine that cash,
other securities, or other property will be paid or transferred in lieu of any
fractional share interests.
(f) CONSIDERATION. The Stock issued under this Plan may be issued (subject
to Section 11(d)) for any lawful form of consideration, the value of which
equals the par value of the Stock or such greater or lesser value as the
Committee, consistent with Sections 11(d), 4(a)(1), 4(a)(2) and 4(a)(3), may
require.
(g) PURCHASE OR EXERCISE PRICE; WITHHOLDING. The exercise or purchase
price (if any) of the Stock issuable pursuant to any Award and any withholding
obligation under applicable tax laws shall be paid in cash or, subject to the
Committee's express authorization and the restrictions, conditions and
procedures the Committee may impose, any one or combination of (i) cash, (ii) a
check payable to the order of the Corporation, (iii) the delivery of shares of
Stock, provided that any such shares used in payment shall have been owned by
the Participant at least six months prior to the date of exercise, (iv) a
reduction in the amount of Stock or other amounts otherwise issuable or payable
pursuant to such Award, (v) by notice and third party payment in such manner as
may be authorized by the Committee, or (vi) the delivery of a promissory note,
or other obligation for the future payment of money, the terms and conditions of
which shall be determined (subject to Section 11(d)) by the Committee. In the
case of a payment by the means described in clause (iii) or (iv) above, the
Stock to be so delivered or offset shall be determined by reference to the Fair
Market Value of the Stock on the date as of which the payment or offset is made.
(h) CASHLESS EXERCISE. The Committee may permit the exercise of the Award
and payment of any applicable withholding tax in respect of an Award by delivery
of written notice, subject to the Corporation's receipt of a third party payment
in full in cash for the exercise price and the applicable withholding prior to
issuance of Stock, in the manner and subject to the procedures as may be
established by the Committee.
SECTION 6. AWARD AGREEMENTS.
Each Award under this Plan shall be evidenced by an Award Agreement in a
form approved by the Committee setting forth, in the case of Share-Based Awards,
the number of shares of Stock or Share Units, as applicable, subject to the
Award, and the price (if any) and term of the Award and, in the case of
Performance-Based Awards, the applicable Performance Goals. The Award Agreement
shall also set forth (or incorporate by reference) other material terms and
conditions applicable to the Award as determined by the Committee consistent
with the limitations of this Plan.
(a) INCORPORATED PROVISIONS. Award Agreements shall be subject to the
terms of this Plan and shall be deemed to include the following terms, unless
the Committee in the Award Agreement otherwise (consistent with applicable legal
considerations) provides:
(1) Non-assignability: The Award shall not be assignable nor transferable,
except (i) by will or by the laws of descent and distribution, or (ii) pursuant
to a QDRO or any other exception to transfer restrictions expressly permitted by
the Committee and set forth in the Award Agreement (or an amendment thereto)
and, in the case of Awards intended to satisfy the conditions of Rule 16b-3,
permitted under Rule 16b-3 (or, in the case of Awards not intended to satisfy
the conditions of Rule 16b-3, as may be not inconsistent with the issue
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of Awards under this Plan that do satisfy the conditions of Rule 16b-3) or (iii)
in the case of Awards constituting Incentive Stock Options, as permitted by the
Code. The restrictions on exercise and transfer shall not be deemed to prohibit,
to the extent permitted by the Committee, (a) transfers without consideration
for estate and financial planning purposes, notwithstanding that the inclusion
of such transfer authority may render the particular Awards ineligible for the
benefits of Rule 16b-3, nor, (b) in the case of Participants who are not Section
16 persons, transfers to such other persons or in such other circumstances as
the Committee may in the Award Agreement expressly permit. During the lifetime
of a Participant the Award shall be exercised only by such Participant or by his
or her guardian or legal representative, except as expressly otherwise provided
consistent with the foregoing transfer restrictions. The designation of a
Beneficiary hereunder shall not constitute a transfer prohibited by the
foregoing provisions.
(2) Rights as Stockholder: A Participant shall have no rights as a holder
of Stock with respect to any unissued securities covered by an Award until the
date the Participant becomes the holder of record of these securities. Except as
provided in Section 7, no adjustment or other provision shall be made for
dividends or other stockholder rights, except to the extent that the Award
Agreement provides for dividend equivalents or similar economic benefits.
(3) Withholding: The Participant shall be responsible for payment of any
taxes or similar charges required by law to be withheld from an Award or an
amount paid in satisfaction of an Award and these obligations shall be paid by
the Participant on or prior to the payment of the Award. In the case of an Award
payable in cash, the withholding obligation shall be satisfied by withholding
the applicable amount and paying the net amount in cash to the Participant. In
the case of an Award paid in shares of Stock, a Participant shall satisfy the
withholding obligation as provided in Section 5(g).
(4) Option Holding Period: Subject to the authority of the Committee under
Section 7, a minimum six-month period shall elapse between the date of initial
grant of any Option and the sale of the underlying shares of Stock, and the
Corporation may impose legend and other restrictions on the Stock issued on
exercise of the Options to enforce this requirement.
(b) OTHER PROVISIONS. Award Agreements may include other terms and
conditions as the Committee shall approve including, but not limited to, the
following:
(1) Termination of Employment: A provision describing the treatment of an
Award in the event of the retirement, disability, death or other termination of
a Participant's employment with or services to the Company, including any
provisions relating to the vesting, exercisability, forfeiture or cancellation
of the Award in these circumstances, subject, in the case of Performance-Based
Awards, to any applicable requirements for "performance-based compensation"
under Code Section 162(m).
(2) Vesting; Effect of Termination; Change of Control: Any other terms
consistent with the terms of this Plan as are necessary and appropriate to
effect the Award to the Participant including, but not limited to, the vesting
provisions, any requirements for continued employment, any other restrictions or
conditions (including performance requirements) of the Award, and the method by
which (consistent with Section 7) the restrictions or conditions lapse, and the
effect on the Award of a Change of Control.
(3) Replacement and Substitution: Any provisions permitting or requiring
the surrender of outstanding Awards or securities held by the Participant in
whole or in part in order to exercise or realize rights under or as a condition
precedent to other Awards, or in exchange for the grant of new or amended Awards
under similar or different terms.
(4) Reloading. Any provisions for successive or replenished Awards
including, but not limited to, reload Options.
(5) Termination of Benefits. A provision that any and all unexercised
Awards and all rights under this Plan of a Participant who received such Award
(or his or her designated Beneficiary or legal representative) and the exercise
or vesting thereof, shall be forfeited if, prior to the time of such exercise,
the Participant shall (i) be employed by a competitor of, or shall be engaged in
any activity in competition with, the Corporation without the Corporation's
consent, (ii) divulge without the Corporation's consent any secret or
confidential
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information belonging to the Corporation, (iii) engage in any other activities
which would constitute grounds for termination For Cause or (iv) be terminated
For Cause.
(c) CONTRACT RIGHTS, FORMS AND SIGNATURES. Any obligation of the
Corporation to any Participant with respect to an Award shall be based solely
upon contractual obligations created by this Plan and an Award Agreement. No
Award shall be enforceable until the Award Agreement or a receipt has been
signed by the Participant and on behalf of the Corporation by an Executive
Officer (other than the recipient) or his or her delegate or, in the case of an
Award to an Insider, by the Participant and the Corporation, whose signature
shall be acknowledged by a member of the Committee. By executing the Award
Agreement or receipt, a Participant shall be deemed to have accepted and
consented to the terms of this Plan and any action taken in good faith under
this Plan by and within the discretion of the Committee, the Board of Directors
or their delegates. Unless the Award Agreement otherwise expressly provides,
there shall be no third party beneficiaries of the obligations of the
Corporation to the Participant under the Award Agreement.
SECTION 7. ADJUSTMENTS; CHANGE IN CONTROL; ACQUISITIONS.
(a) ADJUSTMENTS. If there shall occur any recapitalization, stock split
(including a stock split in the form of a stock dividend), reverse stock split,
merger, combination, consolidation, or other reorganization or any extraordinary
dividend or other extraordinary distribution in respect of the Stock (whether in
the form of cash, Stock or other property), or any split-up, spin-off,
extraordinary redemption, or exchange of outstanding Stock, or there shall occur
any other similar corporate transaction or event in respect of the Stock, or a
sale of substantially all the assets of the Corporation as an entirety, then the
Committee shall, in the manner and to the extent, if any, as it deems
appropriate and equitable to the Participants and consistent with the terms of
this Plan, and taking into consideration the effect of the event on the holders
of the Stock:
(1) proportionately adjust any or all of
(A) the number and type of shares of Stock and Share Units which thereafter
may be made the subject of Awards (including the specific maximum numbers of
shares of Stock or Share Units set forth elsewhere in this Plan),
(B) the number, amount and type of shares of Stock, other property, Share
Units or cash subject to any or all outstanding Awards,
(C) the grant, purchase or exercise price, or conversion ratio of any or
all outstanding Awards, or of the Stock, other property or Share Units
underlying the Awards,
(D) the securities, cash or other property deliverable upon exercise or
conversion of any or all outstanding Awards,
(E) subject to Section 4(b), the performance targets or standards
appropriate to any outstanding Performance-Based Awards, or
(F) any other terms as are affected by the event; or
(2) subject to any applicable limitations in the case of a transaction to
be accounted for as a pooling of interests under generally accepted accounting
principles, provide for
(A) an appropriate and proportionate cash settlement or distribution, or
(B) the substitution or exchange of any or all outstanding Awards, or the
cash, securities or property deliverable on exercise, conversion or vesting of
the Awards.
Notwithstanding the foregoing, in the case of an Incentive Stock Option, no
adjustment shall be made which would cause this Plan to violate Section 424(a)
of the Code or any successor provisions thereto, without the written consent of
the Participant adversely affected thereby. The Committee may act prior to an
event described in this paragraph (a) (including at the time of an Award by
means of more specific provisions in the Award Agreement) if deemed necessary or
appropriate to permit the Participant to realize the benefits
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intended to be conveyed by an Award in respect of the Stock in the case of an
event described in paragraph (a).
(b) CHANGE OF CONTROL. The Committee may, in the Award Agreement, provide
for the effect of a Change of Control on an Award. Such provisions may include,
but are not limited to, any one or more of the following with respect to any or
all Awards: (i) the specific consequences of a Change of Control on the Awards;
(ii) a reservation of the Committee's right to determine in its discretion at
any time that there shall be full acceleration or no acceleration of benefits
under the Awards; (iii) that only certain or limited benefits under the Awards
shall be accelerated; (iv) that the Awards shall be accelerated for a limited
time only; or (v) that acceleration of the Awards shall be subject to additional
conditions precedent (such as a termination of employment following a Change of
Control).
In addition to any action required or authorized by the terms of an Award,
the Committee may take any other action it deems appropriate to ensure the
equitable treatment of Participants in the event of or in anticipation of a
Change of Control including, but not limited to, any one or more of the
following with respect to any or all Awards: (i) the acceleration or extension
of time periods for purposes of exercising, vesting in, or realizing gain from,
the Awards; (ii) the waiver of conditions on the Awards that were imposed for
the benefit of the Corporation, (iii) provision for the cash settlement of the
Awards for their equivalent cash value, as determined by the Committee, as of
the date of the Change of Control; or (iv) such other modification or adjustment
to the Awards as the Committee deems appropriate to maintain and protect the
rights and interests of Participants upon or following the Change of Control.
The Committee also may accord any Participant a right to refuse any acceleration
of exercisability, vesting or benefits, whether pursuant to the Award Agreement
or otherwise, in such circumstances as the Committee may approve.
Notwithstanding the foregoing provisions of this Section 7(b) or any
provision in an Award Agreement to the contrary, (i) in no event shall the
Committee be deemed to have discretion to accelerate or not accelerate or make
other changes in or to any or all Awards, in respect of a transaction, if such
action or inaction would be inconsistent with or would otherwise frustrate the
intended accounting for a proposed transaction as a pooling of interests under
generally accepted accounting principles; and (ii) if the vesting of any Award
to any Insider is accelerated to a date that is less than six months after the
date of the Award, the Committee may prohibit a sale of the underlying Stock
(other than a sale by operation or law in exchange for or through conversion
into other securities) until the expiration of such six-month period, and the
Corporation may impose legend and other restrictions on the Stock to enforce
this prohibition.
(c) CHANGE OF CONTROL DEFINITION. For purposes of this Plan, a "CHANGE OF
CONTROL" of the Corporation shall be deemed to have occurred upon the happening
of any of the following events:
(1) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in paragraph (2)
below) of the Corporation, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (an "ACQUIROR") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the combined voting power of the then
outstanding shares of Stock and other stock of the Corporation entitled to vote
generally in the election of directors, but excluding for this purpose:
(A) any such acquisition (or holding) by the California Public Employees'
Retirement System ("CALPERS"), which as of the date hereof holds approximately
41% of the issued and outstanding Stock of the Corporation, or while CalPERS is
the beneficial owner of shares having a greater percentage of such combined
voting power than the shares held by the Acquiror;
(B) any such acquisition (or holding) by the Corporation or any of its
Subsidiaries, or any employee benefit plan (or related trust) of the Corporation
or such Subsidiaries; or
(C) any such acquisition (or holding) by any corporation with respect to
which, following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Stock and other voting
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<PAGE> 46
securities of the Corporation immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of Stock of the Corporation and of
the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors;
(2) individuals who, as of the date hereof, constitute the Board (the
"CONTINUING DIRECTORS") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the stockholders of
the Corporation, was approved by a vote of at least a majority of the persons
then comprising the Continuing Directors shall be considered a Continuing
Director, but excluding, for this purpose, any such individual whose initial
election as a member of the Board is in connection with an actual or threatened
"election contest" relating to the election of the directors of the Corporation
(as such term is used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(3) approval by the stockholders of the Corporation of (A) a
reorganization, merger or consolidation of the Corporation, with respect to
which in each case all or substantially all of the individuals and entities who
were the respective beneficial owners of the common stock or voting securities
of the Corporation immediately prior to such reorganization, merger or
consolidation will not, immediately following such reorganization, merger or
consolidation, beneficially own, directly and indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation or other entity
resulting from such reorganization, merger or consolidation, or (B) a complete
liquidation or dissolution of the Corporation, or (C) the sale or other
disposition of all or substantially all of the assets of the Corporation.
(d) BUSINESS ACQUISITIONS. Awards may be granted under this Plan on the
terms and conditions as the Committee considers appropriate, which may differ
from those otherwise required by this Plan, to the extent necessary to reflect a
substitution for or assumption of stock incentive awards held by employees of
other entities who become employees of the Corporation or a Subsidiary as the
result of a merger of the employing entity with, or the acquisition of the
property or stock of the employing entity by, the Corporation or a Subsidiary,
directly or indirectly.
SECTION 8. ADMINISTRATION.
(a) COMMITTEE AUTHORITY AND STRUCTURE. This Plan and all Awards granted
under this Plan shall be administered by the Compensation and Benefits Committee
of the Board or such other committee of the Board as may be designated by the
Board and constituted so as to permit this Plan to comply with the disinterested
administration requirements of Rule 16b-3 under the Exchange Act and the
"outside director" requirement of Code Section 162(m). The members of the
Committee shall be designated by the Board. A majority of the members of the
Committee (but not fewer than two) shall constitute a quorum. The vote of a
majority of a quorum or the unanimous written consent of the Committee shall
constitute action by the Committee.
(b) SELECTION AND GRANT. The Committee shall have the authority to
determine the Employees (if any) to whom Awards will be granted under this Plan,
the type of Award or Awards to be made, and the nature, amount, pricing, timing,
and other terms of Awards to be made to any one or more of these individuals,
and to establish the installments (if any) in which such Awards shall become
exercisable or shall vest, or determine that no delayed exercisability or
vesting is required, and establish the events of termination or reversion of
such Awards, subject to the terms of this Plan.
(c) CONSTRUCTION AND INTERPRETATION. The Committee shall have the power to
interpret and administer this Plan and Award Agreements, and to adopt, amend and
rescind related rules and procedures. All questions of interpretation and
determinations with respect to this Plan, the number of shares of Stock, Stock
Appreciation Rights, or units or other Awards granted, and the terms of any
Award Agreements, the adjustments required or permitted by Section 7, and other
determinations hereunder shall be made by the Committee and its determination
shall be final and conclusive upon all parties in interest. In the event of any
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<PAGE> 47
conflict between an Award Agreement and any non-discretionary provisions of this
Plan, the terms of this Plan shall govern.
(d) EXPRESS AUTHORITY (AND LIMITATIONS ON AUTHORITY) TO CHANGE TERMS OF
AWARDS. Without limiting the Committee's authority under other provisions of
this Plan (including Sections 7 and 10), but subject to any express limitations
of this Plan (including under Sections 7 and 10), the Committee shall have the
authority to accelerate the exercisability or vesting of an Award, to extend the
term or waive early termination provisions of an Award (subject to the maximum
ten-year term under Section 4(b)), to cancel, modify or waive the Corporation's
rights with respect to an Award or restrictive conditions of an Award (including
forfeiture conditions), to modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Employees, with or without adjusting any holding
period or other terms of the Award, in any case in such circumstances as the
Committee deems appropriate. The Committee may not, however, reduce by amendment
the exercise or purchase price of an outstanding award.
(e) RULE 16B-3 CONDITIONS; BIFURCATION OF PLAN. It is the intent of the
Corporation that this Plan and Share-Based Awards hereunder satisfy and be
interpreted in a manner, that, in the case of Participants who are or may be
Insiders, satisfies any applicable requirements of Rule 16b-3, so that these
persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 under the Exchange Act and will not be subjected to avoidable
liability thereunder as to Awards intended to be entitled to the benefits of
Rule 16b-3. Notwithstanding anything to the contrary in this Plan, the
provisions of this Plan may at any time be bifurcated by the Board or the
Committee in any manner so that certain provisions of this Plan or any Award
Agreement intended (or required in order) to satisfy the applicable requirements
of Rule 16b-3 are only applicable to Insiders and to those Awards to Insiders
intended to satisfy the requirements of Rule 16b-3.
(f) DELEGATION AND RELIANCE. The Committee may delegate to the officers or
employees of the Corporation the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Plan in accordance with its terms and purpose, except that the Committee
may not delegate any discretionary authority to grant or amend an Award or with
respect to substantive decisions or functions regarding this Plan or Awards as
these relate to the material terms of Performance-Based Awards to Executive
Officers or to the timing, eligibility, pricing, amount or other material terms
of Awards to Insiders. In making any determination or in taking or not taking
any action under this Plan, the Board and the Committee may obtain and may rely
upon the advice of experts, including professional advisors to the Corporation.
No director, officer, employee or agent of the Corporation shall be liable for
any such action or determination taken or made or omitted in good faith.
(g) EXCULPATION AND INDEMNITY. Neither the Corporation nor any member of
the Board of Directors or of the Committee, nor any other person participating
in any determination of any question under this Plan, or in the interpretation,
administration or application of this Plan, shall have any liability to any
person for any action taken or not taken in good faith under this Plan or for
the failure of an Award (or action in respect of an Award) to satisfy Code
requirements as to incentive stock options or to realize other intended tax
consequences, to qualify for exemption or relief under Rule 16b-3 or to comply
with any other law, compliance with which is not required on the part of the
Corporation.
SECTION 9. NON-EMPLOYEE DIRECTOR OPTIONS.
(a) PARTICIPATION. Awards under this Section 9 shall be nondiscretionary,
shall be made only to Non-Employee Directors and shall be evidenced by Award
Agreements setting forth the terms and conditions in this Section 9 and in
Sections 6(a)(1), 6(a)(2), 6(a)(3), 6(a)(4) and 6(b)(5).
(b) ANNUAL OPTION GRANTS.
(1) Initial Award. After approval of this Plan by the stockholders of the
Corporation, if any person who is not then an officer or employee of the
Corporation shall become a director of the Corporation, there shall be granted
automatically to such person (without any action by the Board or Committee) a
Nonqualified Stock
A-11
<PAGE> 48
Option (the date of grant of which shall be the date such person takes office)
to purchase 5,000 shares of Stock.
(2) Subsequent Annual Awards. Immediately following the annual
stockholders meeting in each year during the term of this Plan there shall be
granted automatically (without any action by the Committee or the Board) a
Nonqualified Stock Option (the date of grant of which shall be such date) to
each Non-Employee Director then continuing in office to purchase 5,000 shares of
Stock.
(3) Maximum Number of Shares. A Non-Employee Director shall not receive
more than one Nonqualified Stock Option under this Section 9 in any calendar
year.
(c) OPTION PRICE. The purchase price per share of the Stock covered by
each Option granted under this Section 9 shall be 100% of the Fair Market Value
of the Stock on the date of grant. The exercise or purchase price of the Stock
issuable pursuant to any Option granted under this Section and any withholding
obligation under applicable tax laws shall be paid in cash or any one or
combination of (i) cash, (ii) a check payable to the order of the Corporation,
and (iii) the delivery of shares of Stock, provided that any such shares used in
payment shall have been owned by the Participant at least six months prior to
the date of exercise and (iv) by notice and third party payment to the
Corporation prior to any issue of Stock and otherwise in accordance with all
applicable legal requirements in such manner as may be authorized by the
Committee for all Participants. In the case of a payment by the means described
in clause (iii) above, the Stock to be so delivered shall be determined by
reference to the Fair Market Value of the Stock on the date as of which the
payment is made.
(d) OPTION PERIOD AND EXERCISABILITY. Each Option granted under this
Section 9 and all rights or obligations thereunder shall expire ten years after
the date of grant and shall be subject to earlier termination as provided below.
Each Option granted under this Section 9 shall become exercisable as to 25% of
the Option shares when the Stock Trading Price equals 125% or more of the
exercise price, as to 50% of the Option shares when the Stock Trading Price
equals 150% or more of the exercise price, as to 75% of the Option shares when
the Stock Trading Price equals 175% or more of the exercise price, and as to the
entire Option when the Stock Trading Price equals 200% or more of the exercise
price. Notwithstanding the foregoing, the entire Option shall become exercisable
on the eighth anniversary of the date of grant.
(e) TERMINATION OF DIRECTORSHIP. If a Non-Employee Director's services as
a member of the Board of Directors terminate by reason of death, disability (the
inability of the Non-Employee Director to continue to perform his or her duties
of employment as determined by the Committee) or retirement, an Option granted
pursuant to this Section held by such Participant shall immediately become and
shall remain fully exercisable for one year after the date of such termination
or until the expiration of the stated term of such Option, whichever first
occurs. If a Non-Employee Director's services as a member of the Board of
Directors terminate for any other reason, any portion of an Option granted
pursuant to this Section 9 which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised for three
months after the date of such termination or until the expiration of the stated
term whichever first occurs.
(f) ADJUSTMENTS. Options granted under this Section 9 shall be subject to
adjustment as provided in Section 7, but only to the extent that (i) such
adjustment and the Committee's actions in respect thereof satisfy applicable
criteria under Rule 16b-3 in respect of the disinterested administration of this
Plan, (ii) such adjustment in the case of a Change of Control is effected
pursuant to the terms of a reorganization agreement approved by stockholders of
the Corporation, and (iii) such adjustment is consistent with adjustments to
Options held by persons other than Executive Officers or directors of the
Corporation.
(g) ACCELERATION UPON A CHANGE OF CONTROL. Upon the occurrence of a Change
of Control, each Option granted under this Section 9 shall become immediately
exercisable in full; provided, however, that none of the Options granted under
this Section 9 shall be accelerated to a date that is less than six months after
the date of grant of such Option. To the extent that any Option granted under
this Section 9 is not exercised prior to (i) a dissolution of the Corporation or
(ii) a merger or other corporate event that the Corporation does not survive,
and no provision is (or consistent with the provisions of this Section 9 can be)
made for the assumption, conversion, substitution or exchange of the Option, the
Option shall terminate upon the occurrence of such event.
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<PAGE> 49
(h) LIMITATIONS ON AMENDMENTS. The provisions of this Section 9 with
respect to the amount, purchase price and timing of Options and the eligibility
requirements shall not be amended more than once every six months (other than as
may be necessary to conform to any applicable changes in the Code or the rules
thereunder), unless such amendment would be consistent with the provisions of
Rule 16b-3(c)(2)(ii)(or any successor provision).
SECTION 10. AMENDMENT AND TERMINATION OF PLAN.
The Board of Directors may at any time amend, suspend or discontinue this
Plan, subject to any stockholder approval that may be required under applicable
law. The Committee may at any time alter or amend any or all Award Agreements
under this Plan in any manner that would be authorized for a new Award under
this Plan including, but not limited to, any manner set forth in Section 8(d)
(subject to any applicable limitations thereunder). Notwithstanding the
foregoing, no such action by the Board or the Committee shall, in any manner
adverse to a Participant other than as expressly permitted by the terms of an
Award Agreement, affect any Award then outstanding and evidenced by an Award
Agreement without the consent in writing of the Participant or a Beneficiary who
has become entitled to an Award.
SECTION 11. MISCELLANEOUS.
(a) UNFUNDED PLANS. This Plan shall be unfunded. Neither the Corporation
nor the Board of Directors nor the Committee shall be required to segregate any
assets that may at any time be represented by Awards made pursuant to this Plan.
Neither the Corporation, the Committee, nor the Board of Directors shall be
deemed to be a trustee of any amounts to be paid or securities to be issued
under this Plan. To the extent that a Participant, Beneficiary or other person
acquires a right to receive payment pursuant to any Award hereunder, such right
shall be no greater than the right of any unsecured general creditor of the
Corporation.
(b) RIGHTS OF EMPLOYEES.
(1) No Right to an Award. Status as an Employee shall not be construed as
a commitment that any one or more Awards will be made under this Plan to an
Employee or to Employees generally. Status as a Participant shall not entitle
the Participant to any additional Award.
(2) No Assurance of Employment. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) shall confer upon any
Employee or Participant any right to continue in the employ or other service of
the Corporation or any Subsidiary or constitute any contract (of employment or
otherwise) or limit in any way the right of the Corporation or any Subsidiary to
change a person's compensation or other benefits or to terminate the employment
of a person with or without cause, but, nothing contained in this Plan or any
document related hereto shall adversely affect any independent contractual right
of such person without his or her consent thereto.
(c) EFFECTIVE DATE; DURATION. This Plan has been adopted by the Board of
Directors of the Corporation. This Plan shall become effective upon and shall be
subject to the approval of the stockholders of the Corporation. This Plan shall
remain in effect until any and all Awards under this Plan have been exercised,
converted or terminated under the terms of this Plan and applicable Award
Agreements. Notwithstanding the foregoing, no Award may be granted under this
Plan after March 19, 2006. Any Award granted prior to such date may be amended
after such date in any manner that would have been permitted prior to such date,
except that no such amendment shall increase the number of shares subject to,
comprising or referenced in such Award.
(d) COMPLIANCE WITH LAWS. This Plan, Award Agreements, and the grant,
exercise, conversion, operation and vesting of Awards, and the issuance and
delivery of shares of Stock and/or other securities or property or the payment
of cash under this Plan, Awards or Award Agreements, are subject to compliance
with all applicable federal and state laws, rules and regulations (including,
but not limited to, state and federal insider trading, registration, reporting
and other securities laws and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall
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<PAGE> 50
be subject to such restrictions (and the person acquiring such securities shall,
if requested by the Corporation, provide such evidence, assurance and
representations to the Corporation as to compliance with any thereof) as the
Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
(e) APPLICABLE LAW. This Plan, Award Agreements and any related documents
and matters shall be governed in accordance with the laws of the State of
California, except as to matters of Federal law.
(f) NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be deemed
to limit the authority of the Corporation, the Board or the Committee to grant
awards or authorize any other compensation, with or without reference to the
Stock, under any other plan or authority.
(g) SEVERABILITY. In case any provision in this Plan shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions, or of such provision in any other
jurisdiction, shall not in any way be affected or impaired thereby.
(h) RULE 16B-3 TRANSITION PERIOD PROVISIONS. During the transition period
in respect of Rule 16b-3, any derivative security the grant of which is intended
to be exempt from Rule 16b-3 shall not be transferable other than as permitted
by former Rule 16b-3(d)(ii); the exercise price or other consideration for any
exempt grant or Award shall conform to any additional time and price limitations
under former Rule 16b-3; and, except with respect to non-discretionary Awards to
Non-Employee Directors under Section 9, no member of the Board of Directors who
is not an Officer or Employee of the Corporation shall be eligible for any Award
under this Plan.
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<PAGE> 51
CATELLUS DEVELOPMENT CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Nelson C. Rising, Stephen P. Wallace and
Maureen Sullivan or any 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 May 22, 1996 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 on the reverse side hereof, and in their discretion
upon such other matters as may come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 52
/X/ PLEASE MARK YOUR 9350
VOTES AS IN THIS
EXAMPLE.
The shares represented hereby will be voted in accordance with the
directions given by the stockholder.
If not otherwise directed, the shares represented by this proxy will be voted
FOR the matters described below.
<TABLE>
<CAPTION>
FOR WITHHOLD NOMINEE:
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS. / / / / Joseph F. Albrandi, Daryl J. Carter,
??? withhold from the Christine Garvey, Nelson C. Rising,
following nominee(s): Joseph P. Bolger, Jacqueline R. Slater,
Thomas M. Steinberg, Tom C. Stickel,
Beverly Benedict Thomas
- - -----------------------------------------------
FOR AGAINST ABSTAIN
2. 1994 Performance Award Page / / / / / /
To approve the
1994 Performance Award Plan.
</TABLE>
The undersigned hereby acknowledges receipt of the accom-
panying Notice of Meeting and Proxy Statement and hereby
revokes any proxy or proxies heretofore given.
Please sign exactly as name(s) appears hereon. Joint owners
should each sign. When signing as attorney, executor, ad-
ministrator, trustee or guardian, please give full title as such.
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
SIGNATURE(S) DATE
