<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 0-18694
December 31, 1997
CATELLUS DEVELOPMENT
CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-2953477
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
201 Mission Street
San Francisco, California 94105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(415) 974-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.01 par value per share New York, Pacific, Chicago Stock
Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
- -
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $1,581 million on March 24, 1998.
As of March 24, 1998, there were 106,601,235 issued and outstanding shares of
the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders are incorporated by reference in Part III.
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
Catellus Development Corporation (the "Company") is a diversified real estate
operating company with a large portfolio of income-producing properties and
developable land. The Company engages in a broad range of development activities
including industrial, residential and major mixed-use projects; has 18.1 million
square feet of income-producing properties; and believes it has one of the
largest portfolios of developable land in the western United States. Management
believes the Company's developable land, once entitled and approved, is capable
of supporting up to an estimated: 26.6 million square feet of industrial space;
11.6 million square feet of research and development (R&D), biotech and office
space; 21,000 residential units; 8.8 million square feet of central business
district (CBD) office space; and 2.2 million square feet of retail/entertainment
space. Approximately 78% of the income-producing properties and over 62% of its
total commercial development potential by square footage are located in
California.
The Company was originally formed to conduct the non-railroad real estate
activities of the Santa Fe Pacific Corporation and was spun off to stockholders
in 1990. The Company's railroad heritage has given it a diverse base of
developable properties located near transportation corridors in major urban
areas. Over time, these properties have proven suitable for a variety of product
types (industrial, retail, office and residential), with many of the larger land
sites most suitable for large-scale mixed-use projects.
Starting in the third quarter of 1994, the Company began assembling a new,
entrepreneurial and experienced management team focused on developing a new
strategic plan for the Company. The Company has built a well-rounded team of
over 40 professionals with a wide-ranging set of core competencies in
development, including entitlement experience, land-use planning, design-
construction, leasing, real estate finance and asset management. This group of
professionals has individual real estate experience ranging from 10 to 25 years.
The new strategic plan implemented in 1995 was designed to improve the
capital structure and eliminate the historical operating deficits of the
Company; to optimize the value of the Company's portfolio and increase existing
revenue streams; and to capitalize on core competencies by expanding the
Company's existing activities outside of its historical asset base and, where
attractive, into related activities. In implementing this strategy, the Company
has:
* Increased EBDDT (earnings before depreciation, deferred taxes and non-
recurring items) from $14.7 million in 1994 to $62.8 million in 1997, which
represents growth of 62% compounded annually.
* Improved its financial flexibility by repaying debt and eliminating its
preferred stock through redemptions and forced conversions. As a result,
the ratio of debt and preferred stock to total market capitalization
declined from 67% at December 31, 1994 to 21% at December 31, 1997, while
the Company's fixed charge coverage ratio increased from 1.01:1 in 1994 to
2.37:1 in 1997.
* Sold $179 million of non-strategic assets from January 1, 1995, through
December 31, 1997, using the proceeds to pay down a portion of its existing
debt and fund new development. In addition, at December 31, 1997, the
Company had $ 58.8 million of such assets under contract or option for
sale.
* Expanded the volume of industrial construction starts from 381,000 square
feet in 1994 to 3.8 million in 1997.
* Increased its core competencies across a wide range of real estate
activities and, through its March 1996 acquisition of The Akins Companies,
which now operates as Catellus Residential Group (''CRG''), further
augmented and diversified its core development capabilities.
2
<PAGE>
* Developed asset management relationships with railroad operators. The
Company manages the non-railroad real estate of the Burlington Northern
Santa Fe and provides inventory and other services to other railroads in
the United States and Canada.
The Company's principal office is located at 201 Mission Street, San
Francisco, California 94105; its telephone number at that location is (415) 974-
4500.
STRATEGY
The Company intends to focus on increasing EBDDT by continuing to develop its
significant land portfolio, by acquiring new properties or businesses to support
additional development in existing business lines, and by continuing to provide
third-party fee development and management services. Also, the Company will
continue to focus on increasing cash flow from its portfolio of income-producing
assets and completing entitlements on its mixed-use projects. In the future,
the Company will continue to assess the feasibility of entering into
complementary new related lines of business and refining or reconfiguring its
existing portfolio to take advantage of its experience in bringing
multidisciplinary real estate skills to complex situations, in the light of
opportunities presented and changing market conditions.
DEVELOPMENT OPPORTUNITIES IN EXISTING LAND PORTFOLIO
The Company's existing developable land portfolio, once entitled and
approved, can support an estimated 49.2 million square feet of new commercial
development (approximately 35.4 million square feet of which is already entitled
and approved) and an estimated 21,000 residential units. In 1998 and 1999, the
Company expects to increase its industrial and residential activity further and
to expand office, R&D and urban entertainment development in connection with its
major mixed-use projects. The chart below summarizes the estimated development
potential of the Company's current land holdings (including recent and pending
property acquisitions) as of December 31, 1997:
POTENTIAL DEVELOPMENT SUPPLY FROM EXISTING LAND PORTFOLIO
<TABLE>
<CAPTION>
R&D BIOTECH CBD RETAIL
INDUSTRIAL & OFFICE OFFICE ENTERTAINMENT RESIDENTIAL
---------- ------------ --------- ------------- -----------------
(IN SQUARE FEET) (LOTS OR UNITS)
<S> <C> <C> <C> <C> <C>
Industrial Land 25,630,000 -- -- -- --
Residential Land/(1)/ -- -- -- -- 16,173
Mixed-Use Projects
Mission Bay (San Francisco, California) -- 5,000,000 -- 850,000 4,555
Pacific Commons (Fremont, California)/(2)/ 1,012,000 6,624,000 -- 250,000 --
Union Station (Los Angeles, California) -- -- 5,750,000 750,000 --
Santa Fe Depot (San Diego, California) -- -- 3,000,000 300,000 --
---------- ---------- --------- --------- ------
Total 26,642,000 11,624,000 8,750,000 2,150,000 20,728 (4)
========== ========== ========= ========= ======
Entitled and Approved /(3)/ 25,569,000 -- 8,750,000 1,050,000 6,263
Entitlements/Approvals In Progress 1,073,000 11,624,000 -- 1,100,000 14,465
</TABLE>
(1) Some of these potential lots/units are not yet owned by the Company or a
joint venture of the Company but are pending acquisitions or subject to
options. See ''Development -- Residential'' for detail.
(2) Although entitled, certain additional approvals need to be obtained. See
"Mixed-Use Projects--Pacific Commons, Fremont, CA.''
(3) Entitled means having the necessary discretionary local government
approvals to proceed with development.
(4) Approximately 5,437 of these lots/units are owned in joint ventures and
4,613 are controlled. See detail of residential units on pages 15 and 16.
3
<PAGE>
ACQUISITION OF NEW DEVELOPMENT PROPERTIES
The Company believes that its diverse capabilities and access to capital
provide it with a competitive advantage in identifying and acquiring additional
development opportunities. The Company focuses on markets with strong job
growth, strong real estate demand dynamics and constraints on the supply of real
estate. In 1997, the Company invested approximately $58.4 million in the
acquisition directly or through joint ventures of new property. Following is a
summary of the significant properties acquired.
* Talega Valley--The Company acquired a 3,470-acre residential land
development project located in San Clemente, California purchased in a
joint venture with Starwood Capital and Standard Pacific Corporation.
Planned development upon completion of entitlements and approvals includes
up to 4,965 homes and supporting amenities. Development of this project is
expected to begin in mid-1998.
* Stapleton Business Park-- The Company acquired a 294-acre land site
adjacent to the Stapleton Airport in Denver, Colorado. Development
potential for this land is up to an estimated 3.4 million square feet of
warehouse/distribution and light industrial space. Development of this
project commenced in March 1998.
* Northern California Industrial and Residential Land Sites-- The Company
acquired a 27-acre industrial site in Oakland, California, with a
development potential of up to an estimated 550,000 square feet.
Development of 277,000 square feet on this site began in the third quarter
of 1997. The Company also purchased a 16-acre industrial site in San Jose
with a development potential of an estimated 271,000 square feet and a 13-
acre industrial site in Richmond with a development potential of an
estimated 228,000 square feet. Development of these projects is expected to
begin in mid-1998 . In addition, the Company has an option to acquire a
220-acre site capable, upon completion of entitlements and approvals, of
supporting up to an estimated 1,000 residential units in Hercules.
Development on this project is expected to begin in early 2000.
* Southern California Industrial and Residential Land Sites-- The Company
acquired a 62-acre industrial site in Mira Loma, California, with
development potential of an estimated 1.4 million square feet. Development
of 417,000 square feet began on this site in the fourth quarter of 1997.
The Company also purchased a 27-acre, 122-lot land site in Tustin,
California; a 31-acre, 96-lot site in Carlsbad, California; an 8-acre, 47-
lot housing development in the Long Beach (California) Marina; and 44 acres
in Playa del Rey, California, which upon completion of entitlements and
approvals, will support development of 121 lots.
OPERATIONS
The Company's operations consist of three principal business lines: income-
producing properties, development, and fee services. In addition, the Company
owns approximately 782,000 acres of desert land. The Company believes that the
combination of income-producing properties and development activities allows it
to benefit from the more stable cash flow of its income-producing properties
and, at the same time, to pursue higher-yielding, yet more volatile, development
activities. The tables below provide information on the Company's income-
producing assets, development assets, and other land holdings.
4
<PAGE>
Income-Producing Properties
The following table provides information on the Company's income-producing
properties:
<TABLE>
<CAPTION>
Property
Number of Square Feet Owned Operating Income (1)
--------- ----------------- -------------------
Properties
---------- -
As of December 31, As of December 31, As of December 31,
----------------- -------------------------- ---------------------------------
1997 1996 1997 1996 1995 1997 1996 1995
--------- ---- -------- ---------- ------ ---------- ------------ -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial................................ 57 53 14,326 12,606 11,424 $52,657 $41,851 $39,523
Office.................................... 13 14 1,620 1,683 1,687 16,960 15,746 16,483
Retail.................................... 12 12 928 928 957 9,341 8,839 8,423
Land development /(2) (3)/................ 4 4 1,220 1,231 100 4,296 3,337 1,578
Land leases............................... 55 54 - - - 7,029 6,705 6,171
Equity in earnings of joint ventures......
owning income-producing properties..... - - - - - 7,436 5,993 5,826
---- ---- ------ ------ ------ ------- ------- -------
Total.............................. 141 137 18,094 16,448 14,168 $97,719 $82,471 $78,004
==== ==== ====== ====== ====== ======= ======= =======
</TABLE>
(1) Property operating income represents rental revenue less property
operating costs.
(2) This category represents interim income-producing uses of properties
intended for mixed-use development.
(3) The increase in square feet and income in 1996 reflects the inclusion of
Mission Bay which was previously excluded because of capitalization of
revenues and expenses.
5
<PAGE>
Leasing. The following tables summarize leasing statistics for the
Company's income-producing properties:
<TABLE>
<CAPTION>
As of December 31,
------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
(square feet in thousands)
Industrial buildings
Square feet owned...................................... 14,326 12,606 11,424
Square feet leased..................................... 14,061 12,345 10,945
Percent leased......................................... 98.2% 97.9% 95.8%
Office buildings
Square feet owned...................................... 1,620 1,683 1,687
Square feet leased..................................... 1,547 1,460 1,553
Percent leased......................................... 95.5% 86.7% 92.1%
Retail buildings
Square feet owned...................................... 928 928 957
Square feet leased..................................... 870 874 883
Percent leased......................................... 93.8% 94.2% 92.3%
Land development /(1) (3)/
Square feet owned...................................... 1,220 1,231 100
Square feet leased..................................... 981 1,129 100
Percent leased......................................... 80.4% 91.7% 100.0%
Total /(2)/
Square feet owned...................................... 18,094 16,448 14,168
Square feet leased..................................... 17,459 15,808 13,481
Percent leased......................................... 96.5% 96.1% 95.1%
</TABLE>
(1) This category represents interim income-producing uses of properties
intended for mixed-use development
(2) Excludes joint venture properties
(3) The increase in square feet in 1996 reflects the inclusion of Mission Bay
which was previously excluded because of capitalization of revenues and
expenses
Lease Expirations The following table summarizes the lease expirations in
the total portfolio as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 2005 2006 THEREAFTER
----- ----- ----- ----- ----- ---- ----- ---- ---- ----------
Percent /(1)/.................... 13.1% 9.6% 9.7% 14.5% 15.7% 4.9% 6.0% 5.7% 4.0% 16.8%
Square feet (in thousands)....... 2,291 1,684 1,698 2,526 2,738 858 1,052 990 701 2,921
(1) Excludes properties owned by joint ventures.
</TABLE>
Approximately 740,000 square feet of month-to-month leases are shown as
expiring in 1998.
6
<PAGE>
Development
The following table shows (in acres and by net book value) the Company's
owned developable properties:
<TABLE>
<CAPTION>
Acres Net Book Value
--------------
As of December 31, As of December 31,
------------------ ------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Major Mixed Use Projects............... 1,026 1,171 1,156 $331,360 $323,134 $317,727
Industrial Development................. 1,991 1,838 1,671 118,535 93,783 76,170
Retail and Office Development and
Other Land.......................... 1,156 1,209 6,086 37,187 61,902 59,647
Residential Properties................. 2,006 1,955 550 73,480 44,939 14,522
----- ----- ----- -------- -------- --------
Total............................. 6,179 6,173 9,463 $560,562 $523,758 $468,066
===== ===== ===== ======== ======== ========
</TABLE>
Development Joint Ventures. The Company participates in some development
opportunities through joint ventures. These joint ventures include both land and
residential development partnerships. The following table sets forth the
investment account balance and the Company's share of income (loss) from these
joint ventures in the periods presented.
<TABLE>
<CAPTION>
Investment Account Balance Company's Share of Income (Loss)
-------------------------- --------------------------------
As of December 31, As of December 31,
-------------------------- -------------------------
1997 1996 1995 1997 1996 1995
---------- ----------- ------------ ---------- ------------ ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial Development................. $ 4,067 $4,423 $4,830 $ 908 $ (39) $1,209
Residential Development................ 12,506 583 -- 1,215 797 --
------- ------ ------ ------ ----- ------
Total............................. $16,573 $5,006 $4,830 $2,123 $ 758 $1,209
======= ====== ====== ====== ===== ======
</TABLE>
OTHER LAND HOLDINGS
The table below shows (by acres and in net book value) land held by the
Company for other uses:
<TABLE>
<CAPTION>
Acres Net Book Value
--------------
As of December 31, As of December 31,
------------------ ------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Resources Portfolio.................... 782,361 789,899 833,844 $ 4,260 $ 2,299 $ 1,788
Properties Held For Sale............... 19,008 41,323 11,863 28,129 37,223 84,232
------- ------- ------- ------- ------- -------
Total............................. 801,369 831,222 845,707 $32,389 $39,522 $86,020
======= ======= ======= ======= ======= =======
</TABLE>
7
<PAGE>
Income-Producing Properties
INDUSTRIAL
At December 31, 1997, the Company's industrial income-producing portfolio
included 57 properties with 176 buildings aggregating 14.3 million square feet
that were 98.2% leased. At December 31, 1997, the Company also had 3.7 million
square feet under construction of which approximately 1.7 million square feet
is expected to be added to the Company's portfolio.
The following table summarizes the Company's industrial buildings by region
as of or for the year ended December 31, 1997:
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
Property Excess of
Number of Number of Operating Revenues
Buildings Properties Square Feet Revenues Costs over Costs
--------- ---------- ---------- ---------- ------------- ------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Arizona......................... 12 5 1,195 $ 4,901 $ 1,707 $ 3,194
Northern California............. 24 6 2,683 9,834 1,951 7,883
Southern California............. 126 37 8,270 43,096 8,710 34,386
Illinois........................ 4 1 791 3,740 977 2,763
Oklahoma and Kansas............. 4 4 406 1,053 286 767
Texas........................... 6 4 981 4,562 898 3,664
--- -- ------ ------- ------- -------
Total................. 176 57 14,326 $67,186 $14,529 $52,657
=== == ====== ======= ======= =======
</TABLE>
The following table summarizes the lease expirations in the industrial
portfolio as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 2005 2006 THEREAFTER
----- ----- ----- ----- ----- ---- ---- ---- ---- ----------
Percent.......................... 10.2% 9.8% 9.9% 14.5% 16.1% 5.1% 6.5% 6.4% 4.5% 17.0%
Square feet (in thousands)....... 1,437 1,375 1,399 2,040 2,270 711 911 899 633 2,386
</TABLE>
Of the 1,437,000 of leased square feet that is scheduled to expire in 1998,
58% are located in Southern California, 20% are located in Arizona and the
balance spread throughout the portfolio. Approximately 671,000 square feet of
month-to-month leases are shown as expiring in 1998.
OFFICE
At December 31, 1997, the Company's office income-producing portfolio
included 13 properties consisting of 25 buildings and aggregating approximately
1.6 million square feet. At December 31, 1997, this portfolio was 95.5% leased.
The Company's most significant office projects are the South Bay Center in San
Jose, California (428,000 square feet) and the Railway Exchange Building in
Chicago, Illinois (369,000 square feet).
8
<PAGE>
The following table summarizes the Company's office buildings by region as of
or for the year ended December 31, 1997:
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
Property Excess of
Number of Number of Operating Revenues
Buildings Properties Square Feet Revenues Costs over Costs
--------- ---------- ---------- ---------- ------------- ------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Northern California............. 10 3 525 $ 9,862 $ 3,244 $ 6,618
Southern California............. 12 7 573 8,747 3,229 5,518
Illinois........................ 2 2 466 10,373 5,936 4,437
Oregon.......................... 1 1 56 712 346 366
Texas........................... sold sold -- 19 (2) 21
-- ------------ ----- ------- ------- -------
Totals................ 25 13 1,620 $29,713 $12,753 $16,960
== == ===== ======= ======= =======
</TABLE>
The following table summarizes the lease expirations in the office portfolio
as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 2005 2006 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
Percent.......................... 10.2% 10.5% 7.6% 21.2% 26.4% 7.2% 3.3% 0.0% 2.3% 11.3%
Square feet (in thousands)....... 158 162 118 328 409 112 51 0 35 174
</TABLE>
Of the 158,000 square feet of lease space that is scheduled to expire in
1998, 46% of such space is located in Southern California, 28% in Northern
California and the balance spread throughout the portfolio. Approximately 46,000
square feet of month-to-month leases are shown as expiring in 1998.
RETAIL
At December 31, 1997, the Company's retail income-producing portfolio
included 12 properties consisting of 24 buildings and aggregating 928,000 square
feet. At December 31, 1997, the retail portfolio was 93.8% leased. The Company's
retail properties are located primarily in Northern and Southern California,
with one complex in each of Colorado and Oregon. The largest retail project,
East Baybridge Center, is located on 40 acres near San Francisco in the cities
of Emeryville and Oakland. The 269,000-square-foot Phase I of this project
opened in mid-1994 and was pre-leased to such national retailers as Home Depot,
Sportmart, OfficeMax, Safeway's Pak 'n Save, and CompUSA. A 117,000-square-foot
building for Kmart was added to the center in late 1995.
The following table summarizes the Company's retail portfolio by region as of
or for the year ended December 31, 1997:
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------
Property Excess of
Number of Number of Operating Revenues
Buildings Properties Square Feet Revenues Costs over Costs
--------- ---------- ---------- ---------- ------------- ------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Northern California....... 9 3 460 $ 7,465 $2,079 $5,386
Southern California....... 12 7 330 4,163 1,168 2,995
Colorado.................. 1 1 100 1,116 531 585
Oregon.................... 2 1 38 529 154 375
-- -- --- ------- ------ ------
Total............. 24 12 928 $13,273 $3,932 $9,341
== == === ======= ====== ======
</TABLE>
9
<PAGE>
The following table summarizes the lease expirations in the retail portfolio
as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 2005 2006 THEREAFTER
---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
Percent............................ 10.8% 3.7% 13.6% 7.8% 4.3% 4.0% 10.4% 0.6% 3.4% 41.4%
Square feet (in thousands)......... 94 32 118 68 37 35 90 5 30 361
</TABLE>
Of the 94,000 square feet expiring in 1998, 56% is located in Southern
California and the balance spread across the rest of the portfolio.
Approximately 23,000 square feet of month-to-month leases are shown as expiring
in 1998.
LAND LEASES
The following table summarizes the Company's land leases by region as of or
for the year ended December 31, 1997:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------
EXCESS
OF
PROPERTY REVENUES
NUMBER OF OPERATING OVER
LEASES ACRES REVENUE COSTS COSTS
--------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Arizona................................. 4 16 $ 119 $ 36 $ 83
Northern California..................... 5 24 565 106 459
Southern California..................... 45 5,297 6,539 687 5,852
Texas................................... 1 5 705 70 635
-- ----- ------ ---- ------
Total................................ 55 5,342 $7,928 $899 $7,029
== ===== ====== ==== ======
</TABLE>
In February 1998, the Company executed a contract subject to various
conditions to acquire a large portfolio of land valued at approximately $55
million in the aggregate. The majority of this portfolio is subject to existing
land leases. The first of three closings occurred on February 23, 1998, in the
amount of $32.5 million. Subsequent closings are scheduled to occur in April
and July 1998. There can be no assurances that all conditions for the remaining
closings will be satisfied.
10
<PAGE>
Income - Producing Joint Ventures
The Company has direct or indirect equity interests in five joint ventures
that own income-producing properties. These joint ventures provided cash
distributions to the Company of $9.1 million for the year ended December 31,
1997, and equity in earnings of $7.4 million for the same period. The Company is
engaged in discussions concerning the possible sale of certain joint venture
interests, but there can be no assurances that any sale will be closed. As of
December 31, 1997, the Company owns joint venture interests in the following
income-producing properties in addition to its joint venture interests in
development properties described under "Development--Joint Ventures":
<TABLE>
<CAPTION>
Equity in Earnings (Losses)
---------------------------------------------
Year
Ended
No. of Ownership December 31,
---------------------------------------------
TYPE Ventures Size Interest 1997 1996 1995
---- --------------- ----------------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Hotel..................... 2 2,000 rooms 25-50% $7,321 $6,739 $6,520
Office.................... 1 205,000 sq. ft. 67% 73 (568) (243)
Apartments................ 1 387 units 50% 42 (178) (451)
Furniture Mart............ 1 1,200,000 sq. ft. 72% - - -
------ ------ ------
Total................ $7,436 $5,993 $5,826
====== ====== ======
</TABLE>
DEVELOPMENT
Industrial
The Company's industrial activities include (1) the construction of buildings,
on owned land, for pre-arranged sales to users (build to sell), (2) the
construction of pre-leased buildings (build-to-suit)/and speculative buildings
to be added to the Company's income-producing portfolio, (3) the construction of
buildings for pre-arranged sales to investors (pre-sale), and (4) the sale of
land parcels to third parties for their own development. In certain instances,
the Company provides construction management services to third party purchasers
of land.
For 1997, the Company commenced construction on 3.8 million square feet of
new industrial development and completed approximately 2.4 million square feet
of industrial construction. Of the completed development, 2.1 million square
feet were added to the Company's income-producing portfolio and the remainder
were sold.
The Company intends to continue expanding industrial development activity.
Approximately 1,991 acres of the Company's industrial land in 17 separate
locations would, once fully entitled and approved, support the development of up
to 26.6 million square feet of industrial development.
11
<PAGE>
The following table summarizes industrial development land by location as of
December 31, 1997:
<TABLE>
<CAPTION>
Potential
Potential Sq. Ft. of
Acres Developed Space Revisions & Land Developed Space
12/31/97 12/31/96 Transfers /(1)/ Acquisitions Sales Development 12/31/97
----- --------------- -------------- ------------ ----- ----------- --------------
(square feet in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Southern California
City of Industry...................... 9.6 707 47 - (193) (365) 196
La Mirada (held in joint venture)..... 20.3 594 - - - (237) 357
Mira Loma............................. 44.9 - - 1,380 - (418) 962
Ontario............................... 208.7 4,012 80 - - (739) 3,353
Rancho Cucamonga...................... 32.6 635 - - - - 635
Santa Fe Springs...................... 2.0 245 12 - - (218) 39
Anaheim/SF Corp. Center............... 224 - - (224) - -
Northpoint-Fullerton, CA.............. - 68 - - (68) -
Northern California
Richmond.............................. 54.5 608 - 227 - (131) 704
San Jose.............................. 15.5 - - 272 - - 272
Fremont /(2)/......................... 65.7 2,276 (926) - - (338) 1,012
Oakland............................... 13.9 - - 553 - (277) 276
Livermore............................. - - 43 - - (43) -
------- ------ ---- ----- ---------- ------ ------------
Total in California..................... 467.7 9,301 (676) 2,432 (417) (2,834) 7,806
------- ------ ---- ----- ---------- ------ ------------
Chicago, Illinois
International Centre, Woodridge 379.1 5,550 - - - (833) 4,717
Romeoville............................ 140.5 2,004 - - - - 2,004
Dallas, Texas
Coppell............................... 171.6 2,984 - - - - 2,984
Garland............................... 48.9 1,423 - - (252) (224) 947
Denver, Colorado........................ 294.2 - - 3,396 - - 3,396
Phoenix, Arizona........................ 214.3 3,553 - - - - 3,553
Oklahoma City, Oklahoma................. 274.5 1,235 - - - - 1,235
------- ------ ---- ----- ---------- ------ ------------
Total outside of California............. 1,523.1 16,749 - 3,396 (252) (1,057) 18,836
------- ------ ---- ----- ---------- ------ ------------
Total................................... 1,990.8 26,050 (676) 5,828 (669) (3,891) 26,642 /(3)/
======= ====== ==== ===== ========== ====== ============
</TABLE>
(1) Includes revisions to estimates of potential development or building size,
or transfers of property between industrial development and other categories
of property.
(2) The acreage at Fremont represents the estimated industrial development at
the Company's 840-acre mixed-use project, Pacific Commons in Fremont. The
remainder of the developable acreage at Pacific Commons will be research and
development facilities, flex-tech, office and retail.
(3) Includes 1.1 million square feet for which entitlements are in progress
(635,000 square feet in Rancho Cucamonga and 438,000 square feet in
Fremont). The remainder is entitled.
Because entitlement depends on discretionary government decisions as well as
the results of a variety of predevelopment studies undertaken at various points
in the planning for a project, there can be no assurances that the potential
square feet of entitlements will in fact be received or, if received, will
permit timely development in the light of market conditions.
12
<PAGE>
The following table summarizes the Company's industrial development
activities during the periods presented:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C> <C>
(square feet)
Under construction, beginning of period.............. 2,286,961 641,128 337,136
Construction starts.................................. 3,804,000 /(1)/ 3,259,308 791,846
Completed - Retained in portfolio.................... (2,089,200) (1,269,525) (437,604)
Completed - Sold..................................... (308,761) (343,950) (50,250)
---------- ---------- --------
Under construction, end of period................... 3,693,000 /(2)/ 2,286,961 641,128
========== ========== ========
</TABLE>
(1) The Company's total commercial construction starts in 1997 were 3.9
million square feet which included 81,000 square feet of retail
development.
(2) Includes 925,000 square feet of "design-build" development for third-party
landowners.
The following table summarizes the Company's sales of industrial development
property in the periods presented:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1996 1995
------------ -------------- ------------
<S> <C> <C> <C>
(in thousands)
Sales......................................................... $39,587 $40,525 $3,224
Cost of Sales................................................. 31,717 26,709 2,271
------- ------- ------
Gain....................................................... $ 7,870 $13,816 $ 953
======= ======= ======
</TABLE>
RESIDENTIAL
In March 1996, the Company acquired The Akins Companies (''Akins''), a
residential real estate company consisting of a diversified group of entities
involved in home-building, community development and project management
activities. Akins is now called Catellus Residential Group ("CRG"). CRG has
three operating divisions:
* Community Development, which identifies and develops large-scale
residential communities in prime housing markets;
* Merchant Housing, which designs, builds and markets a variety of for-sale
products, from entry-level to estate homes; and
* Urban Housing, which develops and markets affordable rental and for-sale
housing, primarily within high-density urban areas, as well as
institutional housing such as faculty and student housing for universities.
In 1997, the Company invested approximately $28.3 million in the
acquisition of residential property directly or through joint ventures
including:
* a 44-acre, 121-lot land site in Playa del Rey, California.
* a 31-acre, 96-lot land site in Carlsbad, California.
13
<PAGE>
* an 8-acre, 47-lot land site in the Long Beach (California) Marina.
* a 27-acre, 122-lot land site in Tustin, California.
* A 3,470-acre, 4,965-lot residential land development project (Talega
Valley) located in San Clemente, California, through a joint venture.
In April, 1997, CRG, along with a proposed co-investor, responded to a
Department of Defense (''DOD'') Request for Proposal (''RFP'') for the
rehabilitation and construction of approximately 2,600 housing units at Fort
Carson, Colorado. The DOD considers up-to-date housing with amenities critical
to recruiting and retaining qualified personnel in the all-volunteer military,
and the Fort Carson project is the first RFP under an overall DOD program to
rehabilitate or construct 300,000 housing units for military personnel. The
Department of the Army (''DOA'') has indicated that CRG and its proposed co-
investor are the ''apparent selected offeror'' for the Fort Carson project.
There has been a lawsuit challenging the designation of CRG and its proposed
co-investor by a competing offeror. CRG is continuing its discussions with the
DOA. There can be no assurance that CRG will successfully negotiate the
agreements necessary to consummate the transaction.
The rehabilitation and development of military housing is a new development
opportunity for the Company. CRG may respond to future RFPs for additional
projects under this program. There can be no assurances that CRG will be awarded
any contracts as a result of its responses to future RFPs.
14
<PAGE>
The following table summarizes the Company's residential properties:
<TABLE>
<CAPTION>
Units/Lots at December 31, 1997
-------------------------------
OWNERSHIP/ Original TOTAL TOTAL LOTS
PROFIT TOTAL UNITS/ Total Units/ ENTITLED WITH
INTEREST ACRES LOTS LOTS LOTS ENTITLEMENTS
12/31/97 12/31/97 IN PROGRESS
-----------------------------------------------------------------------------
Owned Properties
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lakeside Buena Park, California 100% 53 350 174 174 -
Tracy, California 100% 450 2,400 2,400 - 2,400
Stockton, California 100% 398 800 800 - 800
Clodine, Texas 100% 877 2,100 2,100 - 2,100
Oakcliff, Texas 100% 110 285 285 - 285
Foothill Glen Union City, California 100% 35 255 100 100 -
Ocean Bluffs Carlsbad, California /(1)/ 100% 31 96 96 96 -
Spinnaker Bay Long Beach, California /(1)/ 100% 8 47 47 47 -
Westbluffs Playa del Rey, California /(1)/ 100% 44 121 121 - 121
----------------------------------------------------------------------
SUBTOTAL OWNED PROPERTIES 2,006 6,454 6,123 417 5,706
----------------------------------------------------------------------
JOINT VENTURE PROPERTIES
- ----------------------------------------------------
Talega San Clemente, California 33% 3,470 4,965 4,965 2,405 2,560
Signature Collection Newport Beach, California 50% 8 30 8 8 -
Vidorra Tustin, California /(1)/ 50% 22 122 105 105 -
Vista Ladera Stevenson Ranch, California 50% 5 55 23 23 -
Ridgemoor Rowland Heights, California 25% 62 394 116 116 -
Kentwood Collection Westchester, California 50% - 49 - - -
Bridgecourt Apartments Emeryville, California /(2)/ 50% 2 220 220 220 -
----------------------------------------------------------------------
SUBTOTAL JOINT VENTURE PROPERTIES 3,569 5,835 5,437 2,877 2,560
----------------------------------------------------------------------
CONTROLLED PROPERTIES /(3)/
- ----------------------------------------------------
Chino Hills, California 100% 279 215 215 - 215
Hercules, California 100% 220 1,000 1,000 - 1,000
Summerland Huntington Beach, California /(1)/ 100% 48 345 345 - 345
Cypress Irvine, California /(1)/ 100% 45 104 104 104 -
Shriners San Francisco, California /(1)/ 80% 5 84 84 - 84
La Quinta California 100% 40 201 201 201 -
Fort Carson Colorado Springs, Colorado 90% 598 2,664 2,664 2,664 -
----------------------------------------------------------------------
SUBTOTAL CONTROLLED PROPERTIES 1,235 4,613 4,613 2,969 1,644
----------------------------------------------------------------------
MISSION BAY /(4)/
- ----------------------------------------------------
Mission Bay 100% 65 4,555 4,555 - 4,555
----------------------------------------------------------------------
SUBTOTAL MISSION BAY 65 4,555 4,555 - 4,555
----------------------------------------------------------------------
SUBTOTAL OWNED/JV/CONTROLLED/MISSION BAY PROPERTIES 6,875 21,457 20,728 6,263 14,465
----------------------------------------------------------------------
MANAGED PROPERTIES
- ----------------------------------------------------
Marbella - San Juan Capistrano, California 1 1 -
Irvine Pacific Condos- Orange, California 6 6 -
UC Davis Student Housing - Davis, California /(2)/ 181 181 -
----------------------------------------------------------------------
SUBTOTAL MANAGED PROPERTIES - - 188 188 -
----------------------------------------------------------------------
TOTAL - ALL PROPERTIES 6,875 21,457 20,916 6,451 14,465
======================================================================
</TABLE>
(1) Acquired in 1997 for development by the Catellus Residential Group's
Merchant Housing Unit.
(2) Rental Property.
(3) Represents properties which the Company does not currently own but which it
has entered into contractual relationships to acquire, such as letters of
intent, purchase agreements with customary conditions precedent, option
agreements and other similar arrangements. There can be no assurance the
Company will actually acquire these properties.
(4) The 65-acres at Mission Bay are reflected in "Major Mixed-Use Projects" in
the table on page 7 that shows development by acres and net book value.
15
<PAGE>
The following table summarizes the Company's residential property activities
in 1996 and 1997:
<TABLE>
<CAPTION>
1996 ACTIVITY 1997 ACTIVITY
------------------------------------- -----------------------------------
TOTAL TOTAL TOTAL
LOTS/UNITS UNIT LOT LOTS/UNITS UNIT LOT LOTS/UNITS
1/1/96 ACQ. SALES SALES 12/31/96 ACQ. SALES SALES 12/31/97
------------------------------------- -----------------------------------
OWNED PROPERTIES
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lakeside Buena Park, California 350 - - - 350 - - 176 174
Tracy, California 2,400 - - - 2,400 - - - 2,400
Stockton, California 800 - - - 800 - - - 800
Clodine, Texas 2,100 - - - 2,100 - - - 2,100
Oakcliff, Texas 285 - - - 285 - - - 285
Foothill Glen Union City, California 255 - - 155 100 - - - 100
Ocean Bluffs Carlsbad, California /(1)/ - - - - - 96 - - 96
Spinnaker Bay Long Beach, California /(1)/ - - - - - 47 - - 47
Westbluffs Playa del Rey, California /(1)/ - - - - - 121 - - 121
---------------------------------------- --------------------------------
SUBTOTAL OWNED PROPERTIES 6,190 - - 155 6,035 264 - 176 6,123
---------------------------------------- --------------------------------
JOINT VENTURE PROPERTIES
- -----------------------------------------------------
Talega San Clemente, California - - - - - 4,965 - - 4,965
Signature Collection Newport Beach, California - 30 - - 30 - 22 - 8
Vidorra Tustin, California /(1)/ - - - - - 122 17 - 105
Vista Ladera Stevenson Ranch, California - 55 - - 55 - 32 - 23
Ridgemoor Rowland Heights, California 347 - 108 - 239 - 123 - 116
Kentwood Collection Westchester, California 49 - 22 - 27 - 27 - -
Bridgecourt Apartments Emeryville, California /(2)/ 220 - - - 220 - - - 220
---------------------------------------- --------------------------------
SUBTOTAL JOINT VENTURE PROPERTIES 616 85 130 - 571 5,087 221 - 5,437
---------------------------------------- --------------------------------
CONTROLLED PROPERTIES /(3)/
- -----------------------------------------------------
Chino Hills, California 215 - - - 215 - - - 215
Hercules, California - - - - - 1,000 - - 1,000
Summerland Huntington Beach, California /(1)/ - - - - - 345 - - 345
Cypress Irvine, California /(1)/ - - - - - 104 - - 104
Shriners San Francisco, California /(1)/ - - - - - 84 - - 84
La Quinta California - - - - - 201 - - 201
Fort Carson Colorado Springs, Colorado - - - - - 2,664 - - 2,664
---------------------------------------- --------------------------------
SUBTOTAL CONTROLLED PROPERTIES 215 - - - 215 4,398 - - 4,613
---------------------------------------- --------------------------------
MISSION BAY /(4)/
- -----------------------------------------------------
Mission Bay 4,555 - - - 4,555 - - - 4,555
---------------------------------------- --------------------------------
SUBTOTAL MISSION BAY 4,555 - - - 4,555 - - - 4,555
---------------------------------------- --------------------------------
11,576 85 130 155 11,376 9,749 221 176 20,728
Subtotal Owned/JV/Controlled/ Mission Bay Properties
---------------------------------------- --------------------------------
MANAGED PROPERTIES
- -----------------------------------------------------
Marbella - San Juan Capistrano, California 39 - 13 - 26 - 25 - 1
Irvine Pacific Condos- Orange, California 136 - 56 - 80 - 74 - 6
UC Irvine Faculty Housing - Irvine, California - - - - - 86 86 - -
UC Davis Student Housing - Davis, California /(2)/ - - - - - 181 - - 181
---------------------------------------- --------------------------------
SUBTOTAL MANAGED PROPERTIES 175 - 69 - 106 267 185 - 188
---------------------------------------- --------------------------------
TOTAL - ALL PROPERTIES 11,751 85 199 155 11,482 10,016 406 176 20,916
==========================================================================
</TABLE>
(1) Acquired in 1997 for development by the Catellus Residential Group's
Merchant Housing Unit.
(2) Rental Property.
(3) Represents properties which the Company does not currently own but which it
has entered into contractual relationships to acquire, such as letters of
intent, purchase agreements with customary conditions precedent, option
agreements and other similar arrangements. There can be no assurance the
Company will actually acquire these properties.
(4) The 65-acres at Mission Bay are reflected in "Major Mixed-Use Projects" in
the table on page 7 that shows development by acres and net book value.
16
<PAGE>
Sales. The following table summarizes the Company's sales of residential
development property, which include finished lots and housing units, for the
periods presented:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1997 1996 1995
------------ -------------- -------------
<S> <C> <C> <C>
(in thousands)
Sales........................................................... $82,632 $21,945 $ -
Cost of Sales................................................... 77,305 20,138 -
------- ------- -------------
Gain......................................................... $ 5,327 $ 1,807 $ -
======= ======= =============
</TABLE>
MIXED-USE PROJECTS
The Company's land portfolio includes four major mixed-use development sites,
which include development for residential, office, retail and entertainment
purposes. The Company is currently in negotiation for the acquisition of a
fifth development site.
Pacific Commons, Fremont, CA. Pacific Commons, which management believes is
the largest planned business park in Silicon Valley, consists of 840 acres
adjacent to I-880 sixteen miles north of San Jose.
In late 1996, the Company received the necessary entitlements from the City
of Fremont for 8.5 million square feet of development, including 8.25 million
square feet of R&D, light industrial, warehouse/distribution, and corporate
campus space, as well as 250,000 square feet of retail space. At year-end, the
company completed the 376,000-square-foot Office Depot distribution facility.
In August 1997, construction was started on two buildings, a 51,000-square-foot
research and development facility and a 187,000-square-foot light industrial
building. In 1997, the Company received habitat mitigation approvals necessary
to proceed with approximately 1.2 million square feet of development on a 78-
acre portion of the project, which is the site of the three buildings described
above and can support up to 574,000 square feet of additional development.
The Company is currently working with the City of Fremont and various
federal, state, and local agencies to address the impact of the rest of the
proposed Pacific Commons development on wetlands and special status species.
Based on the results of the predevelopment species and wetland surveys, the
Company and the City of Fremont intend to file during the second quarter of
1998, all remaining documentation to apply for a permit to undertake the
proposed development activities, including a detailed mitigation design proposal
for the project. Discussions with various federal and state agencies concerning
the mitigation measures necessary for the site are continuing and the amount of
additional area that will ultimately be available for development will be
identified as these discussions proceed in coming months. There can be no
assurances that the necessary government approvals will be obtained for the
development of the remainder of the park, or that the timing of entitlements, if
obtained, will coincide with market conditions.
Mission Bay, San Francisco, CA. The Company owns 166.9 acres of property in
San Francisco adjacent to downtown, which is part of an approximately 300-acre
mixed-use development project known as Mission Bay. The balance of the project
is primarily owned by the City and the Port of San Francisco. The current
proposed development for Mission Bay will include projects to be developed by
the Company and third parties up to the following:
17
<PAGE>
<TABLE>
<CAPTION> Owned
Company By
Owned Others Total
-------- -------- ---------
<S> <C> <C> <C> <C>
Residential - Market Rate(units)............. 4,300 - 4,300
Affordable(units).............. 255 1,445 1,700
----- ----- -----
Total........................................ 4,555 1,445 6,000
===== ===== =====
R&D, Biotech, & office (sq. ft. in thousands) 5,000 -- 5,000
Retail and entertainment (sq. ft. in 850 -- 850
thousands)...................................
UCSF Campus (sq. ft. in thousands)........... -- 2,650 2,650
----- ----- -----
Total........................................ 5,850 2,650 8,500
===== ===== =====
Hotel - (rooms).............................. 500 500
===== =====
</TABLE>
In September 1996, the Mayor of San Francisco forwarded to various city
agencies a non-binding conceptual framework for the development of an
approximately 65-acre portion (''Mission Bay North'') of the project, with a
request that the agencies work diligently to make progress on the proposal. This
portion of the project begins at the terminus of the I-280 freeway and runs on
either side of King Street up to the site of the new Giants ballpark currently
under construction. In July 1997, the Mayor of San Francisco forwarded to
various city agencies a non-binding, conceptual framework for the development of
the remainder of the Mission Bay project (''Mission Bay South''). Mission Bay
South is bordered by Mission Bay North to the north, Mariposa Street to the
south, Seventh Street to the west, and the San Francisco Bay to the east. As
presently proposed, approximately 60% of the incremental property taxes
generated by the project will be available to finance public infrastructure
improvements.
The Mission Bay project will be developed around the new 2.65-million-square-
foot biotech/research expansion campus for the University of California at San
Francisco (UCSF). The proposed development also includes land donated to the
City which can accommodate up to 1,445 housing units to be built by other
developers. The Mission Bay South conceptual framework is conditioned upon a
number of contingencies, including the negotiation of an agreement between the
Company and The Regents of the University of California (''The Regents'') to
locate the UCSF expansion campus at Mission Bay South. In September 1997, the
Company entered into such an agreement with The Regents to locate the UCSF
expansion campus on a portion of Mission Bay South (29.3 acres of which would be
donated by the Company and 13.3 acres of which would be contributed by the City
of San Francisco). The parties are currently discussing an amendment to the
agreement. The obligations of both parties under this agreement are subject to a
number of conditions, including a review of the property. There can be no
assurances that these conditions will be satisfied.
The entitlement process for all of Mission Bay is underway and will continue
into 1998. There can be no assurances that the necessary entitlements will be
obtained for the project, or that the timing or scope of entitlements, if
obtained, will coincide with market conditions. It is not feasible to estimate
project development costs until entitlements have been obtained.
Currently, the 166.9-acre portion of the project owned by the Company
contains approximately 1.1 million square feet of income-producing buildings and
approximately twenty land leases. The buildings, as of December 31, 1997, were
79% occupied. These operating assets are merely interim uses of the property and
are not expected to be part of any final project. Rental revenue from these
assets at Mission Bay was $6.4 million during 1997, resulting in property
operating income of $4.1 million.
18
<PAGE>
Union Station, Los Angeles, CA. The Company currently owns approximately 43
acres surrounding and including the historic Los Angeles Union Station. Located
in downtown Los Angeles, Union Station is a transport hub, with Amtrak rail
service, commuter rail lines serving the surrounding five-county region
(Metrolink), and Los Angeles' growing subway and surface light rail systems.
In 1996, the City of Los Angeles awarded the Company an entitlement package
permitting seven million square feet of office development with the flexibility
to substitute other uses such as office, hotel, sports and entertainment
facilities and housing. As part of this development, in 1996, the Company sold a
4.2-acre portion to the Metropolitan Water District and entered into a design-
build contract to build its new headquarters facility. The sale generated
proceeds of $13.2 million, a gain of $5.0 million. The Company has commenced
construction of the 500,000-square-foot, 12-story headquarters facility, which
is scheduled for completion in late 1998, with occupancy to occur in 1999.
Santa Fe Depot, San Diego, CA. The Company owns approximately 14 acres near
the waterfront in downtown San Diego, California, including Santa Fe Depot. The
site is served daily by Amtrak, a commuter rail line (Coaster), and San Diego's
expanding municipal trolley system. The site is currently entitled for a mixture
of office, hotel, retail and housing development. Management is reevaluating the
approved specific plan in the light of current and projected market conditions,
and is cooperating with the U.S. Navy, the Port Commission of San Diego, and San
Diego City and County agencies on a master plan for the entire North Embarcadero
portion of the waterfront.
Fleet Industrial Supply Center and Annex, Alameda, CA. In February 1998,
the Company was selected by the City Council of Alameda to enter into a 120-day
exclusive negotiating period for an agreement to develop the 143-acre Fleet
Industrial Supply Center and Annex (FISC) in Alameda, California. The FISC
project represents the first phase of redevelopment of the Alameda Naval Air
Station, which was closed in mid-1997.
The proposal submitted by Catellus includes residential and business park
uses for the FISC site. Residential development proposed ranges from 179 to 425
single-family and multi-family housing units. Business park development could
include up to 1.3 million square feet of office and research and development
space. The Alameda FISC site is located off of Highway 880 and is accessible
from both the City of San Francisco and the City of Oakland.
The FISC site is being transferred to the City of Alameda by the Navy,
subject to certain conditions. Environmental remediation on the site is
expected to be handled by the Navy and transfer of the land to the City of
Alameda is expected by September 1999. During the 120-day negotiating period
(which the City of Alameda may extend by two periods of 90 days each), Catellus
and the City of Alameda will attempt to negotiate a Disposition and Development
Agreement. In addition to this agreement, other approvals from the City and
other agencies will be required before development can commence. There can be
no assurances that these negotiations will culminate in an agreement with the
City of Alameda, that the conditions for the transfer of the property by the
Navy will be satisfied, or that the conditions for other necessary approvals
will be satisfied.
19
<PAGE>
Joint Ventures
The Company has direct or indirect equity interests in various land and
residential development partnerships. The following table sets forth the
investment account balance and income the Company received from these
development joint ventures in the periods presented.
<TABLE>
<CAPTION>
Investment Account Balance Company's Share of Income (Loss)
-------------------------- --------------------------------
As of December 31, As of December 31,
-------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
---------- ----------- ---------- --------- ----------- ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial Development................. $ 4,067 $4,423 $4,830 $ 908 $ (39) $1,209
Residential Development................ 12,506 583 -- 1,215 797 --
------- ------ ------ ------ ----- ------
$16,573 $5,006 $4,830 $2,123 $ 758 $1,209
======= ====== ====== ====== ===== ======
</TABLE>
FEE DEVELOPMENT AND MANAGEMENT SERVICES
The diverse capabilities of its management team provide the Company with an
opportunity to export skills to third parties. Management believes that its
development and fee service business allows it both to facilitate development of
its own assets through sales to end-users (design-build contracts), as well as
provide services to landowners which can result in future development
opportunities.
DEVELOPMENT SERVICES
The Company is currently the developer on a design-build basis, in
partnership with Charles Pankow Builders, for the Metropolitan Water District
headquarters facility, for which it receives a fee. The Company intends to
pursue additional design-build opportunities when available to develop
relationships with other entities and to generate fees.
MANAGEMENT SERVICES
The Company's wholly-owned subsidiary, Catellus Management Corporation
(''CMC''), provides management, leasing, disposition, permit management and
inventory services for the railroad industry's non-railroad real estate assets.
CMC currently manages approximately 17,000 leases located in 27 states and two
Canadian provinces and 120,000 permits. Major customers are the Burlington
Northern Santa Fe and Canadian Pacific railroads. The Company uses a proprietary
management system that tracks title and leases and provides site plan mapping
and imaging data for each of the properties under management.
CATELLUS RESOURCES PORTFOLIO
The Company owns approximately 782,000 acres of land in the Southern
California desert regions of Los Angeles, Kern, San Bernardino, Riverside and
Imperial Counties. The ownership of these desert properties are the result of
the historical land grants to the railroad predecessors and the Company. Because
of its location, lack of contiguity among parcels and other factors, this land
is not currently suitable for traditional development activities. As a result, a
new division of the Company, Catellus Resources Group, was created in 1995 to
explore the potential for agricultural, mineral, water, telecommunication,
energy, and waste management uses for this property.
During 1997, the Catellus Resources Group completed its assessment of the
portfolio. This evaluation included an analysis of the portfolio's water,
mineral, land, sales, agricultural and development potential. The Company has
concluded from this assessment that the land, although valuable, is non-
strategic for Catellus and will continue to pursue sale opportunities involving
public and private buyers, as well as other arrangements to maximize the value
of this land. These exchanges and arrangements are complicated in nature and
therefore may take a significant amount of time to complete.
20
<PAGE>
RVL, INC.
In 1997, the Company formed a wholly-owned subsidiary, RVL, Inc., to make
passive investments in limited liability companies formed for the purpose of
acquiring properties requiring environmental remediation, performing the
necessary remediation and reselling the remediated properties. RVL owns passive
interests in two such limited liability companies, Remediation Enterprises, LLC
(''Remediation'') and Restoration Venture, LLC (''Restoration''). Remediation,
Restoration and their subsidiaries expect to acquire properties only after
extensive investigation designed to characterize the environmental problems and
quantify the costs of remediation, and after obtaining appropriate insurance for
overruns in the remediation budget. Between formation and December 31, 1997, the
Company has contributed $5.5 million in cash and property with a book value of
approximately $1.0 million to RVL.
A limited liability company formed by Remediation and Restoration, Hercules,
LLC, acquired the Pacific Refinery at Hercules, California in September 1997.
The Company has entered into an agreement to provide entitlement services to
Hercules, LLC in return for an option to buy the property once defined
remediation work is completed.
This investment represents a new field and a new area of investment for the
Company. There can be no assurances that the managing member of Remediation and
Restoration will manage the business successfully, that environmental problems
will be accurately characterized, or that insurance will be available or
adequate to cover remediation budget overruns. Any of these contingencies could
result in significant losses.
ENVIRONMENTAL MATTERS
Various federal, state, and local laws and regulations covering the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, may affect the Company's operations and costs. See
''Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters.'' Such regulations can increase the cost of
planning, designing, developing, managing and maintaining the Company's
properties. The Company has expended and will continue to expend significant
financial and managerial resources to comply with environmental regulations and
local permitting requirements. While the Company or outside consultants have
evaluated the environmental liabilities associated with most of the Company's
properties, any evaluation necessarily is based upon then-prevailing law,
identified site conditions and sampling methodologies. In addition, many of the
Company's properties are in the early stages of development, and the
environmental studies and investigations which have been performed are
preliminary. It is possible that significant unknown costs and liabilities may
arise in the future relating to these properties and that certain development
projects may be significantly delayed, modified, or canceled as a result of
associated remediation costs. In addition, other properties presently owned by
the Company or "formerly owned" by the Company and no longer accessible for
assessment by the Company, or its corporate predecessors have required or may
require remediation. Although there can be no assurance, the Company does not
believe that such costs will have a material adverse effect on its business,
financial condition or results of operations.
COMPETITION
Real estate markets are regional, and levels of competition vary by market.
The Company encounters significant competition for leasing and sales of real
estate in each of its market areas, but no one competitor is dominant. The
Company is not dependent on any one customer for a significant portion of its
revenues.
21
<PAGE>
Employees, Contractors and Consultants
On December 31, 1997, the Company had 359 employees, including 53 employees
of Catellus Management Corporation and 131 employees of Catellus Residential
Group. The Company engages third parties to manage multi-tenant properties and
properties in locations which are not in close proximity to the Company's
regional or field offices. In addition, the Company engages outside consultants
such as architects and design firms in connection with its pre-development
activities. The Company also employs third party contractors on development
projects for infrastructure and building construction and retains consultants to
assist it in a variety of areas at the project level and at the corporate level
for efforts like strategic planning.
RISK FACTORS
It is the Company's belief that this Annual Report on Form 10-K may contain
statements which, to the extent that they are not recitations of historical
fact, may constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange
Act of 1934. All forward-looking statements involve risks and uncertainties.
The forward-looking statements in this document are intended to be subject to
the safe harbor protection provided by Sections 27A and 21E. Factors that most
typically affect the Company's operating results and financial condition include
(i) changes in general economic conditions in regions in which the Company's
projects are located, (ii) supply and demand for office, industrial, and
residential space, (iii) the delay in receipt of or the denial of government
approvals and entitlements for development projects, (iv) other public and
private development activity in the areas in which the Company owns property,
(v) land and building material costs, (vi) the availability and cost of project
financing, (vii) competition from other property owners, (viii) liability for
environmental remediation, (ix) the Company's ability to increase development
fees, (x) the Company's ability to sell non-strategic assets, (xi) changes in
the capital markets affecting the ability of the Company to minimize its
interest and preferred dividends, (xii) the Company's ability to control the
timing of the recognition of deferred tax liability, (xiii) the impact of
discretionary government actions, (xiv) the exposure of the Company's assets to
natural occurrences, such as earthquakes, tornadoes, and similar events, and
(xv) changes in the legal and regulatory environment, including the tax
treatment of the Company's activities and assets.
For discussions identifying other important factors that could cause actual
results to differ materially from those anticipated in the forward looking
statements, see the Company's Securities and Exchange Commission filings,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this Form 10-K and Note 15 to the Consolidated Financial
Statements included in this Form 10-K. The Company cautions that the forgoing
list of risk factors is not exclusive. Further, the Company does not undertake
to update any forward-looking statements that may be made from time to time by
or on behalf of the Company.
ITEM 2. PROPERTIES
The Company's real estate projects are generally described in Item 1 above,
which descriptions are incorporated in this Item by reference. The Company's
principal executive office is located in San Francisco, California, and it has
regional or field offices in ten other locations in the United States. The
Company believes that its property and equipment are generally well maintained,
in good condition, and adequate for its present needs.
22
<PAGE>
Item 3. Legal Proceedings
The Company, its subsidiaries and other related companies are named
defendants in several lawsuits arising from normal business activities, are
named parties in certain governmental proceedings (including environmental
actions) and are the subject of various environmental remediation orders of
local governmental agencies arising in the ordinary course of its business.
While the outcome of these lawsuits or other proceedings against the Company and
the cost of compliance with any governmental order cannot be predicted with
certainty, management does not expect any of these matters to have a material
adverse effect on the business, financial condition or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1997.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are listed below. There were no family
relationships among any executive officers and directors of the Company. All
officers serve at the pleasure of the Board of Directors of the Company, subject
to compliance with various employment agreements to which the Company and the
officers are parties.
Executive Officers
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ ----------- ------------------------------------------------------------
<S> <C> <C>
Nelson C. Rising................ 56 President, Chief Executive Officer and Director
Stephen P. Wallace.............. 43 Senior Vice President and Chief Financial Officer
Timothy J. Beaudin.............. 39 Senior Vice President Property Operations
Ira E. Yellin................... 57 Senior Vice President Southern California Development
Kathleen Smalley................ 40 Senior Vice President, General Counsel and Secretary
Paul A. Lockie.................. 39 Vice President and Controller
</TABLE>
Additional information concerning the business background of each executive
officer and director of the Company is set forth below:
MR. RISING has served as President and Chief Executive Officer and a Director
of the Company since September 1994. For more than five years prior to joining
the Company, Mr. Rising was a Senior Partner with Maguire Thomas Partners, a Los
Angeles-based commercial developer with projects in Southern California, Dallas
and Philadelphia.
MR. WALLACE was elected as Senior Vice President and Chief Financial Officer
in July 1995. Mr. Wallace was previously the Senior Vice President and Chief
Financial Officer at Castle & Cooke Homes, Inc. from May 1993. Before that Mr.
Wallace served as the Chief Financial Officer at A.M. Homes in Newport Beach,
California, and before that he was a Partner at Arthur Andersen LLP.
MR. BEAUDIN was elected Senior Vice President Property Operations in January
1996. Before this appointment, Mr. Beaudin served as Vice President Property
Operations since February 1995. For more than five years before that, Mr.
Beaudin served as Senior Vice President--Managing Officer of the Financial
Services Group at CB Commercial Real Estate Group, a national real estate
brokerage firm.
23
<PAGE>
MR. YELLIN joined the Company in February 1996 as the Senior Vice President,
Southern California Development. For more than five years before joining the
Company, Mr. Yellin served as President of The Yellin Company, a Los Angeles
real estate investment, development and management company involved primarily in
the acquisition, restoration and redevelopment of historic buildings in the
Historic Core of Downtown Los Angeles.
MS. SMALLEY joined the Company as a Senior Vice President, General Counsel,
and Secretary on January 1, 1997. For more than five years before joining the
Company, Ms. Smalley was General Counsel and Investment Manager of Crow Family
Holdings ("CFH"), an investment management company that manages assets,
including real estate and related businesses, throughout the United States and
abroad. Ms. Smalley also currently holds an appointment to Harvard Law School,
where she lectures in the real estate field.
CFH, during Ms. Smalley's employment, managed investments in thousands of
entities holding real estate. In connection with her duties as General Counsel
and Investment Manager for CFH, Ms. Smalley managed both legal functions and a
number of special assignments. Among those special assignments was the
management of the bankruptcy of approximately 55 affiliated entities in two
jointly administered proceedings. Ms. Smalley was not involved in the ownership
or management (other than as described below) of the properties owned by the
affected debtors before the debt restructuring negotiations and related filing
of bankruptcy petitions. In addition, there were approximately 35 other entities
affiliated with CFH that filed for protection under federal bankruptcy laws. In
connection with her employment by CFH, Ms. Smalley served as an officer of the
direct or indirect general partner of some of these entities.
MR. LOCKIE joined the Company as Vice President and Controller in February
1996. Before joining the Company, Mr. Lockie served as the Chief Financial
Officer for Kimball Small Properties, Inc. ("KSP"), a San Jose, California real
estate development and management company.
Mr. Lockie, in connection with his duties as Chief Financial Officer for KSP,
also served as Chief Financial Officer of several companies affiliated with KSP,
including Techmart Properties, Inc., the indirect general partner of a real
estate partnership that filed for protection under federal bankruptcy laws in
September, 1992. In September, 1995, a final decree was entered closing the
case.
24
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock commenced trading on December 5, 1990 and is
listed on the New York Stock Exchange, the Pacific Stock Exchange and the
Chicago Stock Exchange under the symbol ''CDX.'' The following table sets forth
for the periods indicated the high and low sale prices of the Company's Common
Stock as reported by Bloomberg Financial Markets:
<TABLE>
<CAPTION>
Common Stock Price
-------------------------
HIGH LOW
-------------- ---------
<S> <C> <C>
Year ended December 31, 1996
First Quarter....................................... 8 1/4 5 7/8
Second Quarter...................................... 10 7 3/4
Third Quarter....................................... 10 1/2 8 1/8
Fourth Quarter...................................... 11 1/2 9 1/2
Year ended December 31, 1997
First Quarter....................................... 16 5/8 11 1/8
Second Quarter...................................... 18 3/8 13 5/8
Third Quarter....................................... 21 7/16 18 3/16
Fourth Quarter...................................... 22 16 5/16
</TABLE>
The Company has never declared or paid any cash dividends on its Common
Stock. The Company intends to retain any earnings to support operations and to
finance development projects and does not intend to pay cash dividends on the
Common Stock in the foreseeable future.
On March 24, 1998, there were approximately 31,980 holders of record of the
Company's Common Stock.
25
<PAGE>
Item 6. Selected Financial Data
The following income statement and selected balance sheet data with respect
to each of the years in the five-year period ended December 31, 1997 have been
derived from the annual Consolidated Financial Statements. The operating data
have been derived from the Company's underlying financial and management records
and are unaudited. This information should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for a
discussion of results of operations for 1997, 1996 and 1995.
26
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Income producing properties
Rental revenue.............................. $128,953 $115,886 $ 102,828 $ 99,183 $107,625
Property operating costs.................... (38,670) (39,408) (30,650) (29,609) (38,708)
Equity in earnings of joint ventures, net... 7,436 5,993 5,826 4,240 1,878
-------- -------- --------- -------- --------
97,719 82,471 78,004 73,814 70,795
-------- -------- --------- -------- --------
Development activities and fee services
Gain on development property sales.......... 13,197 15,623 953 -- --
Development and management fee income, net.. 6,449 3,432 1,924 2,151 2,260
Equity in earnings (losses) of joint
ventures, net............................... 2,123 758 1,209 3,742 (60)
Land holding costs, net..................... (1,241) (3,724) (3,871) (4,891) (872)
-------- -------- --------- -------- --------
20,528 16,089 215 1,002 1,328
-------- -------- --------- -------- --------
Interest expense......................................... (39,988) (42,521) (25,757) (24,671) (43,959)
Depreciation and amortization............................ (31,245) (30,561) (27,990) (28,577) (31,117)
General and administrative expense....................... (10,897) (8,019) (10,924) (14,818) (13,143)
Gain on non-strategic land and other asset sales......... 5,029 24,405 32,789 13,307 33,165
Adjustment to carrying value of property /(1)/........... -- -- (102,400) (24,100) (32,500)
Litigation, environmental and restructuring costs........ 2,551 1,093 (961) (2,854) (12,637)
Other, net............................................... (1,113) (19) 2,504 3,091 (25,292)
-------- -------- --------- -------- --------
Income (loss) before income taxes and extraordinary
expense.............................................. 42,584 42,938 (54,520) (3,806) (53,360)
Income tax (expense) benefit............................. (17,343) (17,537) 21,518 1,359 8,008
-------- -------- --------- -------- --------
Net income (loss) before extraordinary expense........... 25,241 25,401 (33,002) (2,447) (45,352)
Extraordinary expense related to early retirement of
debt, net of income tax benefit /(2)/................... -- -- -- -- (7,401)
-------- -------- --------- -------- --------
Net income (loss)........................... 25,241 25,401 (33,002) (2,447) (52,753)
Preferred stock dividends................... (1,353) (22,173) (23,813) (23,813) (16,132)
Premium on redemption of preferred stock.... -- (1,334) -- -- --
-------- -------- --------- -------- --------
Net income (loss) applicable to common
stockholders................................ $ 23,888 $ 1,894 $ (56,815) $(26,260) $(68,885)
======== ======== ========= ======== ========
Income (loss) per common share - basic
and assuming dilution
Before extraordinary expense................ $0.24 $0.03 $(0.78) $(0.36) $(0.87)
Extraordinary expense /(2)/................. -- -- -- -- (0.10)
-------- -------- --------- -------- --------
Net income (loss) per share after
extraoridinary expense /(2)/................ $0.24 $0.03 $(0.78) $(0.36) $(0.97)
======== ======== ========= ======== ========
Average number of common shares
outstanding - basic......................... 97,601 74,947 72,967 72,967 70,834
======== ======== ========= ======== ========
Average number of common shares
outstanding - assuming
dilution.................................... 100,768 75,835 72,967 72,967 70,834
======== ======== ========= ======== ========
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995 1994 1993
------------- ------------- -------------- --------------- --------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
OTHER OPERATING DATA:
<S> <C> <C> <C> <C> <C>
EBDDT /(3)/................................... $ 62,771 $ 25,852 $18,254 $14,665 $(9,530)
Buildings owned (square feet) /(4)/........... 18,094 16,448 14,168 13,609 13,367
Leased percentage............................. 96.5% 96.1% 95.1% 95.0% 94.9%
Annual fixed charges /(5)/.................... $ 48,037 $ 67,550 $73,129 $72,533 $85,684
Debt and preferred stock to total market
capitalization /(6)/...................... 21.00% 46.81% 65.63% 66.56% 63.56%
Capital expenditures /(7)/.................... $235,569 $115,338 $68,523 $73,900 $61,060
Fixed Charge Coverage Ratio /(8)/............. 2.37 1.70 1.39 1.01 1.55
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total properties, net............................. $1,122,975 $1,024,102 $1,007,451 $1,087,119 $1,091,832
Total assets...................................... $1,241,019 $1,123,118 $1,097,604 $1,207,363 $1,373,827
Mortgage and other debt........................... $ 568,699 $ 496,742 $ 496,180 $ 530,641 $ 663,764
Preferred Stock................................... -- $ 274,428 $ 322,500 $ 322,500 $ 322,500
Total stockholders' equity........................ $ 451,899 $ 422,453 $ 442,874 $ 499,689 $ 525,949
</TABLE>
(1) The Company took charges of $102.4 million in 1995, $24.1 million in 1994
and $32.5 million in 1993 to adjust the carrying value of certain
properties. The 1995 charge included $84.8 million resulting from the
Company's decision to terminate the 1991 Development Agreement for its
Mission Bay Project in San Francisco. See Note 6 to Consolidated Financial
Statements included in this From 10-K for further discussion.
(2) Net income in 1993 reflects extraordinary expense of $7.4 million, net of
income tax benefit, relating to a redemption premium paid to a lender and
write-off of deferred financing costs on the Company's $388.2 million first
mortgage loan.
(3) The Company uses a supplemental performance measure called Earnings Before
Depreciation and Deferred Taxed (EBDDT) along with net income (loss) to
report its operating results. EBDDT is not a measure of operating results or
cash flows from operating activities as defined by generally accepted
accounting principles. Additionally, EBDDT is not necessarily indicative of
cash available to fund cash needs and should not be considered as an
alternative to cash flows as a measure of liquidity. However, the Company
believes that EBDDT provides relevant information about its operations and
is necessary, along with net income (loss), for an understanding of its
operating results.
EBDDT is calculated by taking net income (loss) and making various
adjustments. Depreciation, amortization and deferred income
taxes are excluded from EBDDT as they represent non-cash charges. In
addition, gains on the sale of non-strategic land and other assets,
adjustments to the carrying value of property, premium on the redemption of
preferred stock, restructuring costs, conversion of debenture costs and
extraordinary expense related to early retirement of debt represent non-
operating, unusual and/or nonrecurring items and are excluded from the EBDDT
calculation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Earnings Before Depreciation and
Deferred Taxes."
(4) Before 1996, square feet owned excluded approximately
1.1 million square feet of existing buildings, primarily at Mission Bay.
(5) Represents interest incurred (See Note 3 to the Company's Consolidated
Financial Statements) plus preferred stock dividends.
(6) Represents the ratio of total debt plus the face value of preferred stock to
equity market capitalization (based on the number of common shares
outstanding at the end of the period indicated and the closing stock price
for that respective period) plus total debt and preferred stock.
(7) Represents expenditures for commercial and residential development for
projects to be developed and sold or held for rental.
(8) Represents the ratio of earnings before interest, taxes, depreciation and
amortization, adjustments to the carrying value of property, and preferred
stock dividends to interest costs and preferred stock dividends.
28
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In the second half of 1994, the Company began building a new senior
management team. It then implemented a new strategy, which included a number of
steps designed to eliminate operating deficits, restructure the organization,
enhance its core competencies, improve its capital structure and sell non-
productive land assets. In particular, the Company:
* Sold $179 million of non-strategic assets from January 1, 1995 through
December 31, 1997, using the proceeds to pay down a portion of its existing
debt and fund new development.
* Increased, development activity with industrial construction starts of
381,000 square feet in 1994, 792,000 square feet in 1995, 3.3 million square
feet in 1996 and 3.8 million square feet in 1997.
* Acquired in 1996 The Akins Companies (now Catellus Residential Group), an
established residential developer located in Southern California, to position
the Company to pursue residential development opportunities.
* Completed in 1997 a series of redemption calls for all outstanding
preferred shares, eliminating approximately $24 million in annual preferred
stock dividend payments. A total of $25.8 million of preferred stock was
redeemed and $296.7 million was converted into common equity.
* Decreased the Company's ratio of debt and preferred stock to total market
capitalization from 66.6% at December 31, 1994 to 21% at December 31, 1997.
* Improved operating results with EBDDT (earnings before depreciation and
deferred taxes) increasing from $14.7 million in 1994 to $18.3 million in
1995, $25.9 million in 1996 and $62.8 million in 1997.
The Company intends to focus on increasing EBDDT by continuing to increase
the development of its significant land portfolio by acquiring new properties
or businesses to support additional development and by providing third-party
fee development and management services. In addition, the Company will continue
to focus on increasing cash flow from its portfolio of income-producing assets.
Capital to fund this planned growth is expected to come from operations, sales
of non-strategic assets and debt. In the future, the Company will continue to
assess the feasibility of entering into complementary new lines of business and
refining or reconfiguring its existing portfolio to take advantage of its
experience, opportunities presented, and changing market conditions.
Although the Company has a large portfolio of income-producing properties
that provides stable operating results, the Company's earnings from period to
period will be affected by the nature and timing of development activity and
sales of development property and non-strategic assets. Many of the Company's
projects require a lengthy process to complete the development cycle before they
are sold. Additionally, sales of non-strategic assets are difficult to predict
and are generally subject to lengthy negotiations and contingencies that need to
be resolved before closing. These factors tend to ''bunch'' income in particular
periods rather than producing a more even pattern throughout the year. In
addition, gross margins may vary significantly as the mix of property varies.
The cost basis of the properties sold varies because: (i) a number of properties
have been owned for many decades, (ii) some properties were recently constructed
or acquired, and (iii) properties are owned in various geographical locations.
29
<PAGE>
Results of Operations
Comparison of the years ended December 31, 1997 to 1996
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-
producing properties for the years ended December 31, 1997 and 1996 are
summarized below:
<TABLE>
<CAPTION>
Rental Revenue Property Operating Costs
----------------------------------------- ----------------------------------------
1997 1996 Difference 1997 1996 Difference
------------ ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Industrial buildings................ $ 67,186 $ 55,865 $11,321 $14,529 $14,014 $ 515
Office buildings.................... 29,713 28,407 1,306 12,753 12,661 92
Retail buildings.................... 13,273 13,215 58 3,932 4,376 (444)
Land development /(1)/.............. 10,853 10,589 264 6,557 7,252 (695)
Land leases......................... 7,928 7,810 118 899 1,105 (206)
-------- -------- ------- ------- ------- -----
$128,953 $115,886 $13,067 $38,670 $39,408 $(738)
======== ======== ======= ======= ======= =====
</TABLE>
(1) This category represents interim income-producing uses of properties
intended for mixed-use development.
Building square footage owned, square footage leased, and occupancy are as
follows:
<TABLE>
<CAPTION>
As of December 31,
------------------
1997 1996
--------------- --------------
<S> <C> <C>
(in thousands except percentages)
Industrial buildings
Square feet owned..................................... 14,326 12,606
Square feet leased.................................... 14,061 12,345
Percent leased........................................ 98.2% 97.9%
Office buildings
Square feet owned..................................... 1,620 1,683
Square feet leased.................................... 1,547 1,460
Percent leased........................................ 95.5% 86.7%
Retail buildings
Square feet owned..................................... 928 928
Square feet leased.................................... 870 874
Percent leased........................................ 93.8% 94.2%
Land development /(1)/
Square feet owned..................................... 1,220 1,231
Square feet leased.................................... 981 1,129
Percent leased........................................ 80.4% 91.7%
Total
Square feet owned..................................... 18,094 16,448
Square feet leased.................................... 17,459 15,808
Percent leased........................................ 96.5% 96.1%
(1) This category represents interim income-producing uses of properties intended for
mixed-use development.
</TABLE>
30
<PAGE>
The increase in revenue from industrial buildings is primarily
attributable to ten newly constructed buildings totaling approximately 2.1
million square feet that were added to the portfolio in 1997 and a full year
of operations from eight buildings totaling approximately 1.3 million
square feet that were completed and added to the portfolio in 1996.
Approximately $8.2 million of the increase was attributable to base rents for
the new buildings completed in 1997 and 1996, approximately $1.6 million was
attributable to higher tenant pass-through charges and other income associated
with this new construction and approximately $1.5 million was a result of
increases in rental rates and tenant pass-through charges under existing
leases. Operating costs for the industrial portfolio increased by $.5 million
primarily because of property taxes and other operating expenses related to
the new construction.
Rental revenue for the Company's office portfolio increased by $1.3 million
primarily because of higher rental rates and occupancy. Operating costs for
office buildings increased by $0.1 million, primarily as a result of higher
utility costs and property taxes.
The $0.4 million decrease in property operating costs for the retail
buildings was primarily due to a reduction in property taxes.
The $0.3 million increase in rental revenue from the land development
portfolio resulted from higher occupancies during the year and expense
recoveries. The decrease in operating costs for land development properties was
primarily because of lower property taxes as a result of refunds and sales of
properties.
The increase in revenue from land leases was primarily because of increased
rent from new tenant leases and higher percentage rents. The decreased expenses
from land leases was primarily attributable to a reduction in property taxes as
a result of the sale of a land lease in mid-1996.
In total, property operating costs were lower because of lower property
operating overhead costs and lower insurance premiums, partially offset by
higher property taxes.
Income-producing joint venture earnings, net, increased by $1.4 million
primarily because of higher occupancies and room rates in a hotel joint venture
and higher occupancy and lower interest expense for an office building joint
venture.
Development Activities and Fee Services
- ---------------------------------------
Gain on development property sales decreased from $15.6 million in 1996 to
$13.2 million in 1997, summarized as follows:
<TABLE>
<CAPTION>
1997 1996 Difference
-------------- ------------- -------------
Commercial Sales: (in thousands)
<S> <C> <C> <C>
Sales........................................... $39,587 $40,525 $ (938)
Cost of sales................................... 31,717 26,709 5,008
------- ------- -------
Gain....................................... 7,870 13,816 (5,946)
------- ------- -------
RESIDENTIAL SALES:
Sales........................................... 82,632 21,945 60,687
Cost of sales................................... 77,305 20,138 57,167
------- ------- -------
Gain....................................... 5,327 1,807 3,520
------- ------- -------
Total gain on development property sales........ $13,197 $15,623 $(2,426)
======= ======= =======
</TABLE>
31
<PAGE>
The 1996 commercial sales include an approximate $5.0 million gain from the
sale of a 4.2-acre site to the Metropolitan Water District at Los Angeles Union
Station. The 1997 commercial sales include a $2.2 million gain from the sale of
a 279,000-square-foot industrial building in La Mirada, California. Residential
sales in 1997 include a full year of activity from the Company's residential
group which was formed in March 1996.
The Company expects there will be significant variability in income
generated from its development activities.
Following is a summary of development property sales under contract but not
closed as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(in thousands)
<S> <C> <C>
Commercial.................................................. $ 7,091 $ -
======= =======
Residential (lot and unit sales):
Joint venture projects /(1)/........................... $21,003 $20,901
======= =======
Management projects /(2)/.............................. $ 8,404 $10,878
======= =======
</TABLE>
(1) The amounts shown are 100% of the gross sales price; the Company is entitled
to receive 50% of the net profits from these joint ventures.
(2) The amounts shown are 100% of the gross sales price; the Company receives a
fee based on the sales of these units, which averages 5% of revenues.
Development and management fee income, net, increased by $3.0 million
primarily because of an increase in management fees from management contracts
signed in 1996 and higher development fees from a construction project at Los
Angeles Union Station that began in June 1996.
Equity in earnings of development joint ventures increased by $1.4 million
primarily because of a 1997 property sale from a land development joint venture
and higher residential joint venture earnings.
The $2.5 million reduction in losses from land holding costs, net, is
primarily attributable to sales of properties and property tax refunds.
Other Items on the Statement of Operations
- ------------------------------------------
Interest expense was $2.5 million lower in 1997 primarily because of an
increase in capitalized interest related to increased development activity in
1997.
Following is a summary of interest incurred for the years ended December
31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996 Difference
------------- ------------ ---------------
(in thousands)
<S> <C> <C> <C>
Total interest incurred..................................... $46,684 $45,377 $ 1,307
Interest capitalized........................................ (6,696) (2,856) (3,840)
------- ------- -------
Interest expensed........................................... $39,988 $42,521 $(2,533)
======= ======= =======
</TABLE>
General and administrative expense increased by $2.9 million in 1997
primarily because of the increase in the Company's overall activities.
32
<PAGE>
The decrease in gain on sales of non-strategic land and other property in
1997 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 Difference
------------ ------------- -------------
(in thousands)
<S> <C> <C> <C>
Sales........................................................ $31,122 $85,678 $(54,556)
Cost of sales................................................ 26,093 61,273 (35,180)
------- ------- --------
Gain................................................... $ 5,029 $24,405 $(19,376)
======= ======= ========
</TABLE>
In 1995, the Company began an accelerated program of selling non-strategic
assets, with the proceeds intended to pay down a portion of existing debt and
fund new development. From 1995 through 1997, the Company sold $179 million of
non-strategic assets. In addition, at the end of 1997, $58.8 million of such
assets were under contract or option for sale. Because of the diminishing amount
of such assets in the Company's portfolio, the Company expects future sales of
non-strategic assets to be substantially lower than the levels in the recent
past.
In prior years the Company accrued estimates of its environmental liability
(see Note 11 to the Company's Consolidated Financial Statements). During 1997
and 1996, the Company either settled certain claims or received recoveries in
excess of what was expected. These settlements/recoveries resulted in increases
to net income of $2.6 million in 1997 and $1.1 million in 1996.
Other, net, increased by $1.1 million in 1997 primarily because of the $1.0
million in costs associated with the filing of a registration statement with the
Securities and Exchange Commission in accordance with a Registration Rights
Agreement between the Company and the California Public Employees' Retirement
System.
Preferred Stock Dividends
- -------------------------
Preferred stock dividends declined by $20.8 million in 1997 compared to
1996 as a result of preferred stock calls. During 1996, the Company commenced
a series of calls for redemption of its outstanding preferred stock. As a
result of these calls, during 1996, a total of 453,326 shares of $3.75 Series
A Cumulative Convertible Preferred Stock ("Series A preferred stock") were
converted into 2,501,783 common shares and 508,113 shares of Series A
preferred stock were redeemed at a cost of approximately $26.7 million. In
1997, a total of 2,480,671 shares of Series A preferred stock and all of the
$3.625 Series B Cumulative Convertible Exchangable Preferred Stock were
converted into 29,001,469 shares of common stock, with 7,889 shares of Series
A preferred stock redeemed at a cost of approximately $440,000. With the
completion of these preferred stock calls in June 1997, the Company has no
remaining outstanding preferred stock.
33
<PAGE>
Comparison of the years ended December 31, 1996 to 1995
Income-Producing Properties
- ---------------------------
Rental revenue and property operating costs for the Company's income-
producing properties for the years ended December 31, 1996 and 1995,
respectively, are summarized below:
<TABLE>
<CAPTION>
Rental Revenue Property Operating Costs
-------------- ------------------------
1996 1995 Difference 1996 1995 Difference
------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Industrial buildings................. $ 55,865 $ 50,716 $ 5,149 $14,014 $11,193 $2,821
Office buildings..................... 28,407 28,662 (255) 12,661 12,179 482
Retail buildings..................... 13,215 11,364 1,851 4,376 2,941 1,435
Land development /(1)/............... 10,589 4,886 5,703 7,252 3,308 3,944
Land leases.......................... 7,810 7,200 610 1,105 1,029 76
-------- -------- ------- ------- ------- ------
$115,886 $102,828 $13,058 $39,408 $30,650 $8,758
======== ======== ======= ======= ======= ======
(1) This category represents interim income-producing uses of properties intended for mixed-use development.
</TABLE>
Of the increase in revenue from industrial buildings, $3.3 million was
attributable to eleven new buildings totaling 1.7 million square feet that were
completed in late 1995 and 1996. Revenue also increased $1.2 million as a
result of higher tenant pass-through charges associated with the new
construction and higher operating costs. Operating costs for the industrial
portfolio increased, in part, because of new buildings completed and higher
overhead, maintenance and repairs.
Rental revenue for the Company's office portfolio decreased $0.3 million
because of a decrease in occupancy, primarily in one building, compared to the
same period in 1995. As of the end of 1996, a majority of this office space had
been leased. Revenue and costs for retail buildings increased primarily because
a 117,000-square-foot building leased to Kmart was acquired in December 1995 at
the East Baybridge shopping center.
The increase in revenue and costs from land development properties
resulted, in large part, from determination by the Company at the end of 1995
that Mission Bay and certain other properties no longer qualified for the
capitalization of interest expense. As a result, incremental revenue and
operating costs from interim uses, which had previously also been capitalized to
the project, were included in the consolidated statement of operations
effective January 1, 1996. Rental revenue and property operating cost increases
attributable to Mission Bay and other such properties were $6.1 million and $3.3
million, respectively, in 1996.
34
<PAGE>
Development Activities and Fee Services
- ---------------------------------------
Gain on development property sales increased to $15.6 million in 1996 from
$953,000 in 1995, summarized as follows:
<TABLE>
<CAPTION>
1996 1995 Difference
--------------- ------------- ------------
Commercial Sales: (in thousands)
<S> <C> <C> <C>
Sales..................................................... $40,525 $3,224 $37,301
Cost of sales............................................. 26,709 2,271 24,438
------- ------ -------
Gain............................................... 13,816 953 12,863
------- ------ -------
RESIDENTIAL SALES:
Sales..................................................... 21,945 - 21,945
Cost of sales............................................. 20,138 - 20,138
------- ------ -------
Gain............................................... 1,807 - 1,807
------- ------ -------
Total gain on development property sales.. $15,623 $ 953 $14,670
======= ====== =======
</TABLE>
The significant increase in gain on development property sales is
attributable to improved industrial development activity ($7.9 million),
residential sales activity resulting from the acquisition of The Akins Companies
($1.8 million) and the sale of the Metropolitan Water District site at the
Company's Los Angeles Union Station project ($5.0 million).
Development and management fee income, net, increased to $3.4 million
during 1996 from $1.9 million in 1995. This increase was primarily from "design-
build" fee income for the 500,000-square-foot Metropolitan Water District's
corporate headquarters at Los Angeles Union Station, residential development fee
income and fees under various management contracts.
Other Items on the Statement of Operations
- ------------------------------------------
Total interest incurred was $3.9 million lower in 1996 compared to 1995
because of debt reduction in 1996 and late 1995. However, during 1996, the
Company capitalized $2.9 million of interest compared to $23.6 million in 1995
because Mission Bay and certain other properties no longer qualified for
capitalization of interest. As a result, interest expense increased $16.8
million.
In late 1994, the Company experienced significant staff reductions and
realignment of responsibilities. In connection with these changes, the Company
refined its general and administrative expense allocation to align certain
common costs more closely with the underlying activities. This change in
allocations had the result of increasing property operating costs and decreasing
general and administrative expense in 1996 when compared to 1995.
In 1995, the Company began an accelerated program of selling non-strategic
assets, with the proceeds intended to pay down a portion of its existing debt
and fund new development. In connection with this program, the Company
completed sales totaling $85.7 million resulting in gains of $24.4 million in
1996 compared to completed sales of $62.2 million and gains of $32.8 million in
1995.
In 1995, the Company took a $102.4 million charge to adjust the carrying
value of certain properties, where the carrying cost exceeded what management
expected to recover through future operations and ultimate sale of such
properties. This charge included $84.8 million resulting from the Company's
decision to terminate the 1991 Development Agreement for its Mission Bay project
in San Francisco.
35
<PAGE>
Litigation and environmental costs decreased by $2.1 million. The $1.1
million income in 1996 represents amounts received from settlement proceeds in
environmental matters, with no offsetting cost being incurred. The $1.0
million expense in 1995 represents actual environmental costs incurred with
respect to operating properties, partly offset by income resulting from the
settlement of litigation in favor of the Company.
Other, net, decreased by $2.5 million in 1996 as a result of lower interest
income.
The Company completed a preferred stock call in September 1996. As a
result, a charge of $1.3 million for the premium on that redemption was
recognized in 1996. No preferred calls occurred in 1995.
Earnings Before Depreciation and Deferred Taxes
The Company uses a supplemental performance measure called Earnings Before
Depreciation and Deferred Taxes (EBDDT) along with net income (loss) to report
its operating results. EBDDT is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash available
to fund cash needs and should not be considered as an alternative to cash flows
as a measure of liquidity. However, the Company believes that EBDDT provides
relevant information about its operations and is necessary, along with net
income (loss), for an understanding of its operating results.
EBDDT is calculated by taking net income (loss) and making various
adjustments. Depreciation, amortization and deferred income taxes are excluded
from EBDDT as they represent non-cash charges. In addition, gains on the sale of
non-strategic land and other assets, adjustments to the carrying value of
property and premium on the redemption of preferred stock represent non-
operating, unusual and/or nonrecurring items and are excluded from the EBDDT
calculation. EBDDT is reconciled to net income (loss), as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Net income (loss) applicable to common stockholders..................... $ 23,888 $ 1,894 $(56,815)
Depreciation and amortization........................................... 31,245 30,561 27,990
Deferred income taxes................................................... 12,667 16,468 (22,532)
Gain on non-strategic land and other asset sales........................ (5,029) (24,405) (32,789)
Adjustment to carrying value of property................................ - - 102,400
Premium on redemption of preferred stock................................ - 1,334 -
-------- -------- --------
Earnings before depreciation and deferred taxes................... $ 62,771 $ 25,852 $ 18,254
======== ======== ========
Average number of common shares outstanding - basic..................... 97,601 74,947 72,967
======== ======== ========
Average number of common shares outstanding - assuming dilution......... 100,768 75,835 72,967
======== ======== ========
</TABLE>
The $36.9 million increase in EBDDT in 1997 compared to 1996 was primarily
because of a reduction in preferred stock dividends and improved results from
income-producing assets.
The $7.6 million increase in EBDDT from 1995 to 1996 was primarily because
of an increase in gain on development property sales, improved operating results
from income-producing assets and a decrease in general and administrative
expenses, all of which were partially offset by higher interest expense in 1996
because of the decision that the Mission Bay project no longer qualified for the
capitalization of interest.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities
Cash provided by operating activities reflected in the statement of cash
flows for the years ended December 31, 1997, 1996 and 1995 was $84.2 million,
$111.1 million and $102.2 million, respectively. The $26.9 million decrease
from 1996 to 1997 is primarily because of a $52.4 million increase in 1997
expenditures for development of
36
<PAGE>
property for sale and residential acquisitions and an increase in notes and
accounts receivable related to development and sales activity offset by improved
earnings from income-producing properties. The Company started construction on
112 residential units and completed 128 units in 1997 compared to 68 starts and
24 completions for the same period in 1996. Capital expenditures for development
properties for the years ended 1997, 1996 and 1995 are included in the schedule
of capital expenditures in the following discussion of cash flows from investing
activities.
The $8.9 million increase in cash provided by operating activities in 1996
compared to 1995 is primarily the result of a significant increase in 1996
development property and non-strategic land sales, offset by an increase in
interest expense and increased capital expenditures for properties developed to
be sold.
Cash generated from sales of non-strategic land and development property
was $108.4 million, $113.1 million and $58.4 million for the years ended
December 31, 1997, 1996 and 1995, respectively. Cash generated from rental
operations increased principally because of the addition of new buildings.
Cash flow from investing activities
Net cash used in investing activities reflected in the statement of cash
flows for the years ended December 31, 1997, 1996 and 1995 was $156.5 million,
$64.4 million and $30.7 million, respectively. The increase between 1997 and
1996 is primarily because of a $67.8 million increase in capital expenditures
and $18.0 million increase in joint venture contributions.
Capital expenditures reflected in the statement of cash flows include the
following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
(in millions)
<S> <C> <C> <C>
CAPITAL EXPENDITURES INCLUDED IN CASH FLOW FROM OPERATING ACTIVITIES/(1)/
Capital expenditures for residential and industrial development properties.... $ 47.2 $ 24.7 $ 2.7
Residential property acquisitions/(3)/........................................ 44.5 16.3 -
Capitalized interest and property tax......................................... 2.7 1.0 0.1
------ ------ -----
94.4 42.0 2.8
------ ------ -----
CAPITAL EXPENDITURES INCLUDED IN CASH FLOW FROM INVESTING ACTIVITIES /(2)/
Construction and building improvements........................................ 68.2 32.8 14.8
Commercial property acquisitions.............................................. 30.1 12.2 9.3
Predevelopment................................................................ 17.4 11.1 3.7
Infrastructure and other...................................................... 15.5 11.5 9.6
Capitalized interest and property tax......................................... 4.3 2.2 26.1
Tenant improvements........................................................... 5.7 3.6 2.2
------ ------ -----
141.2 73.4 65.7
------ ------ -----
Total Capital Expenditures/(3)/............................................... $235.6 $115.4 $68.5
====== ====== =====
(1) This category includes capital expenditures for properties the Company intends to sell.
(2) This category includes capital expenditures for properties the Company intends to hold for its own account.
(3) Excludes $16.2 million invested in join ventures to acquire residential property.
</TABLE>
Capital expenditures for residential and industrial development properties
- -- relates to the development of residential and for-sale industrial development
properties. The increase from 1996 to 1997 is primarily because of the increase
in both residential and for-sale industrial development activity and the fact
that 1997 reflects the first full year of residential activity since the
purchase of the Akins Companies in March 1996.
37
<PAGE>
Construction and building improvements -- relates primarily to development
of new industrial properties held for lease and improvements to existing
buildings. Industrial development activity is summarized below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
--------------- -------------- -------------
<S> <C> <C> <C>
(square feet)
Under construction, beginning of period.............. 2,286,961 641,128 337,136
Construction starts.................................. 3,804,000/(1)/ 3,259,308 791,846
Completed - Retained in portfolio.................... (2,089,200) (1,269,525) (437,604)
Completed - Sold..................................... (308,761) (343,950) (50,250)
--------------- ---------- --------
Under construction, end of period............... 3,693,000/(2)/ 2,286,961 641,128
=============== ========== ========
(1) The Company's total commercial construction starts in 1997 were 3.9 million
square feet which included 81,000 square feet of retail development.
(2) Includes 925,000 square feet of "design-build" development for third-party
landowners.
</TABLE>
As of December 31, 1997, the Company had 3.7 million square feet under
construction, all of which is expected to be completed in 1998. Of the 3.7
million square feet under construction, approximately 1.7 million square feet is
expected to be added to the Company's portfolio.
Property Acquisitions--During the second quarter of 1997, the Company
began the process of actively identifying and acquiring development sites beyond
its historical land holdings. As a result, the Company invested approximately
$90.8 million in the acquisition of new property directly or through joint
ventures.
* Residential acquisitions-- In 1997, the Company invested approximately
$60.7 million in the acquisition of residential development property
directly or through joint ventures. These acquisitions will support up to
5,351 new residential lots and included the following significant
acquisitions: (1) a 44-acre, 121-lot site in Playa del Rey, California, (2)
a 31-acre, 96-lot site in Carlsbad, California, (3) an 8-acre, 47-lot site
in Spinnaker Bay in the Long Beach (California) Marina, (4) a 27-acre, 122-
lot site in Tustin, California, and (5) a 3,470-acre, 4,965-lot site in a
Talega Valley residential land development project in San Clemente,
California, through a joint venture. Entitlements and approvals
for 2,670 lots have been received and are in progress for the remainder.
* Industrial acquisitions-- In 1997, the Company invested approximately $30.1
million in the acquisition of industrial development property. These
acquisitions added approximately 5.8 million square feet of potential
industrial development. During the year, the company acquired: (1) 294
acres of land in Denver, Colorado, (2) 27 acres of land in Oakland,
California, (3) 13 acres of land in Richmond, California, (4) 62 acres of
land in Mira Loma, California, and (5) 16 acres of land in San Jose,
California. Entitlements have been received and construction or development
of these sites has commenced or is scheduled to commence by mid-1998.
Predevelopment--relates primarily to amounts incurred in obtaining
entitlements for the Company's major mixed-use projects. The annual increases in
predevelopment costs primarily relate to activity at the Mission Bay and Pacific
Commons projects .
Infrastructure and other--primarily represents infrastructure costs
incurred in connection with the Company's major mixed-use and development
projects. The increase in 1997 compared to 1996 primarily relates to the Pacific
Commons and Woodridge, Illinois, projects.
Capitalized interest and property taxes--represents construction period
interest and property taxes capitalized to the Company's development projects.
The increase in 1997 compared to 1996 is due to the significant increase in
development activity, as noted above. The decrease in 1995 to 1996 is primarily
related to the Company's decision in 1995 that the Mission Bay project no longer
qualified for capitalization of interest.
38
<PAGE>
The $33.7 million increase in net cash used in investing activities in 1996
compared to 1995 is primarily from a decrease in short-term investments and
restricted cash.
Cash flow from financing activities
Net cash provided by financing activities reflected in the statement of
cash flows increased by $116.9 million in 1997 compared to 1996. This increase
is primarily because of a $76.6 million increase in net borrowings used to
finance development projects, a $17.1 million decrease in preferred stock
dividends paid and a $26.3 million decrease in preferred stock redemptions.
As of December 31, 1997, the Company had total outstanding debt of $568.7
million, of which 61.5% was non-recourse to the Company and secured by
certainproperty of the Company, 38.2% was recourse to the Company and also
secured by certain property and 0.3% was unsecured. During the next twelve
months, approximately $218.9 million of debt matures, consisting primarily of
the secured line of credit but also including construction financing, term loans
and first mortgage loans. The Company expects that the maturing debt will most
likely be resolved through a combination of long-term fixed-rate financing
combined with a restructure of the secured line of credit. All other maturing
debt is expected to be repaid upon sale of the property securing it, extended,
refinanced or repaid.
Capital commitments
As of December 31, 1997, the Company had approximately $38.8 million in
total commitments for capital expenditures. These commitments are primarily to
fund the construction of industrial development projects, predevelopment costs
and re-leasing costs.
Cash balances, available borrowings and capital resources
As of December 31, 1997, the Company had $17.3 million in cash and cash
equivalents. In September 1997, the Company modified its secured revolving
credit line to increase the maximum commitment from $240 million to $265
million. At December 31, 1997, the Company had available $72.9 million under its
modified secured revolving credit facility, $14.7 million under its residential
construction facilities and $25 million under an unsecured line of credit.
The Company's short- and long-term liquidity and capital resources
requirements will essentially be provided from three sources: ongoing operating
income from rental properties, proceeds from development, non-strategic and
other asset sales and fee services income. As noted above, a secured revolving
line of credit, an unsecured line of credit and residential construction loan
facilities are available to the Company for meeting liquidity requirements. The
Company currently estimates the debt requirements relating to its planned
development activities will exceed the current commitment under existing debt
facilities. The Company believes it will be able to obtain the additional
required debt capacity to complete its planned development activities.
Debt covenants. Certain loan agreements contain restrictive financial
covenants, the most restrictive of which require the maximum funded debt to net
worth ratio not to exceed 0.75:1, require stockholders' equity to be no less
than $385 million and require that the Company maintain certain specified
financial ratios. In addition, certain agreements restrict the total leverage
for the Company. The Company was in compliance with all such covenants at
December 31, 1997.
Income taxes. At December 31, 1997, the Company's deferred tax liability
consisted of deferred tax assets totaling $113.8 million and deferred tax
liabilities of $231.5 million. Deferred tax assets included $7.5 million
relating to net operating loss carryforwards (''NOLs'') of $21.5 million. The
Company has NOLs of $14.5 million, $6.5 million, $0.3 million and $0.2 million
which expire in 2007, 2008, 2009 and 2011 (none of the Company's
39
<PAGE>
NOLs are scheduled to expire in 2010). The Company's other deferred tax assets
of $106.3 million relate primarily to differences between book and tax basis of
properties. These deferred tax assets are not subject to expiration and will
likely be realized at the time of taxable dispositions of the properties.
Deferred tax liabilities in excess of deferred tax assets are often associated
with the same property, with the result that the deferred tax asset will likely
be realized in a taxable disposition, without regard to other taxable income.
The Company believes it is more likely than not that it will realize the benefit
of its deferred tax assets, and that no valuation allowance is required. In
making this determination, the Company considered: the nature of its deferred
tax assets (and liabilities); the amounts and expiration dates of its NOLs; the
historical levels of taxable income; the significant unrealized appreciation of
its properties, including properties likely to be sold during the NOL
carryforward periods; and its ability in many cases to control the timing of
property sales in order to assure that deferred tax assets will be offset by
deferred tax liabilities or realized appreciation.
A significant portion of the Company's NOLs was used to reduce tax
payments for 1997, and the Company believes it will use the balance of its
NOLs to reduce tax payments for 1998. The estimated amount of federal tax
payments if any, will depend on the Company's taxable income.
ENVIRONMENTAL MATTERS
Many of the Company's properties are in urban and industrial areas and may
have been leased to or previously owned by commercial and industrial tenants who
may have discharged hazardous materials. The Company incurs on-going
environmental remediation costs, including clean-up costs, consulting fees for
environmental studies and investigations, monitoring costs, and legal costs
relating to clean-up, litigation defense and the pursuit of responsible third
parties. Costs incurred in connection with operating properties and properties
previously sold are expensed. As of December 31, 1997, management has provided a
reserve of approximately $11 million for such costs. These costs are expected to
be incurred over an estimated ten-year period, with a substantial portion
incurred over the next five years.
Costs incurred for properties to be sold are deferred and will be charged
to cost of sales when the properties are sold. Costs relating to undeveloped
properties are capitalized as part of development costs. At December 31, 1997,
the Company's estimate of its potential liability for identified environmental
costs relating to properties to be developed or sold ranged from $12.6 million
to $38.2 million. These costs generally will be capitalized as they are incurred
over the course of the estimated development period of approximately 20 years.
Environmental costs capitalized during the years ended December 31, 1997 and
1996 totaled $5.7 million and $2.8 million, respectively.
While the Company or outside consultants have evaluated the environmental
liabilities associated with most of the Company's properties, any evaluation
necessarily is based upon then-prevailing law, identified site conditions and
sampling methodologies. The Company monitors its exposure to environmental costs
for properties it owns on a regular basis. Properties formerly owned by the
Company or its predecessors are not generally accessible for assessment.
Although an unexpected event could have a material impact on the results of
operations for any period, based on existing assessments, the Company does not
believe that such costs for identified liabilities will have a material adverse
effect on its financial position, results of operations or cash flows.
Year 2000 Compliance
The Company has examined the problem presented by the inability of many
computer programs to distinguish the year 2000 from the year 1900 (the "Year
2000 Problem"). The primary software package used by the Company is one
designed by an outside vendor to be Year 2000 compliant (that is, not to be
negatively affected by the occurrence or use of a date in 2000). Other
significant operating software has also been designed by third party vendors,
and the current versions being used have been certified as being Year 2000
compliant. Although there can be no assurances, at the present time the Company
does not believe problems likely to be faced by its vendors, lenders or
customers because of the Year 2000 Problem would be likely to have a material
adverse impact on the Company. The Company would be affected by systemic
problems in the economy resulting from the Year
40
<PAGE>
2000 Problem, such as problems in air traffic control, other transportation
systems or overall economic dislocation. In addition, the Company's development
activities could be halted or materially delayed if its banks are, as a result
of the Year 2000 Problem, unable to advance funds on construction loans, lines
of credit or similar facilities. Beginning in 1998, the Company will begin
testing all of its systems to ensure Year 2000 compliance. The Company expects
to redeploy systems resources from its current staff for such testing so as to
eliminate any incremental costs.
41
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements and schedules required under Regulation S-X
promulgated under the Securities Act of 1933 are identified in Item 14 and are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Except for the information relating to the executive officers of the
Company set forth in Part I of this Annual Report on Form 10-K, the
information required by the following items in this Part III is hereby
incorporated by reference to the relevant sections contained in the Company's
definitive Proxy Statement ("1998 Proxy Statement") which will be filed with
the Securities and Exchange Commission in connection with the 1998 Annual
Meeting of Stockholders.
Item 10. Directors and Executive Officers of the Registrant
The information in the section caption "Election of Directors" in the
1998 Proxy Statement is incorporated herein by reference. Information
concerning executive officers required by this Item 10 is located under Part
I, Item 4 and pages 23 through page 24 of this Form 10-K.
The information in the section captioned "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the 1998 Proxy Statement is
incorporated herein by reference.
Item 11. Executive Compensation
The information in the sections captioned "Election of Directors --
Directors' Compensation," "Employment Agreements" and "Compensation of
Executive Officers" included in the 1998 Proxy Statement is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information in the sections captioned "Security Ownership of
Directors and Executive Officers" and "Security Ownership of Certain
Beneficial Owners" in the 1998 Proxy Statement is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information in the section captioned "Certain Transactions" in
the 1998 Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) and (a)(2) Financial Statements and Financial Statement
Schedules
See Index to Financial Statements and Financial Statement Schedules
at F-1 herein.
42
<PAGE>
All other Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a)(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
No.
------
<S> <C> <C>
3.1 Form of Restated Certificate of Incorporation of the Registrant(1)
3.1A Amendment to Restated Certificate of Incorporation of the Registrant(6)
3.2 Form of Certificate of Designations, Preferences and Rights of $3.25 Series A Cumulative Convertible Preferred
Stock(2)
3.3 By-Laws, as amended*
3.4 Form of Certificate of Designations, Preferences and Rights of $3.625 Series B Cumulative Convertible Exchangeable
Preferred Stock(6)
4.1 Form of stock certificate representing Common Stock(1)
4.2 Loan Agreement dated as of February 16, 1994 between the Registrant and The Prudential Insurance Company of
America(7)
4.3 Loan Agreement dated as of October 28, 1996 between the Registrant and Bank of America National Trust and Savings
Association(10)
10.1 Exploration Agreement and Option to Lease dated December 28, 1989 between the Registrant and Santa Fe Pacific
Minerals Corporation(1)
10.2 Registration Rights Agreement dated as of December 29, 1989 among the Registrant, BAREIA, O&Y and Itel(1)
10.2A Letter Agreement dated November 14, 1995 between the Registrant and California Public Employees' Retirement
System(9)
10.3 Restated Tax Allocation and Indemnity Agreement dated December 29, 1989 among the Registrant and certain of its
subsidiaries and Santa Fe Pacific Corporation ("SFP")(1)
10.4 State Tax Allocation and Indemnity Agreement dated December 29, 1989 among the Registrant and certain of its
subsidiaries and SFP(1)
10.5 Registrant's Incentive Stock Compensation Plan(3)
10.6 Termination, Substitution and Guarantee Agreement between ATSF and the Registrant dated December 21, 1990(4)
10.7 Registrant's Amended and Restated 1991 Stock Option Plan*
10.8 Registrant's Amended and Restated Executive Stock Option Plan*
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.9 Form of First Amendment to Registration Rights Agreement among the Registrant, BAREIA, O&Y and Itel(5)
10.10 Amended and Restated Executive Employment Agreement dated as of November 29, 1995 between the Registrant and Nelson
C. Rising(9)
10.11 Executive Employment Agreement dated February 10, 1995 between the Registrant and Timothy J. Beaudin(8)
10.12 Employment Agreement dated July 24, 1996 between the Registrant and Stephen P. Wallace(9)
10.13 Registrant's Amended and Restated 1995 Stock Option Plan*
10.14 Registrant's Amended and Restated 1996 Performance Award Plan*
10.15 Employment Agreement dated February 1, 1996 between the Registrant and Ira Yellin(10)
10.16 Letter Agreement dated February 1, 1996 between the Registrant and Ira Yellin(10)
10.17 Amended and Restated Employment Agreement dated September 16,1997 between the Registrant and Kathleen Smalley*
10.18 Letter Agreement dated November 16, 1996 between the Registrant and Steve Wallace(10)
10.19 Letter Agreement dated November 16, 1996 between the Registrant and Timothy Beaudin(10)
10.20 Office lease dated November 22, 1996 between Bradbury Associates, L.P. and the Registrant(10)
10.21 Registrant's Deferred Compensation Plan*
21.1 Subsidiaries of the Registrant*
23.1 Consent of Independent Accountants*
24.1 Powers of Attorney from directors with respect to the filing of the Form 10-K*
27 Financial Data Schedule*
99.1 Report of the Independent Real Estate Appraisers dated March 12, 1996(9)
</TABLE>
The Registrant has omitted instruments with respect to long-term debt
where the total amount of the securities authorized thereunder does not exceed
10 percent of the assets of the Registrant and its subsidiaries on a
consolidated basis. The Registrant agrees to furnish a copy of such instrument
to the Commission upon request.
44
<PAGE>
(b) Reports on Form 8-K
None.
______________________________
*Filed with this report on Form 10-K.
(1) Incorporated by reference to the Registration Statement on Form 10
(Commission File No. 0-18694) as filed with the Commission on July 18, 1990
("Form 10").
(2) Incorporated by reference to the Form 8 constituting a Post-Effective
Amendment No. 1 to the Form 8-A as filed with the Commission on February
19, 1993.
(3) Incorporated by reference to the Form 8 constituting Post-Effective
Amendment No. 1 to the Form 10 as filed with the Commission on November 20,
1990.
(4) Incorporated by reference to the Form 10-K for the year ended December 31,
1990.
(5) Incorporated by reference to Amendment No. 2 to Form S-3 as filed with the
Commission on February 4, 1993.
(6) Incorporated by reference to the Form 10-K for the year ended December 31,
1993.
(7) Incorporated by reference to Amendment No. 1 to the Form 10-K for the year
ended December 31, 1993.
(8) Incorporated by reference to the Form 10-K for the year ended December 31,
1994.
(9) Incorporated by reference to the Form 10-K for the year ended December 31,
1995.
(10) Incorporated by reference to the Form 10-K for the year ended December 31,
1996.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Catellus Development Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CATELLUS DEVELOPMENT CORPORATION
By /s/ Nelson C. Rising
--------------------------------
Nelson C. Rising
President and Chief Executive
Officer
Dated: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Catellus
Development Corporation and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Nelson C. Rising
- ---------------------------------- President, Chief Executive March 31, 1998
Nelson C. Rising Officer and Director
Principal Executive Officer
/s/ Stephen P. Wallace
- ---------------------------------- Senior Vice President and March 31, 1998
Stephen P. Wallace Chief Financial Officer
Principal Financial Officer
/s/ Paul A. Lockie
- ---------------------------------- Vice President and Controller March 31, 1998
Paul A. Lockie Principal Accounting Officer
</TABLE>
46
<PAGE>
* Director
- -------------------------------------
Joseph F. Alibrandi
* Director
- -------------------------------------
Daryl J. Carter
* Director
- -------------------------------------
Richard D. Farman
* Director
- -------------------------------------
Christine Garvey
* Director
- -------------------------------------
William M. Kahane
* Director
- -------------------------------------
Donald J. McNamara
* Director
- -------------------------------------
Leslie D. Michelson
* Chairman of the Board, Director
- -------------------------------------
Jacqueline R. Slater
* Director
- -------------------------------------
Thomas M. Steinberg
* Director
- -------------------------------------
Beverly Benedict Thomas
* By/s/ PAUL A. LOCKIE
-------------------
March 31, 1998
Paul A. Lockie
Attorney-in-fact
47
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
FINANCIAL STATEMENTS
<S> <C>
Report of Independent Accountants dated January 30, 1998.................................... F-2
Consolidated Balance Sheet at December 31, 1997 and 1996.................................... F-3
Consolidated Statement of Operations for the years ended December 31, 1997, 1996 and 1995... F-4
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1997, 1996
and 1995............................................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995... F-6
Notes to Consolidated Financial Statements.................................................. F-7
Summarized Quarterly Results (Unaudited).................................................... F-23
</TABLE>
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants dated January 30, 1998.................................... S-1
Schedule II -- Valuation and Qualifying Accounts............................................ S-2
Schedule III -- Real Estate and Accumulated Depreciation.................................... S-3
Attachment A to Schedule III................................................................ S-4
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Catellus Development Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Catellus
Development Corporation and its subsidiaries at December 31, 1997 and 1996 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
January 30, 1998
F-2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1997 1996
-------------------- ------------------
ASSETS
<S> <C> <C>
Properties............................................. $1,358,807 $1,235,440
Less accumulated depreciation.......................... (235,832) (211,338)
---------- ----------
1,122,975 1,024,102
Other assets and deferred charges, net.................. 50,138 50,547
Notes receivable, less allowance........................ 30,971 11,924
Accounts receivable, less allowance..................... 19,641 12,965
Cash and cash equivalents............................... 17,294 23,580
---------- ----------
Total.................................... $1,241,019 $1,123,118
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and other debt................................. $ 568,699 $ 496,742
Accounts payable and accrued expenses................... 62,681 54,178
Deferred credits and other liabilities.................. 40,035 43,007
Deferred income taxes 117,705 106,738
---------- ----------
Total liabilities............................. 789,120 700,665
---------- ----------
Commitments and contingencies (Note 15)
Stockholders' equity
Preferred stock...................................... -- 274,428
Common stock (106,503 and 77,028 shares
issued at December 31, 1997 and 1996)............. 1,065 770
Paid-in capital...................................... 476,047 197,709
Accumulated deficit.................................. (25,213) (50,454)
---------- ----------
Total stockholders' equity.................... 451,899 422,453
---------- ----------
Total.................................... $1,241,019 $1,123,118
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995
------------- ------------- ------------
INCOME PRODUCING PROPERTIES
<S> <C> <C> <C>
Rental revenue.......................................... $128,953 $115,886 $ 102,828
Property operating costs................................ (38,670) (39,408) (30,650)
Equity in earnings of joint ventures, net............... 7,436 5,993 5,826
-------- -------- ---------
97,719 82,471 78,004
-------- -------- ---------
DEVELOPMENT ACTIVITIES AND FEE SERVICES
Gain on development property sales...................... 13,197 15,623 953
Development and management fee income, net.............. 6,449 3,432 1,924
Equity in earnings of joint ventures, net............... 2,123 758 1,209
Land holding costs, net................................. (1,241) (3,724) (3,871)
-------- -------- ---------
20,528 16,089 215
-------- -------- ---------
Interest expense............................................. (39,988) (42,521) (25,757)
Depreciation and amortization................................ (31,245) (30,561) (27,990)
General and administrative expense........................... (10,897) (8,019) (10,924)
Gain on non-strategic land and other asset sales............. 5,029 24,405 32,789
Adjustment to carrying value of property..................... -- -- (102,400)
Litigation and environmental costs........................... 2,551 1,093 (961)
Other, net................................................... (1,113) (19) 2,504
-------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES....................... 42,584 42,938 (54,520)
-------- -------- ---------
Income tax (expense) benefit
Current................................................. (4,676) (1,069) (1,014)
Deferred................................................ (12,667) (16,468) 22,532
-------- -------- ---------
(17,343) (17,537) 21,518
-------- -------- ---------
NET INCOME (LOSS)....................................... 25,241 25,401 (33,002)
Preferred stock dividends.................................... (1,353) (22,173) (23,813)
Premium on redemption of preferred stock..................... -- (1,334) --
-------- -------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS..... $ 23,888 $ 1,894 $ (56,815)
======== ======== =========
Net income (loss) per share of common stock -
basic and assuming dilution......................... $0.24 $0.03 $(0.78)
======== ======== =========
Average number of common shares outstanding - basic..... 97,601 74,947 72,967
======== ======== =========
Average number of common shares outstanding -
assuming dilution................................... 100,768 75,835 72,967
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED
--------------- ------------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------ ------ ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994............. 6,450 $ 322,500 72,967 $ 730 $220,338 $(43,879)
Series A preferred stock dividends..... -- -- -- -- (12,938) --
Series B preferred stock dividends..... -- -- -- -- (10,875) --
Net loss............................... -- -- -- -- -- (33,002)
------ --------- ------- ------ -------- --------
Balance at December 31, 1995............. 6,450 322,500 72,967 730 196,525 (76,881)
Redemption of Series A preferred stock. (508) (25,406) -- -- (1,334) --
Conversion of Series A preferred stock. (453) (22,666) 2,502 25 22,641 --
Series A preferred stock dividends..... -- -- -- -- (11,298) --
Series B preferred stock dividends..... -- -- -- -- (10,875) --
Exercise of stock options and other.... -- -- 1,559 15 2,050 1,026
Net income............................. -- -- -- -- -- 25,401
------ --------- ------- ------ -------- --------
Balance at December 31, 1996............. 5,489 274,428 77,028 770 197,709 (50,454)
Redemption of Series A preferred stock. (8) (395) -- -- (69) --
Conversion of Series A preferred stock. (2,481) (124,033) 13,696 137 123,896 --
Conversion of Series B preferred stock. (3,000) (150,000) 15,306 153 149,847 --
Series B preferred stock dividends..... -- -- -- -- (1,353) --
Exercise of stock options and other.... -- -- 473 5 6,017 --
Net income............................ -- -- -- -- -- 25,241
------ --------- ------- ------ -------- --------
Balance at December 31, 1997............. -- $ -- 106,503 $1,065 $476,047 $(25,213)
====== ========= ======= ====== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995
------------- ----------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................................. $ 25,241 $ 25,401 $ (33,002)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization............................. 31,245 30,561 27,990
Deferred income taxes..................................... 12,667 16,468 (22,392)
Amortization of deferred loan fees and other costs........ 2,959 4,799 2,743
Equity in earnings of joint ventures...................... (9,559) (6,751) (7,035)
Operating distributions from joint ventures............... 12,129 10,235 8,332
Cost of non-strategic land and development properties sold 111,509 84,276 23,716
Expenditures for development properties................... (94,371) (41,978) (2,761)
Adjustment to carrying value of property.................. -- -- 102,400
Other, net................................................ 1,911 (1,904) 2,224
Change in assets and liabilities:..............................
Accounts and notes receivable............................. (26,713) (9,681) 1,306
Other assets and deferred charges......................... (1,110) (13,444) (5,652)
Accounts payable and accrued expenses..................... 15,482 12,341 850
Other..................................................... 2,779 754 3,483
--------- --------- ---------
Net cash provided by operating activities........................... 84,169 111,077 102,202
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions.......................................... (30,105) (12,230) (9,326)
Capital expenditures........................................... (105,396) (57,517) (54,190)
Tenant improvements............................................ (5,697) (3,613) (2,246)
Net proceeds from sale of other assets......................... 2,623 8,969 --
Contributions to joint ventures................................ (17,966) -- --
Reduction in short-term investments and restricted cash....... -- -- 35,067
--------- --------- ---------
Net cash used in investing activities............................... (156,541) (64,391) (30,695)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings..................................................... 181,680 222,052 99,013
Repayment of borrowings........................................ (107,467) (224,470) (135,884)
Dividends paid................................................. (5,975) (23,067) (23,813)
Redemption of preferred stock.................................. (471) (26,739) --
Contributions to/distribution from minority partners, net...... (5,167) 1,201 --
Proceeds from issuance of common stock......................... 3,486 174 --
--------- --------- ---------
Net cash provided by (used in) financing activities................. 66,086 (50,849) (60,684)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................ (6,286) (4,163) 10,823
Cash and cash equivalents at beginning of year...................... 23,580 27,743 16,920
--------- --------- ---------
Cash and cash equivalents at end of year............................ $ 17,294 $ 23,580 $ 27,743
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized)...................... $ 36,717 $ 39,144 $ 23,208
Income taxes.............................................. $ 1,338 $ 1,009 $ 444
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
Catellus Development Corporation (the Company) is a diversified real
estate operating company, with a large portfolio of income-producing properties
and developable land, that manages and develops real estate for its own account
and others. The Company's portfolio of industrial, residential, retail and
office projects, undeveloped land and joint venture interests are primarily
located in major markets in California and 7 other western states. The Company's
income-producing properties consist primarily of industrial facilities, along
with a number of office and retail buildings located in California, Arizona,
Illinois, Texas, Colorado and Oregon. The Company also has substantial
undeveloped land holdings primarily in these same states.
In March 1996, the Company acquired The Akins Companies (Akins), a
residential real estate company involved in home building, community development
and project management services, primarily in Southern California. Akins was
acquired in exchange for 1,528,421 shares of the Company's common stock in a
transaction that qualified for the pooling of interest method of accounting.
However, prior financial statements were not restated because Akins was not
material to the financial position, results of operations or cash flows of the
Company. Concurrent with this acquisition, Akins changed its legal name to
Catellus Residential Group (Residential Group) and commenced development of
certain of the Company's residential land holdings, projects previously started
by Akins and new development activities on properties owned by others.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation--The accompanying consolidated financial
statements include the accounts of the Company, its wholly-owned subsidiaries
and investees over 50% owned which are controlled by the Company. All other
investees are accounted for using the equity method.
Revenue recognition--Rental revenue, in general, is recognized when due
from tenants; however, revenue from leases with rent concessions or fixed
escalations is recognized on a straight-line basis over the initial term of the
lease. Direct costs of negotiating and consummating a lease are deferred and
amortized over the initial term of the related lease.
The Company recognizes revenue from the sale of properties using the
accrual method. Sales not qualifying for full recognition at the time of sale
are accounted for under the percentage-of-completion method. In general,
specific identification is used to determine the cost of sales. Estimated future
costs to be incurred by the Company after completion of each sale are included
in cost of sales.
Cash and cash equivalents --The Company considers all highly liquid
investments with a maturity of three months or less at time of purchase to be
cash equivalents.
Financial instruments--The historical cost basis of the Company's notes
receivable is representative of fair value based on a comparison to year-end
interest rates for receivables of comparable risks and maturities. Mortgage and
other debt have carrying values which approximate estimated fair value based on
a comparison to year-end interest rates for debt with similar terms and
remaining maturities, with the exception of one of the Company's first mortgage
loans. As of December 31, 1997, this loan had an estimated aggregate fair market
value of approximately $270 million and remaining principal of $251.6 million.
Property and deferred costs--Real estate is stated at cost or the lower
of cost or estimated fair value. For operating properties and properties held
for long-term investment, a write-down to estimated fair value is recognized
when a property's estimated undiscounted future cash flow, before interest
charges, is less than its book value. For properties held for sale, a write-down
to estimated fair value is recorded when the Company determines that the
carrying cost exceeds the estimated selling price, less cost to sell. This
evaluation is made by management
F-7
<PAGE>
on a property by property basis. The evaluation of fair value and future cash
flows from individual properties requires significant judgment; it is reasonably
possible that a change in estimate could occur.
The Company capitalizes construction and development costs. Costs
associated with financing or leasing projects are also capitalized and amortized
over the period benefited by those expenditures.
Depreciation is computed using the straight-line method. Buildings and
improvements are depreciated using lives of between 20 and 40 years. Tenant
improvements are depreciated over the primary terms of the leases (generally 3-
15 years), while furniture and equipment are depreciated using lives ranging
between 3 and 10 years.
Maintenance and repair costs are charged to expense as incurred, while
significant improvements, replacements and major renovations are capitalized.
Allocated costs--Direct and indirect costs incurred by the Company in
connection with development property sales and development and management fees
are reflected as an offset to the associated revenues in the accompanying
consolidated statement of operations.
Notes Receivable--Notes receivable are carried at the principal balance,
less estimated uncollectible amounts of $0.8 million as of December 31, 1996.
Interest is recognized as earned; however, the Company discontinues accruing
interest when collection is considered doubtful. All notes are secured by real
property.
Allowance for uncollectible accounts--Accounts receivable are net of an
allowance for uncollectible accounts totaling $2.1 million and $2.4 million at
December 31, 1997 and 1996, respectively.
Environmental costs--The Company incurs on-going environmental remediation
costs, including clean-up costs, consulting fees for environmental studies and
investigations, monitoring costs, and legal costs relating to clean-up,
litigation defense, and the pursuit of responsible third parties. Costs incurred
in connection with operating properties and properties previously sold are
expensed. Costs relating to undeveloped land are capitalized as part of
development costs. Costs incurred for properties to be sold are deferred and
charged to cost of sales when the properties are sold.
The Company maintains a reserve for known, probable costs of environmental
remediation to be incurred in connection with operating properties and
properties previously sold. When there is a legal requirement for environmental
remediation of developable land, the Company will accrue for the estimated cost
of remediation and capitalize that amount. Where there is no legal requirement
for remediation, costs will be capitalized, as incurred, as part of the project
costs.
Income taxes--Income taxes are recorded based on the future tax effects of
the difference between the tax and financial reporting bases of the Company's
assets and liabilities. In estimating future tax consequences, expected future
events are considered except for potential income tax law or rate changes.
Net income (loss) per share--Net income (loss) per share of common stock is
computed by dividing net income (loss), after reduction for preferred stock
dividends and premium on redemption of preferred stock, by the weighted average
number of shares of common stock and equivalents outstanding during the period
(see table below for effect of dilutive securities).
F-8
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ---------------------------- --------------------------
Per Per Per
Share Share Share
Income Shares Amount Income Shares Amount Income Shares Amount
------- ------ ------ ------ ------ ------ ------ ------ -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)....................... $25,241 $ 25,401 $(33,002)
Less: Preferred stock dividends......... (1,353) (22,173) (23,813)
Premium on redemption of
preferred stock................ - (1,334) -
------- -------- --------
Net income (loss) applicable to
common stockholders............ 23,888 97,601 $0.24 1,894 74,947 $0.03 (56,815) 72,967 ($0.78)
===== ===== ======
Effect of dilutive securities:
Stock options.................. - 3,167 - 888 - -
------- ------- -------- ------ -------- ------
Net income (loss) applicable to common
stockholders plus assumed
conversion of options............ $23,888 100,768 $0.24 $ 1,894 75,835 $0.03 $(56,815) 72,967 ($0.78)
======= ======= ========= ======== ====== ========= ======== ====== ======
</TABLE>
Preferred stock convertible into 29,040,000 and 34,346,000 shares of common
stock was outstanding at December 31, 1996 and 1995, respectively, but was not
included in the computation of diluted income (loss) per share because the
assumed conversion would be anti-dilutive for each period. In addition, at
December 31, 1995, options to purchase 2,877,000 shares of common stock were not
included in the computation of diluted income (loss) per share because the
options' exercise price was greater than the average annual market price of the
common stock.
Use of estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenue and expenses. Actual results could differ from those
estimates.
Reclassifications--Certain prior year amounts have been reclassified to
conform with the current year financial statement presentation.
New Accounting Standards--In the fourth quarter 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings Per Share", which
changes the method of calculation and presentation of earnings per share. This
change did not have any impact on previously reported earnings per share amounts
for the years ended December 31, 1997, 1996 or 1995.
During June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, ''Reporting Comprehensive Income'',
and No. 131, ''Segment Reporting''. Both standards are effective for fiscal
years beginning after December 15, 1997. The Company plans to adopt these
standards in the first quarter of 1998 and does not expect that they will have a
material effect on its financial presentation and disclosure.
F-9
<PAGE>
NOTE 3. MORTGAGE AND OTHER DEBT
Mortgage and other debt at December 31, 1997 and 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
First mortgage loan, interest at an average rate of 8.71%, due at
various dates through March 1, 2004 (a)....................................... $251,589 $259,063
Secured revolving credit line, interest variable (7.567% at December 31, 1997),
due November 1, 1998 (b)...................................................... 192,100 118,600
First mortgage loans, interest at 7.625% to 10.05%, due at various
dates through March 1, 2009 (c)............................................... 65,843 67,249
Assessment district bonds, interest at 6.218% to 8.7%, due at various
dates through April 10, 2021 (d).............................................. 17,825 21,012
Residential construction loans, interest variable (9.25% to 9.75%
at December 31, 1997), due at various dates through September 25, 1998 (e)... 6,453 10,105
Term loan, secured, interest variable (7.625% at December 31, 1997),
due August 1, 2002 (f)........................................................ 12,929 9,000
Secured promissory notes, interest variable (9.5% to 10.5% at December 31, 1997),
due at various dates through June 12, 2002 (g)................................ 21,570 6,160
Construction loans, interest variable........................................... -- 5,028
Other loan, interest at 4.6%, due at various dates through
December 31, 1999............................................................ 390 525
-------- --------
$568,699 $496,742
======== ========
</TABLE>
(a) This loan with The Prudential Insurance Company of America is collateralized
by certain of the Company's operating properties and by an assignment of
rents generated by the underlying properties. This loan has a penalty if
paid prior to maturity.
(b) On October 28, 1996, the Company entered into an agreement for a $240
million credit line which replaced six existing credit lines or term
facilities. On September 15, 1997, the credit line was expanded by an
additional $25 million to $265 million, subject to the underlying borrowing
base. This credit line is used to fund the Company's development projects,
interim capital requirements and to provide working capital for general
corporate purposes. At December 31, 1997, $72.9 million was available for
future borrowings. The credit line is collateralized by certain of the
Company's operating properties, an assignment of rents generated by the
underlying properties and certain land holdings.
(c) These first mortgage loans are collateralized by certain of the Company's
operating properties and by an assignment of rents generated by the
underlying properties. A majority of these loans have penalties if paid
prior to maturity.
(d) The assessment district bonds are issued through local municipalities to
fund the construction of public infrastructure and improvements which
benefit the Company's properties. These bonds are secured by certain of the
Company's properties.
(e) The Company's residential construction loans are used to finance development
projects and are secured by the related land and improvements. The
Residential Group and certain joint venture partners have guaranteed $6.1
million of these borrowings. At December 31, 1997, $14.7 million was
available for future borrowings under these residential construction loans.
F-10
<PAGE>
(f) This secured term loan is collateralized by an operating property and by an
assignment of rents generated by the underlying property.
(g) These promissory notes were used to finance land purchases for residential
development projects and are secured by deeds of trust.
As of December 31, 1997, the Company had a $25 million unsecured revolving
line of credit which matures May 1, 1998. There have been no advances under this
credit facility and, as of December 31, 1997, the entire $25 million was
available for future borrowings.
Certain loan agreements contain restrictive financial covenants, the most
restrictive of which allows for a maximum funded debt to net worth not to exceed
75%, require stockholders' equity to be no less than $385 million, and that the
Company maintain certain specified financial ratios. In addition, certain
agreements restrict the level of total leverage for the Company. The Company was
in compliance with all such covenants at December 31, 1997.
The maturities of mortgage and other debt outstanding as of December 31,
1997 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1998............................................................................ $218,933
1999............................................................................ 11,744
2000............................................................................ 9,774
2001............................................................................ 10,612
2002............................................................................ 83,231
Thereafter...................................................................... 234,405
--------
$568,699
========
</TABLE>
Interest costs relating to mortgage and other debt for the years ended
December 31, 1997, 1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Total interest incurred...................................... $46,684 $45,377 $ 49,316
Interest capitalized......................................... (6,696) (2,856) (23,559)
------- ------- --------
Interest expensed............................................ $39,988 $42,521 $ 25,757
======= ======= ========
</TABLE>
NOTE 4. INCOME TAXES
The income tax expense (benefit) reflected in the consolidated
statement of operations differs from the amounts computed by applying the
federal statutory rate of 35% to income (loss) before income taxes as follows
(in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal income tax expense (benefit) at statutory rate........... $14,904 $15,028 $(19,082)
Increase (decrease) in taxes resulting from:
State income taxes, net of federal impact..................... 2,345 2,441 (2,460)
Other......................................................... 94 68 24
------- ------- --------
$17,343 $17,537 $(21,518)
======= ======= ========
</TABLE>
F-11
<PAGE>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities and for operating loss and tax credit carryforwards. Significant
components of the Company's net deferred tax liability as of December 31, 1997
and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
Deferred tax liabilities:
<S> <C> <C>
Involuntary conversions (condemnations) of property........... $ 89,076 $ 90,074
Capitalized interest and taxes................................ 88,580 89,119
Like-kind property exchanges.................................. 22,463 22,392
Investments in partnerships................................... 23,335 20,544
Other......................................................... 8,043 5,999
-------- --------
231,497 228,128
-------- --------
Deferred tax assets:
Operating loss and tax credit carryforwards................... 9,757 14,345
Intercompany transactions (prior to spin-off)................. 14,620 16,332
Capitalized rent.............................................. 23,873 23,469
Adjustment to carrying value of property...................... 43,669 46,026
Depreciation and amortization................................. 10,399 8,897
Environmental reserve......................................... 4,624 4,633
Other......................................................... 6,850 7,688
-------- --------
113,792 121,390
Deferred tax assets valuation allowance....................... -- --
-------- --------
113,792 121,390
-------- --------
Net deferred tax liability.................................... $117,705 $106,738
======== ========
</TABLE>
During 1996, the Company generated a net operating loss carryforward of
$0.2 million for tax purposes which expires in 2011. Deferred income tax expense
was reduced to reflect the future benefit of this amount. Deferred tax assets
included $7.5 million relating to net operating loss carryforwards ("NOLs") of
$21.5 million. The Company has NOLs of $14.5 million, $6.5 million, $0.3 million
and $0.2 million which expire in 2007, 2008, 2009 and 2011 (none of the
Company's NOLs are scheduled to expire in 2010).
The benefit of $1.7 million for the year ended December 31, 1997 associated
with the exercise of stock options is credited directly to paid-in capital on
the accompanying statement of shareholders' equity.
NOTE 5. JOINT VENTURE INVESTMENTS
The Company has investments in a variety of unconsolidated real estate-
oriented joint ventures that are involved in both operation of income-producing
properties and development of various other projects. At December 31, 1997,
these joint venture investments included two hotels, one office building, a
1,200,000-square-foot trade mart center for the contract and home furnishing
industries, an apartment complex and other projects in the early stages of
development.
The Company guarantees a portion of the debt and interest of certain of its
joint ventures. At December 31, 1997, these guarantees totaled $17.4 million.
F-12
<PAGE>
The condensed combined balance sheets and statement of operations of these
unconsolidated joint ventures, along with the Company's proportionate share, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
PROPORTIONATE
COMBINED SHARE
----------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Assets:
Income-producing properties:
Property......................................... $ 226,704 $ 233,150 $104,872 $107,656
Other............................................ 22,285 26,506 11,978 13,134
Development projects:
Property......................................... 113,483 62,720 23,085 4,461
Other............................................ 4,970 15,647 1,052 1,627
--------- --------- -------- --------
Total................................... $ 367,442 $ 338,023 $140,987 $126,878
========= ========= ======== ========
Liabilities and venturers' deficit:
Income-producing properties:
Notes payable.................................... $ 410,003 $ 401,266 $160,643 $161,748
Other............................................ 14,256 18,984 4,720 5,957
Development projects:
Notes payable.................................... 23,847 8,525 1,842 144
Other............................................ 2,283 376 246 87
--------- --------- -------- --------
Total liabilities....................... 450,389 429,151 167,451 167,936
--------- --------- -------- --------
Venturers' deficit:
Income-producing properties....................... (175,270) (160,594) (48,512) (46,915)
Development projects.............................. 92,323 69,466 22,048 5,857
--------- --------- -------- --------
(82,947) (91,128) (26,464) (41,058)
--------- --------- -------- --------
Total liabilities and venturers' deficit $ 367,442 $ 338,023 $140,987 $126,878
========= ========= ======== ========
</TABLE>
The Company's proportionate share of venturers' deficit is an aggregate
amount for all ventures. Because the Company's ownership percentage differs from
venture to venture, and certain ventures have accumulated deficits while others
have accumulated equity, the Company's percentage of venturers' deficit is not
reflective of the Company's ownership percentage of the ventures. The Company
does not recognize its share of losses generated by joint ventures in excess of
its investment unless it is committed, legally or otherwise, to fund deficits in
the future.
The Company has contributed appreciated property to certain of its joint
venture investments. Although the properties are recorded by the venture at fair
value on the date of contribution, the related gains have been deferred in the
Company's financial statements and will be recognized when the properties are
sold by the joint ventures.
F-13
<PAGE>
<TABLE>
<CAPTION>
COMBINED PROPORTIONATE SHARE
------------------------------------ -----------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenue
Income-producing properties.. $144,291 $134,144 $127,678 $37,622 $35,527 $33,356
Development projects......... 52,545 49,235 5,735 13,556 9,516 2,054
-------- -------- -------- ------- ------- -------
196,836 183,379 133,413 51,178 45,043 35,410
-------- -------- -------- ------- ------- -------
Expenses
Income-producing properties.. 127,746 122,964 118,670 30,186 29,534 27,530
Development projects......... 48,161 45,256 5,018 11,433 8,758 845
-------- -------- -------- ------- ------- -------
175,907 168,220 123,688 41,619 38,292 28,375
-------- -------- -------- ------- ------- -------
Net earnings before income tax.... $ 20,929 $ 15,159 $ 9,725 $ 9,559 $ 6,751 $ 7,035
======== ======== ======== ======= ======= =======
</TABLE>
The Company had a loan outstanding to one of its joint ventures in the
amount of $1.7 million at December 31, 1995. During 1996, the Company converted
this note to equity in the joint venture.
NOTE 6. PROPERTY
Net book value by property type at December 31, 1997 and 1996 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
Income-producing properties:
<S> <C> <C>
Industrial buildings............................................... $ 351,704 $ 291,608
Office buildings................................................... 102,934 108,184
Retail buildings................................................... 83,612 86,070
Land development................................................... 331,360 323,134
Land leases........................................................ 8,036 6,627
---------- ----------
877,646 815,623
---------- ----------
Land holdings:
Developable properties............................................. 229,202 200,624
Natural resources.................................................. 4,260 2,299
Properties held for sale........................................... 28,129 37,223
---------- ----------
261,591 240,146
---------- ----------
Other (including proportionate share of joint ventures'
net deficits of $26,464 and $41,058).............................. (16,262) (31,667)
---------- ----------
$1,122,975 $1,024,102
========== ==========
</TABLE>
During 1997 and 1996, the Company took charges of $8.6 million and
$9.9 million, respectively, to cost of sales relating to non-strategic land
assets identified for sale during the year. During 1995, the Company took a
charge of $102.4 million to adjust the carrying value of certain properties. The
1995 charge included $84.8 million resulting from the Company's decision to
terminate the 1991 Development Agreement for its Mission Bay project in San
Francisco. The revised carrying value of the Mission Bay project represented
management's best estimate of its fair value, assuming the Company is successful
in re-entitling the property.
F-14
<PAGE>
NOTE 7. OTHER FINANCIAL STATEMENT CAPTIONS
OTHER ASSETS AND DEFERRED CHARGES, NET
The Company's other assets and deferred charges at December 31, 1997
and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Unamortized lease commission...... $18,451 $16,183
Rent concessions.................. 10,410 10,061
Deferred financing fees........... 8,752 10,904
Other............................. 12,525 13,399
------- -------
$50,138 $50,547
======= =======
</TABLE>
Amortization of lease commissions was $3.2 million, $3.0 million and
$2.5 million for the years ended December 31, 1997, 1996 and 1995, respectively.
Amortization of deferred finance fees of $3.0 million, $4.8 million and $2.7
million for the years ended December 31, 1997, 1996 and 1995, respectively, is
included in interest expense.
DEFERRED CREDITS AND OTHER LIABILITIES
The Company's deferred credits and other liabilities at December 31,
1997 and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Environmental and legal reserve... $12,995 $14,139
Minority interest................. 5,991 8,008
Deferred revenues................. 4,934 3,696
Security deposits................. 4,258 4,155
Other............................. 11,857 13,009
------- -------
$40,035 $43,007
======= =======
</TABLE>
The environmental reserve is more fully described in Notes 11 and 15.
Deferred revenues represent cash received by the Company in connection with
transactions which do not meet the criteria for sales recognition.
NOTE 8. LEASES
The Company, as lessor, has entered into noncancelable operating
leases expiring at various dates through 2039. Rental revenue under these leases
totaled $131.1 million in 1997, $118.7 million in 1996 and $106.8 million in
1995. Included in this revenue are rentals contingent on lessee's operations of
$3.0 million in 1997, $2.7 million in 1996 and $2.1 million in 1995. Future
minimum rental revenue under existing noncancelable operating leases as of
December 31, 1997 are summarized as follows (in thousands):
<TABLE>
<S> <C> <C>
1998............................................ $ 96,957
1999............................................ 88,816
2000............................................ 79,569
2001............................................ 66,908
2002............................................ 53,239
Thereafter...................................... 445,053
--------
$830,542
========
</TABLE>
F-15
<PAGE>
The book value of the Company's properties under operating leases or
held for rent at December 31, 1997 and 1996 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Buildings.................................... $ 584,121 $ 527,190
Land and improvements........................ 199,980 173,828
--------- ---------
784,101 701,018
Less accumulated depreciation................ (220,084) (197,586)
--------- ---------
$ 564,017 $ 503,432
========= =========
</TABLE>
The Company, as lessee, has entered into noncancelable operating
leases expiring at various dates through 2023. Rental expense under these leases
totaled $2.5 million in 1997, $1.6 million in 1996 and $1.7 million in 1995.
Future minimum lease payments as of December 31, 1997 are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1998................................................ $2,182
1999................................................ 1,875
2000................................................ 1,414
2001................................................ 1,046
2002................................................ 728
Thereafter.......................................... 2,183
------
$9,428
======
</TABLE>
F-16
<PAGE>
NOTE 9. REVENUES AND DIRECT COSTS BY ACTIVITY
Revenues and related costs exclusive of depreciation and amortization
for the years ended December 31, 1997, 1996 and 1995 are summarized by activity
as follows (in thousands):
<TABLE>
<CAPTION>
PROPERTY EXCESS (DEFICIT)
OPERATING COSTS OF REVENUES
REVENUES OR COSTS OF SALES OVER COSTS
-------------- ------------------------ ---------------
<S> <C> <C> <C>
1997
INCOME-PRODUCING PROPERTIES:
Industrial buildings...................................... $ 67,186 $ 14,529 $ 52,657
Office buildings.......................................... 29,713 12,753 16,960
Retail buildings.......................................... 13,273 3,932 9,341
Land development.......................................... 10,853 6,557 4,296
Land leases............................................... 7,928 899 7,029
Equity in earnings of joint ventures...................... 7,436 -- 7,436
-------- -------- --------
136,389 38,670 97,719
-------- -------- --------
DEVELOPMENT ACTIVITIES AND FEE SERVICES:
Commercial property sales................................. 39,587 31,717 7,870
Residential property sales................................ 82,632 77,305 5,327
Development and management fees........................... 13,976 7,527 6,449
Equity in earnings of joint ventures...................... 2,123 -- 2,123
Land holdings............................................. 3,675 4,916 (1,241)
-------- -------- --------
141,993 121,465 20,528
-------- -------- --------
$278,382 $160,135 $118,247
======== ======== ========
1996
INCOME-PRODUCING PROPERTIES:
Industrial buildings...................................... $ 55,865 $ 14,014 $ 41,851
Office buildings.......................................... 28,407 12,661 15,746
Retail buildings.......................................... 13,215 4,376 8,839
Land development.......................................... 10,589 7,252 3,337
Land leases............................................... 7,810 1,105 6,705
Equity in earnings of joint ventures...................... 5,993 -- 5,993
-------- -------- --------
121,879 39,408 82,471
-------- -------- --------
DEVELOPMENT ACTIVITIES AND FEE SERVICES:
Commercial property sales................................. 40,525 26,709 13,816
Residential property sales................................ 21,945 20,138 1,807
Development and management fees........................... 11,945 8,513 3,432
Equity in earnings of joint ventures...................... 758 -- 758
Land holdings............................................. 4,874 8,598 (3,724)
-------- -------- --------
80,047 63,958 16,089
-------- -------- --------
$201,926 $103,366 $ 98,560
======== ======== ========
1995
INCOME-PRODUCING PROPERTIES:
Industrial buildings...................................... $ 50,716 $ 11,193 $ 39,523
Office buildings.......................................... 28,662 12,179 16,483
Retail buildings.......................................... 11,364 2,941 8,423
Land development.......................................... 4,886 3,308 1,578
Land leases............................................... 7,200 1,029 6,171
Equity in earnings of joint ventures...................... 5,826 -- 5,826
-------- -------- --------
108,654 30,650 78,004
-------- -------- --------
DEVELOPMENT ACTIVITIES AND FEE SERVICES:
Commercial property sales................................. 3,224 2,271 953
Development and management fees........................... 4,674 2,750 1,924
Equity in earnings of joint ventures...................... 1,209 -- 1,209
Land holdings............................................. 5,240 9,111 (3,871)
-------- -------- --------
14,347 14,132 215
-------- -------- --------
$123,001 $ 44,782 $ 78,219
======== ======== ========
</TABLE>
F-17
<PAGE>
NOTE 10. NON-STRATEGIC LAND AND OTHER ASSET SALES
Based on management's assessment of the maximum value to be derived
from its various real estate holdings, the Company sells certain operating
properties, land parcels and other assets.
The Company's non-strategic land and other asset sales for the years
ended December 31, 1997, 1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NON-STRATEGIC LAND AND OTHER ASSETS:
Non-strategic land:
Sales....................................................... $28,347 $76,553 $62,199
Cost of sales............................................... 24,918 56,894 29,410
------- ------- -------
Gain................................................... 3,429 19,659 32,789
------- ------- -------
Other:
Sales....................................................... 2,775 9,125 --
Cost of sales............................................... 1,175 4,379 --
------- ------- -------
Gain................................................... 1,600 4,746 --
------- ------- -------
Total:
Sales....................................................... 31,122 85,678 62,199
Cost of sales............................................... 26,093 61,273 29,410
------- ------- -------
Gain................................................... $ 5,029 $24,405 $32,789
======= ======= =======
</TABLE>
NOTE 11. LITIGATION AND ENVIRONMENTAL COSTS
Litigation and environmental costs for the years ended December 31,
1997, 1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Litigation recovery........................................... $ -- $ -- $ 6,450
Environmental recovery (expense), net......................... 2,551 1,093 (7,411)
------ ------ -------
$2,551 $1,093 $ (961)
====== ====== =======
</TABLE>
Environmental costs charged to operations, including amounts charged
to cost of sales, for 1997, 1996 and 1995 totaled $0.1 million, $1.1 million and
$8.1 million, respectively. Environmental costs capitalized in 1997, 1996 and
1995 were $5.7 million, $2.8 million and $1.7 million, respectively.
See further discussion regarding litigation and environmental matters at
Note 15.
F-18
<PAGE>
NOTE 12. OTHER, NET
Other income (expense) for the years ended December 31, 1997, 1996 and
1995 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest income........................................... $ 931 $ 1,212 $ 3,769
Cost of S-3 registration.................................. (1,000) -- --
All other, net............................................ (1,044) (1,231) (1,265)
------- ------- -------
$(1,113) $ (19) $ 2,504
======= ======= =======
</TABLE>
The Company registered shares issued to the California Public
Employees' Retirement System during 1997. As the Company did not receive any
proceeds from this offering, such costs were expensed in the fourth quarter
1997.
NOTE 13. EMPLOYEE BENEFIT AND STOCK OPTION PLANS
The Company has a profit sharing and savings plan for all employees.
Funding consists of employee contributions along with matching and discretionary
contributions by the Company. Total expense for the Company under this plan was
$0.7 million, $0.4 million and $0.2 million in 1997, 1996 and 1995.
The Company has various plans through which employees may purchase
common stock of the Company.
The Incentive Stock Compensation Plan (Substitute Plan) was adopted to
provide substitute awards to employees whose awards under certain plans of the
former parent company, Santa Fe Pacific Corporation (SFP), were forfeited as a
result of the Company's spin-off from SFP in 1990. The number of shares,
exercise price and expiration dates of these awards were set so the participant
retained the full unrealized potential value of the original SFP grant. Options
became exercisable after March 5, 1992 and expire from 1996 through 1999.
The Company also has four stock option plans under which each of two
committees of Board of Directors may grant options to purchase up to 8,750,000
shares of common stock (Stock Option Plan, 1995 Stock Option Plan, Amended and
Restated Executive Stock Option Plan and Amended and Restated 1996 Performance
Award Plan). The exercise price of options granted under these plans is
generally the fair market value of the common stock on the date of grant.
Options generally are exercisable no earlier than six months from the date of
grant and expire ten years after the date of grant. All options granted to date
are exercisable (a) in installments on a cumulative basis at a rate of 25% each
year commencing on the first anniversary of the date of grant, (b) in increments
based on stock price performance benchmarks, or (c) in increments based on a
combination of stock price performance benchmarks and time vesting requirements.
The Company also has various plans through which non-employee
directors may purchase common stock of the Company.
Under the Amended and Restated Executive Stock Option Plan, each non-
employee director was automatically granted an option, upon initial election to
the Board of Directors, to purchase 5,000 shares of common stock at a price of
127.63% of the fair market value on the date of grant, increasing 5% on each
anniversary of the grant date commencing on the sixth anniversary. These options
are exercisable in installments on a cumulative basis at a rate of 20% each
year. No further options may be granted to non-employee directors under this
plan.
Under the Amended and Restated 1996 Performance Award Plan, each non-
employee director is automatically granted an option to purchase 5,000 shares of
common stock upon initial election to the Board of Directors and annually
thereafter during his or her term of service. The exercise price of these
options is the fair
F-19
<PAGE>
market value of the common stock on the date of grant and the options are
exercisable based upon stock price performance benchmarks.
In addition, under the Amended and Restated 1996 Performance Award Plan,
each non-employee director may elect to defer receipt of his or her annual
retainer fee, committee meeting fees and chairmen's retainer until termination
of board service or upon the occurrence of an earlier specified date which is at
least three years after the election of deferral and to acquire stock rather
than receive the cash retainer at a purchase price equal to 90% of the fair
market value of the common stock on the date of deferral.
The Company has elected to follow Accounting Principles Board Opinion No.
25, ''Accounting for Stock Issued to Employees'' (APB 25), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, ''Accounting for Stock-
Based Compensation'' (Statement 123) requires use of option valuation models
that were developed for use in valuing publicly traded stock options. Under APB
25, because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income (loss) and income (loss) per
share is required by Statement 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The
weighted-average fair value of options granted during 1997, 1996 and 1995 were
$6.36, $3.30 and $2.34. The fair value of options granted was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997, 1996 and 1995, respectively: risk-free
interest rates of 6.22%, 5.82% and 6.11%; zero percent dividend yields;
volatility factors of the expected market price of the Company's common stock of
29.95%, 29.56% and 30.77%, and a weighted-average expected life of the options
of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands, except income (loss) per
share information):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Pro forma net income (loss) applicable to
common stockholders................................... $21,120 $ 671 $(57,074)
======= ===== ========
Pro forma income (loss) per share - basic................. $ 0.22 $0.01 $ (0.78)
======= ===== ========
Pro forma income (loss) per share -
assuming dilution..................................... $ 0.21 $0.01 $ (0.78)
======= ===== ========
</TABLE>
F-20
<PAGE>
A summary of the Company's stock option activity, and related information
for the years ended December 31, 1997, 1996 and 1995 is as follows (in
thousands, except exercise price information):
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ --------------------------------- -----------------------------
Weighted-Average Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price Options Exercise Price
---------- ---------------- ---------- ----------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning
of year................. 6,361 $ 8.13 2,877 $ 9.84 1,779 $10.69
Granted..................... 778 $16.58 4,189 $ 8.85 1,305 $ 6.04
Exercised................... (473) $ 7.35 (68) $ 7.15 -- --
Expired..................... -- -- -- -- (207) $14.51
Forfeited................... (144) $ 8.99 (637) $10.81 -- --
----- ----- -----
Outstanding-end of year..... 6,522 $ 9.16 6,361 $ 8.13 2,877 $ 9.84
===== ===== =====
Exercisable at end of year.. 2,129 $ 7.84 404 $ 7.32 277 $ 9.08
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged
from $5.58 to $21.38. The weighted-average remaining contractual life of those
options is 8.02 years.
NOTE 14. CAPITAL STOCK
The Company has authorized the issuance of 150 million shares of $.01
par value common stock. The Company has reserved 8,750,000 shares of common
stock pursuant to various compensation programs.
Prior to September 1996, the Company had outstanding 3,449,999 shares
of $3.75 Series A Cumulative Convertible Preferred Stock (Series A preferred
stock) and 3,000,000 shares of $3.625 Series B Cumulative Convertible
Exchangeable Preferred Stock (Series B preferred stock). The Series A preferred
stock had an annual dividend of $3.75 per share and a stated value of $50 per
share. The Series A preferred stock was convertible into common stock at a price
of $9.06 per common share and was also redeemable, at the Company's option, at
any time after February 16, 1996, at $52.625 per share. The Series B preferred
stock had an annual dividend of $3.625 per share and a stated value of $50 per
share. The Series B preferred stock was convertible into common stock at a price
of $9.80 per common share and was also redeemable, at the Company's option, at
any time after November 15, 1996, at $52.5375 per share.
During 1996, the Company commenced a series of calls for redemption of
its outstanding preferred stock. As a result of these calls, during 1996,
453,326 Series A preferred shares were converted into 2,501,783 common shares
and 508,113 Series A preferred shares were redeemed at a cost of approximately
$26.7 million. In 1997, 2,480,671 shares of Series A preferred stock and all of
the Series B preferred stock were converted into 29,001,469 shares of common
stock, with 7,889 shares of Series A preferred stock redeemed at a cost of
approximately $440,000. With the completion of these calls in June 1997, the
Company has no remaining outstanding preferred stock.
NOTE 15. COMMITMENTS AND CONTINGENCIES
As of December 31, 1997, the Company has outstanding standby letters
of credit and surety bonds in the amount of $23 million in favor of local
municipalities or financial institutions to guarantee performance on real
property improvements or financial obligations.
The Company, as a partner in certain joint ventures, has made certain
financing guarantees (Note 5).
F-21
<PAGE>
The Company is a party to a number of legal actions arising in the
ordinary course of business. While the Company cannot predict with certainty the
final outcome of these proceedings, considering the substantial legal defenses
available, management believes that none of these actions, when finally
resolved, will have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company.
Inherent in the operations of the real estate business is the
possibility that environmental liability may arise from the ownership, or
previous ownership, of real properties owned. The Company may be required in the
future to take action to correct or reduce the environmental effects of prior
disposal or release of hazardous substances by third parties, the Company, or
its corporate predecessors. Future environmental costs are difficult to estimate
because of such factors as the unknown magnitude of possible contamination, the
unknown timing and extent of the corrective actions which may be required, the
determination of the Company's liability in proportion to that of responsible
parties, and the extent to which such costs are recoverable from insurance.
At December 31, 1997, management estimates that future costs for
remediation of identified or suspected environmental contamination on operating
properties and properties previously sold approximate $11 million, and has
provided a reserve for that amount. It is anticipated that such costs will be
incurred over the next ten years with a substantial portion incurred over the
next five years. Management also estimates that similar costs relating to the
Company's properties to be developed or sold may range from $12.6 million to
$38.2 million. These amounts will be capitalized as components of development
costs when incurred, which is anticipated to be over a period of twenty years,
or will be deferred and charged to cost of sales when the properties are sold.
The Company's estimates were developed based on reviews which took place over
several years based upon then prevailing law and identified site conditions.
Because of the breadth of its portfolio and past sales, the Company is unable to
review extensively each property on a regular basis. Such estimates are not
precise and are always subject to the availability of further information about
the prevailing conditions at the site, the future requirements of regulatory
agencies and the availability of other parties to pay some or all of such costs.
In April 1991, a lawsuit was brought against the Company alleging
breach of contract for a finder's fee in connection with an August 1990 sale of
land in Fremont, California. On November 1, 1993, the jury returned a verdict in
favor of the plaintiff and made an award of approximately $440,000 which,
together with pre-judgment interest, totaled approximately $600,000.
Additionally, the jury awarded approximately $7.7 million in punitive damages
for what it found was the Company's bad faith denial of an alleged contract.
While the Company was vigorously pursuing an appeal, it recognized an expense of
$8.3 million in the 1993 consolidated statement of operations. In December 1995,
the Company reached a settlement with the plaintiff and $7.5 million of the
expense was reversed in the 1995 consolidated statement of operations.
F-22
<PAGE>
SUMMARIZED QUARTERLY RESULTS (UNAUDITED)
The Company's income and cash flow are determined to a large extent by
property sales. Sales and net earnings have fluctuated significantly from
quarter to quarter, as evidenced by the following summary of unaudited quarterly
consolidated results of operations. Property sales fluctuate from quarter to
quarter, reflecting general market conditions and the Company's intent to sell
property when it can obtain attractive prices. Cost of sales may also vary
widely because it is determined by the Company's historical cost basis in the
underlying land.
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- ---------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
----- ------ ----- ------ ----- ------ ----- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME-PRODUCING PROPERTIES:
Rental revenue ................. $30,805 $ 31,421 $ 32,901 $ 33,826 $ 28,034 $ 29,380 $ 28,606 $ 29,866
Property operating costs ....... (9,056) (10,045) (9,794) (9,822) (8,987) (9,928) (9,953) (10,540)
DEVELOPMENT ACTIVITIES AND FEE
SERVICES:
Gain on development property
sales........................... 484 3,154 3,368 6,191 -- 6,569 2,746 6,308
Development and management fee
income, net ................... 719 1,435 2,223 2,072 403 410 1,182 1,437
Gain on non-strategic land and other
asset sales ................... 3,640 418 570 401 3,087 7,358 1,330 12,630
Interest expense ................... (9,794) (10,205) (10,035) (9,954) (10,939) (10,841) (10,536) (10,205)
General and administrative expense . (2,615) (2,701) (2,926) (2,655) (2,060) (1,997) (1,661) (2,301)
Depreciation and amortization ...... (7,476) (7,723) (7,839) (8,207) (7,672) (7,432) (7,550) (7,907)
Net income ......................... $ 5,109 $ 5,685 $ 6,278 $ 8,169 $ 1,714 $ 8,817 $ 2,752 $ 12,118
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) per common share -
basic ........................ $ 0.05 $ 0.06 $ 0.06 $ 0.08 $ (0.06) $ 0.04 $ (0.05) $ 0.09
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) per common share -
assuming dilution ............ $ 0.05 $ 0.06 $ 0.06 $ 0.07 $ (0.06) $ 0.04 $ (0.05) $ 0.09
======== ======== ======== ======== ======== ======== ======== ========
EBDDT (1) .......................... $ 10,563 $ 16,297 $ 17,199 $ 18,712 $ 1,521 $ 8,716 $ 5,567 $ 10,048
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) The Company uses a supplemental performance measure called Earnings Before
Depreciation and Deferred Taxes (EBDDT) along with net income to report its
operating results. EBDDT is not a measure of operating results or cash flows
from operating activities as defined by generally accepted accounting
principles. Additionally, EBDDT is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. However, the Company believes that
EBDDT provides relevant information about its operations and is necessary,
along with net income, for an understanding of its operating results.
EBDDT is calculated by taking net income and making various adjustments.
Depreciation, amortization and deferred income taxes are excluded from EBDDT
as they represent non-cash charges. In addition, gains on the sale of non-
strategic land and other assets and premium on the redemption of preferred
stock represent nonrecurring items and are excluded from the EBDDT
calculation.
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors
and Stockholders of Catellus
Development Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 30, 1998, appearing on page F-2 of this Form 10-K of
Catellus Development Corporation, also included an audit of the Financial
Statement Schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion,
these Financial Statement Schedules present fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
San Francisco, California
January 30, 1998
S-1
<PAGE>
<TABLE>
<CAPTION>
CATELLUS DEVELOPMENT CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF YEAR
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS
----------- ---------------------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful receivables......... $ 1,863 $ 504 $ -- $ 616 (1) $ 1,751
Reserve for abandoned projects............. 977 407 -- 38 (2) 1,346
Reserve for environmental and legal costs.. 8,395 5,965 -- 5 (3) 14,355
Year ended December 31, 1996
Allowance for doubtful receivables......... 1,751 1,053 81 533 (1) 2,352
Reserve for abandoned projects............. 1,346 -- -- 30 (2) 1,316
Reserve for environmental and legal costs.. 14,355 -- 200 416 (3) 14,139
Year ended December 31, 1997
Allowance for doubtful receivables......... 2,352 359 6 636 (1) 2,081
Reserve for abandoned projects............. 1,316 1,275 1,226 1,422 (2) 2,395
Reserve for environmental and legal costs.. 14,139 -- 574 1,718 (3) 12,995
</TABLE>
____________
Notes:
(1) Balances written off as uncollectible.
(2) Costs of unsuccessful projects written off.
(3) Environmental and legal costs incurred.
S-2
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO SUBSEQUENT AT CLOSE OF PERIOD
CATELLUS TO ACQUISITION (1)(2)(3)(4)
------------------------ ----------------------- ----------------------------------
BUILDINGS & CARRYING BUILDINGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL
- -------------------------- ------------- --------- ------------- ------------ ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income-producing
properties:
Mission Bay,
San Francisco, CA... $ -- $ 80,587 $ 3,952 $ 24,070 $ 42,790 $ 80,587 $ 70,812 $ 151,399
Other properties
less than 5% of
total ............. 534,077 144,312 35,492 557,049 211,708 144,312 804,249 948,561
-------- -------- -------- -------- -------- -------- ---------- ----------
534,077 224,899 39,444 581,119 254,498 224,899 875,061 1,099,960
-------- -------- -------- -------- -------- -------- ---------- ----------
Land holdings ............ 34,622 121,478 11,697 98,327 32,862 121,478 142,886 264,364
-------- -------- -------- -------- -------- -------- ---------- ----------
Total .................... $568,699 $346,377 $ 51,141 $679,446 $287,360 $346,377 $1,017,947 $1,364,324
======== ======== ======== ======= ======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIFE ON
WHICH
DEPRECIATION
IN LATEST
DATE OF INCOME
DESCRIPTION ACCUMULATED COMPLETION OF DATE STATEMENT IS
DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- --------------------------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Income-producing
properties:
Mission Bay,
San Francisco, CA... $ 3,323 N/A various (5)
Other properties
less than 5% of
total .............. 218,991 N/A various (5)
--------
222,314
--------
Land holdings ............ 2,773 N/A various (5)
--------
Total..................... $225,087
========
</TABLE>
Notes:
(1) A reserve of $2,395,000 against predevelopment costs has been established
for projects to be abandoned.
(2) The aggregate cost for Federal income tax purpose is approximately
$1,051,000.
(3) See Attachment A to Schedule III for reconciliation of beginning of period
total to total at close of period.
(4) Excludes investments in joint ventures and furniture and equipment.
(5) Reference is made to Note 2 to the Consolidated Financial Statements for
information related to depreciation.
S-3
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
ATTACHMENT A TO SCHEDULE III
RECONCILIATION OF COST OF REAL ESTATE AT BEGINNING OF PERIOD
WITH TOTAL AT END OF PERIOD
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
----------- -------------- --------------
<S> <C> <C> <C>
Balance at January 1 $1,258,121 $1,218,995 $1,276,955
---------- ---------- ----------
Additions during period:
Acquisitions.................................... 30,105 10,987 9,326
Improvements.................................... 201,774 104,646 58,967
Reclassification from other accounts............ 965 30 270
---------- ---------- ----------
Total additions........................ 232,844 115,663 68,563
---------- ---------- ----------
Deductions during period:
Cost of real estate sold........................ 122,270 75,364 23,716
Other
Write-down of properties to estimated
net realizable value.............. -- -- 102,400
Reclassification to personal property
and other accounts................. 3,096 1,173 --
Increase reserve for abandoned projects..... 1,275 -- 407
---------- ---------- ----------
Total deductions....................... 126,641 76,537 126,523
---------- ---------- ----------
Balance at December 31.................................... $1,364,324 $1,258,121 $1,218,995
========== ========== ==========
</TABLE>
RECONCILIATION OF REAL ESTATE ACCUMULATED DEPRECIATION
AT BEGINNING OF PERIOD WITH TOTAL AT END OF PERIOD
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1...................................... $ 202,352 $ 177,312 $ 154,002
---------- ---------- ----------
Additions during period:
Charged to expense.............................. 26,349 25,994 24,342
---------- ---------- ----------
Deductions during period:
Cost of real estate sold........................ 3,488 1,190 795
Other........................................... 126 (236) 237
---------- ---------- ----------
Total deductions...................... 3,614 954 1,032
---------- ---------- ----------
Balance at December 31.................................... $ 225,087 $ 202,352 $ 177,312
========== ========== ==========
</TABLE>
S-4
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS AT MEETING HELD ON OCTOBER 29,
1997; SECOND AMENDMENT ON MARCH 26, 1998
________________________________________________________________________________
________________________________________________________________________________
AMENDED AND RESTATED BY-LAWS
OF
CATELLUS DEVELOPMENT CORPORATION
A DELAWARE CORPORATION
______________________________
1
<PAGE>
INDEX
PAGE
----
ARTICLE 1 Meetings of Stockholders.........................1
Section 1.1. Annual Meeting...................................1
Section 1.2. Special Meetings.................................1
Section 1.3. Place and Time of Meetings.......................1
Section 1.4. Notice of Meetings; Waiver of
Notice.......................................1
Section 1.5. Quorum...........................................1
Section 1.6. Voting; Proxies..................................2
Section 1.7. List of Stockholders.............................2
Section 1.8 Action by Consent Without a Meeting..............2
ARTICLE 2 Board of Directors...............................3
Section 2.1. Number, Qualification, Election
and Term of Directors........................3
Section 2.2. Quorum and Manner of Acting.....................3
Section 2.3. Place of Meetings...............................3
Section 2.4. Annual and Regular Meetings.....................3
Section 2.5. Special Meetings................................4
Section 2.6. Notice of Meetings; Waiver of
Notice.......................................4
Section 2.7. Board or Committee Action
Without a Meeting...............................4
Section 2.8. Participation in Board or
Committee Meetings by Conference
Telephone....................................4
Section 2.9. Resignation and Removal of
Directors....................................4
Section 2.10. Vacancies.......................................5
Section 2.11. Compensation....................................5
Section 2.12. Chairman of the Board...........................5
ARTICLE 3 Committees......................................5
Section 3.1. Committees of the Board.........................5
Section 3.2. Rules Applicable to Committees..................5
i
<PAGE>
ARTICLE 4 Officers.........................................5
Section 4.1. Number; Security.................................5
Section 4.2. Election; Term of Office.........................6
Section 4.3. Subordinate Officers.............................6
Section 4.4. Resignation and Removal of
Officers...................................6
Section 4.5. Vacancies........................................6
Section 4.6. Chairman of the Board............................6
Section 4.7. President........................................6
Section 4.8. Vice President...................................6
Section 4.9. Treasurer........................................7
Section 4.10. Secretary........................................7
Section 4.11. Salaries.........................................7
ARTICLE 5 Shares...........................................7
Section 5.1. Certificates.....................................7
Section 5.2. Transfers........................................7
Section 5.3. Determination of Stockholders
of Record..................................7
ARTICLE 6 Indemnification..................................7
Section 6.1. Right to Indemnification.........................8
Section 6.2. Right of Claimant to Bring Suit..................8
Section 6.3. Non-Exclusivity of Rights........................9
Section 6.4. Insurance........................................9
Section 6.5. Expenses as a Witness............................9
Section 6.6. Indemnity Agreements.............................9
ARTICLE 7 Miscellaneous....................................9
Section 7.1. Seal..............................................9
Section 7.2. Fiscal Year.......................................9
Section 7.3. Voting of Shares in Other
Corporations...............................9
Section 7.4. Amendments........................................9
ii
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
CATELLUS DEVELOPMENT CORPORATION
1. MEETINGS OF STOCKHOLDERS.
------------------------
1.1. ANNUAL MEETING. The annual meeting of stockholders shall be
--------------
held during the month of May in each year, or as soon thereafter as practicable,
and shall be held at a place and time determined by the board of directors (the
"Board").
1.2. SPECIAL MEETINGS. Special meetings of the stockholders may be
----------------
called by resolution of the Board or by the chairman of the board or the
president and shall be called by the president or secretary upon the written
request (stating the purpose or purposes of the meeting) of the holder or
holders of 10% or more of the then outstanding voting capital stock of the
corporation or a majority of the directors then in office. Only business
related to the purposes set forth in the notice of the meeting may be transacted
at a special meeting.
1.3. PLACE AND TIME OF MEETINGS. Meetings of the stockholders may be
--------------------------
held in or outside Delaware at the place and time specified by the Board or the
directors or stockholders requesting the meeting.
1.4. NOTICE OF MEETINGS; WAIVER OF NOTICE. Written notice of each
------------------------------------
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, in writing, personally, via facsimile or by mail, not less than 10 nor
more than 60 days before the meeting and shall state the time and place of the
meeting, and unless it is the annual meeting, shall state at whose direction or
request the meeting is called and the purposes for which it is called. Notice
shall be deemed duly given when (i) delivered personally, (ii) sent via
facsimile (with receipt confirmed) or (iii) mailed to a stockholder at his
address on the corporation's records. The attendance of any stockholder at a
meeting, without protesting at the beginning of the meeting that the meeting is
not lawfully called or convened, shall constitute a waiver of notice by him.
1.5. QUORUM. At any meeting of stockholders, the presence in person
------
or by proxy of the holders of a majority of the shares entitled to vote shall
constitute a quorum for the transaction of any business. In the absence of a
quorum a majority in voting interest of those present or, if no stockholders are
present, any officer entitled to
<PAGE>
preside at or to act as secretary of the meeting, may adjourn the meeting until
a quorum is present. At any adjourned meeting at which a quorum is present any
action may be taken which might have been taken at the meeting as originally
called. No notice of an adjourned meeting need be given if the time and place
are announced at the meeting at which the adjournment is taken except that, if
adjournment is for more than thirty days or if, after the adjournment, a new
record date is fixed for the meeting, notice of the adjourned meeting shall be
given pursuant to Section 1.4.
1.6. VOTING; PROXIES. Each stockholder of record shall be entitled
---------------
to one vote for every share registered in his name. Corporate action to be
taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders, except
as otherwise provided by the corporation's Restated Certificate of Incorporation
or by law or by Section 1.8 of these by-laws. Directors shall be elected in
the manner provided in Section 2.1 of these by-laws. Voting, including
election of directors, need not be by written ballot unless requested by a
stockholder at the meeting or ordered by the chairman of the meeting. Each
stockholder entitled to vote at any meeting of stockholders or to express
consent or to dissent from corporate action in writing without a meeting may
authorize another person to act for him by proxy. Every proxy must be signed by
the stockholder or his attorney-in-fact. No proxy shall be valid after three
years from its date unless it provides otherwise.
1.7. LIST OF STOCKHOLDERS. Not less than 10 days prior to the date
--------------------
of any meeting of stockholders, the secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not less than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
the meeting is to be held, if that place shall have been specified in the notice
of the meeting, or (b) if not so specified, at the place where the meeting is to
be held. The list shall also be available for inspection by stockholders at the
time and place of the meeting.
1.8. ACTION BY CONSENT WITHOUT A MEETING.
-----------------------------------
(a) Subject to compliance with the procedures set forth in Section
1.8(b) of these by-laws, if required, any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voting.
Prompt notice of the taking of any such action shall be given to those
stockholders who did not consent in writing.
(b) So long as any of the corporation's securities are listed on the
New York Stock Exchange, action by the holders of any class of security so
listed may not be
<PAGE>
taken by consent in writing pursuant to this Section 1.8 except with the prior
approval of the New York Stock Exchange, and otherwise in accordance with this
Section 1.8(b). A record date for the determination of stockholders entitled to
express consent to or dissent from the action to be taken shall be established
in accordance with Section 5.3 of these by-laws, and material soliciting the
written consent of stockholders shall be sent to each stockholder who would be
entitled to vote on the action to be taken if such action were being considered
at a meeting of stockholders. Such solicitation materials shall include the form
of written consent, which shall set forth the action to be taken, and shall
otherwise comply with the proxy statement disclosure standards then applicable
to the corporation. The solicitation materials shall be deemed duly given when
(i) delivered personally, (ii) sent via facsimile (with receipt confirmed) or
(iii) mailed to a stockholder at his address on the corporation's records. The
solicitation period, from the date the solicitation materials are first given to
stockholders until and including the date by which stockholders must return such
written consent, shall be not less than 30 days. Notwithstanding anything to the
contrary contained in these by-laws, no action to be taken by written consent
may be taken until the expiration of the solicitation period, whether or not the
requisite consents have been signed prior to such expiration.
2. BOARD OF DIRECTORS.
------------------
2.1. NUMBER, QUALIFICATION, ELECTION AND TERM OF DIRECTORS. The
-----------------------------------------------------
business of the corporation shall be managed by the Board, which shall consist
of eleven directors. The number of directors may be changed by resolution of a
majority of the entire Board or by the stockholders, but no decrease may shorten
the term of any incumbent director. Directors shall be elected at each annual
meeting of stockholders by a plurality of the votes cast and shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
Section 2.9. As used in these by-laws, the term "entire Board" means the total
number of directors which the corporation would have if there were no vacancies
on the Board.
2.2. QUORUM AND MANNER OF ACTING. A majority of the entire Board
---------------------------
shall constitute a quorum for the transaction of business at any meeting, except
as provided in Section 2.10 of these by-laws. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of the
vote if there is a quorum, unless otherwise provided by law or these by-laws.
In the absence of a quorum a majority of the directors present may adjourn any
meeting from time to time until a quorum is present.
2.3. PLACE OF MEETINGS. Meetings of the Board may be held in or
-----------------
outside Delaware.
2.4. ANNUAL AND REGULAR MEETINGS. Annual meetings of the Board, for
---------------------------
the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place, or (b)
<PAGE>
as soon as practicable after the annual meeting of stockholders, on notice as
provided in Section 2.6 of these by-laws. Regular meetings of the Board may be
held without notice at such times and places as the Board determines. If the day
fixed for a regular meeting is a legal holiday, the meeting shall be held on the
next business day.
2.5. SPECIAL MEETINGS. Special meetings of the Board may be called
----------------
by the chairman of the board, the president or by a majority of the directors.
Only business related to the purposes set forth in the notice of meeting may be
transacted at a special meeting.
2.6. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of the time and
-------------------------------------
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting or by delivering notice
to him personally (including by telephone) or via facsimile at least one day
before the meeting. Notice shall be deemed duly given when (a) delivered
personally, (b) sent via facsimile (with receipt confirmed) or (c) mailed to a
director's residence or usual place of business. Notice of a special meeting
shall also state the purpose or purposes for which the meeting is called.
Notice need not be given to any director who submits a signed waiver of notice
before or after the meeting or who attends the meeting without protesting at the
beginning of the meeting the transaction of any business because the meeting was
not lawfully called or convened. Notice of any adjourned meeting need not be
given, other than by announcement at the meeting at which the adjournment is
taken.
2.7. BOARD OR COMMITTEE ACTION WITHOUT A MEETING. Any action
-------------------------------------------
required or permitted to be taken by the Board or by any committee of the Board
may be taken without a meeting if all of the members of the Board or of the
committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents by the members of the Board or
the committee shall be filed with the minutes of the proceedings of the Board or
of the committee.
2.8. PARTICIPATION IN BOARD OR COMMITTEE MEETINGS BY CONFERENCE
----------------------------------------------------------
TELEPHONE. Any or all members of the Board or of any committee of the Board may
- ---------
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other. Participation by such means
shall constitute presence in person at the meeting.
2.9. RESIGNATION AND REMOVAL OF DIRECTORS. Any director may resign
------------------------------------
at any time by delivering his resignation in writing to the president or
secretary of the corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, by vote of the stockholders.
<PAGE>
2.10. VACANCIES. Any vacancy in the Board, including one created by
---------
an increase in the number of directors, may be filled for the unexpired term by
a majority vote of the remaining directors, though less than a quorum.
2.11. COMPENSATION. Directors shall receive such compensation as the
------------
Board determines, together with reimbursement of their reasonable expenses in
connection with the performance of their duties. A director may also be paid
for serving the corporation, its affiliates or subsidiaries in other capacities.
2.12. CHAIRMAN OF THE BOARD. The chairman of the board shall be
---------------------
elected by the Board at the annual meeting of the Board. The chairman of the
board shall preside at all meetings of the Board and of the stockholders and
shall have such powers and duties as the Board assigns to the chairman. The
chairman shall hold office until the next annual meeting of the Board and until
the election of his successor; provided, however, that the chairman may resign
at anytime by delivering his resignation in writing to the president or
secretary of the Corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. The chairman may be removed by the
Board either with or without cause.
3. COMMITTEES.
----------
3.1. COMMITTEES OF THE BOARD. The Board, by resolution adopted by a
-----------------------
majority of the entire Board, may designate committees of one or more directors,
which shall serve at the Board's pleasure and have such powers and duties as the
Board determines. No director who is also an officer of the Corporation shall
be eligible to serve as a member of the Audit, Compensation and Benefits or
Board Affairs Committee of the Board, or any committee performing a similar
function.
3.2. RULES APPLICABLE TO COMMITTEES. The Board may designate one or
------------------------------
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of a committee, the member or members present at
a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee may adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
4. OFFICERS.
--------
4.1. NUMBER; SECURITY. The executive officers of the corporation
----------------
shall be the president, one or more vice presidents (which may include one or
more executive or senior vice presidents, if the Board so determines), a
secretary and a treasurer. Any two
<PAGE>
or more officer may be held by the same person. Unless otherwise required by
law, the Board shall not be required to fill a vacancy in an executive office.
The Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
4.2. ELECTION; TERM OF OFFICE. The executive officers of the
------------------------
corporation shall be elected annually by the Board and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of Section 4.4.
4.3. SUBORDINATE OFFICERS. The Board or the president may appoint
--------------------
subordinate officers (including assistant secretaries and assistant treasurers),
agents or employees, each of whom shall hold office for such period and have
such powers and duties as the Board or the president determines. The Board may
delegate to any other executive officer or to any committee the power to appoint
and define the powers and duties of any subordinate officers, agents or
employees. The president or the chief financial officer may designate in
writing any employee with the position of "Director" to execute and deliver, and
any other employee to attest, agreements, certificates and other documents on
behalf of the corporation in connection with any transaction authorized by the
Board of Directors, whether by specific resolution or pursuant to a delegation
of authority.
4.4. RESIGNATION AND REMOVAL OF OFFICERS. Any officer may resign at
-----------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer appointed by the Board or appointed
by an executive officer or by a committee may be removed by the Board either
with or without cause, and in the case of an officer appointed by an executive
officer or by a committee, by the officer or committee who appointed him or by
the president.
4.5. VACANCIES. A vacancy in any office may be filled for the
---------
unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.
4.6. PRESIDENT. The president shall be the chief executive officer
---------
of the corporation and shall, in the absence of the chairman of the board,
preside at all meetings of the Board and of the stockholders. Subject to the
control of the Board, he shall have general supervision over the business of the
corporation and shall have such other powers and duties as presidents of
corporations usually have or as the Board assigns to him.
4.7. VICE PRESIDENT. Each vice president shall have such powers and
--------------
duties as the Board or the president assigns to him.
4.8. TREASURER. The treasurer shall be in charge of the
---------
corporation's books and accounts. Subject to the control of the Board, he shall
have such other powers
<PAGE>
and duties as the Board or the president assigns to him. The Board may designate
the treasurer or any other officer as the chief financial officer of the
corporation.
4.9. SECRETARY. The secretary shall be the secretary of, and keep
---------
the minutes of, all meetings of the Board and of the stockholders, shall be
responsible for giving notice of all meetings of stockholders and of the Board,
and shall keep the seal and apply it to any instrument requiring it. Subject to
the control of the Board, he shall have such powers and duties as the Board or
the president assigns to him. In the absence of the secretary from any meeting,
the minutes shall be kept by the person appointed for that purpose by the
presiding officer.
4.10. SALARIES. The Board may fix the officers' salaries, if any, or
--------
it may authorize the president to fix the salary of any other officer.
5. SHARES.
------
5.1. CERTIFICATES. The corporation's shares shall be represented by
------------
certificates in the form approved by the Board. Each certificate shall be
signed by the chairman of the board, the president or a vice president and by
the secretary or an assistant secretary, or the treasurer (or chief financial
officer) or an assistant treasurer, and shall be sealed with the corporation's
seal or a facsimile of the seal. Any or all of the signatures on the
certificate may be a facsimile.
5.2. TRANSFERS. Shares shall be transferable only on the
---------
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
5.3. DETERMINATION OF STOCKHOLDERS OF RECORD. The Board may fix, in
---------------------------------------
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or less than 10 days
before the date of the meeting or more than 60 days before any other action.
6. INDEMNIFICATION AND INSURANCE.
-----------------------------
6.1 RIGHT TO INDEMNIFICATION. Each person who was or is a party or
------------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
<PAGE>
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent permitted by the laws of Delaware, as the
same exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Article shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of proceeding, shall
be made only upon delivery to the corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The corporation may, by action of
the Board, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
6.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section
-------------------------------
6.1 of this Article is not paid in full by the corporation within thirty days
after a written claim has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
corporation (including its Board, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the corporation (including its Board, independent legal counsel, or its
stockholders) that the claimant has not met such standard of conduct, shall be a
defense to the action or create a presumption that the claimant has failed to
meet such standard of conduct.
<PAGE>
6.3 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
--------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
6.4 INSURANCE. The corporation may maintain insurance, at its
----------
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
6.5 EXPENSES AS A WITNESS. To the extent that any director, officer,
----------------------
employee or agent of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in any
action, suit or proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
6.6 INDEMNITY AGREEMENTS. The corporation may enter into agreements
---------------------
with any director, officer, employee or agent of the corporation providing for
indemnification to the full extent permitted by Delaware law.
7. MISCELLANEOUS.
-------------
7.1. SEAL. The Board shall adopt a corporate seal, which shall be in
----
the form of a circle and shall bear the corporation's name and the year and
state in which it was incorporated.
7.2. FISCAL YEAR. The Board may determine the corporation's fiscal
-----------
year. Until changed by the Board, the corporation's fiscal year shall be the
calendar year.
7.3. VOTING OF SHARES IN OTHER CORPORATIONS. Shares in other
--------------------------------------
corporations which are held by the corporation may be represented and voted by
the president or a vice president of this corporation or by proxy or proxies
appointed by one of them. The Board may, however, appoint some other person to
vote the shares.
7.4. AMENDMENTS. By-laws may be amended, repealed or adopted by the
----------
stockholders or by a majority of the entire Board, but any by-law adopted by the
Board may be amended or repealed by the stockholders.
<PAGE>
EXHIBIT 10.7
CATELLUS DEVELOPMENT CORPORATION
1991 STOCK OPTION PLAN
(Restated to Incorporate Amendments
through February 11, 1998)
1. PURPOSES
The purposes of the Catellus Development Corporation 1991 Stock Option
Plan (the "Plan") are (a) to provide incentives to those key employees of
Catellus Development Corporation (the "Company") and its subsidiaries whose
performance will contribute to the long-term success and growth of the Company,
(b) to strengthen the ability of the Company to attract and retain employees of
high competence, (c) to increase the identity of interests of such employees
with those of the Company's stockholders and (d) to help build loyalty to the
Company through recognition and the opportunity for stock ownership. The Plan
provides the committees designated below with the discretion to grant
participants incentives relating to the Company's common stock utilizing
incentive stock options or nonqualified stock options. These benefits may be
granted to participants singly or in any combination which such committee deems
appropriate.
2. DEFINITIONS
(a) "Exchange Act" means the Securities Exchange Act of 1934 as in
effect from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(d) "Common Stock" means the common stock, par value $.01 per share,
of the Company or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Section 12.
(e) "Compensation and Benefits Committee" means the Compensation and
Benefits Committee of the Board, whose members are appointed by the Board from
time to time. Although the Compensation and Benefits Committee has the
authority under the Plan to make grants of Stock Options to any Participant, it
is anticipated that the Compensation and Benefits Committee will make grants of
Options only to those Participants who are not subject to Section 16 of the
Exchange Act or Section 162(m) of the Code and the rules promulgated thereunder.
(f) "Compensation Review Committee" means the Compensation Review
Committee of the Board, whose members are appointed by the Board from time to
time. All of the members of the Compensation Review Committee, which may not be
less than two, are intended at all times to qualify as "outside directors"
within the meaning of Section 162(m) of the Code, and as "non-employee
directors" within the meaning of Rule 16b-3; provided, however, that the failure
of a member of such committee to so qualify shall not be deemed to invalidate
any Option granted by such committee. Although the Compensation Review
Committee has the authority under the Plan to make grants of Options to any
Participant, it is anticipated that the Compensation Review Committee will make
grants of Options only to those Participants who are subject to Section 16 of
the Exchange Act and/or Section 162(m) of the Code and the rules promulgated
thereunder.
(g) "Date of Grant" means the date specified by the Compensation and
Benefits Committee, the Compensation Review Committee or the Special Committee,
as applicable, on which a grant of Options will become effective (which date
will not be earlier than the date on which such committee takes action with
respect thereto).
<PAGE>
(h) "Fair Market Value" means the closing price of the relevant
security for 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
selected by the Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee, as applicable). The applicable committee
will determine the Fair Market Value of any security that is not publicly traded
using criteria as it determines, in such committee's discretion, to be
appropriate for the valuation.
(i) "Option" means the right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Section 6.
(j) "Participant" means a person who is selected by the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee, as applicable, to receive Options under Section 6 of the Plan and who
is at that time an officer or other key employee of the Company or any
Subsidiary. Part-time employees (defined for purposes of the Plan as
individuals regularly working fewer than 30 hours per week) and temporary
employees of the Company or any Subsidiary are not eligible to participate in
the Plan.
(k) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Exchange Act
as such Rule is in effect from time to time.
(l) "Special Committee" means a committee consisting of one or more
members of the Board that is appointed by the Board from time to time. The
member or members of the Special Committee need not qualify as "outside
directors" within the meaning of Section 162(m) of the Code, or as "non-employee
directors" within the meaning of Rule 16b-3. Although the Special Committee
has the authority under the Plan, within limits (if any) authorized by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Board, to make grants of Options to any Participant, it is anticipated that the
Special Committee will make grants of Options only to those Participants who are
not subject to Section 16 of the Exchange Act or Section 162(m) of the Code and
the rules promulgated thereunder.
(m) "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly, not
less than 50% of the total combined voting power or equity interests represented
by all classes of stock issued by such corporation, partnership, joint venture
or other entity.
3. SHARES SUBJECT TO THE PLAN
The maximum aggregate number of shares as to which options may at any
time be granted under the Plan shall be 250,000 shares of Common Stock, subject
to adjustment in accordance with Section 12. Such shares of Common Stock may be
either authorized but unissued shares or shares previously issued and reacquired
by the Company. If and to the extent options granted under the Plan terminate,
expire or are canceled without having been exercised, the shares subject to such
option shall again be available for purposes of the Plan.
4. PLAN ADMINISTRATION
(a) The Plan and all Options granted under the Plan will be
administered by the Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee. For purposes of any action taken by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, whichever is applicable, a majority of the members will
constitute a quorum, and the action of the members present at any meeting at
which a quorum is present, or acts unanimously approved in writing, will be the
acts of the applicable committee.
(b) The Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee have the full authority and discretion to
administer the Plan and to take any action that is
2
<PAGE>
necessary or advisable in connection with the administration of the Plan,
including without limitation the authority and discretion to interpret and
construe any provision of the Plan or of any agreement, notification or document
evidencing the grant of an Option. The interpretation and construction by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, of any such provision and any determination by
the Compensation and Benefits Committee, the Compensation Review Committee or
the Special Committee pursuant to any provision of the Plan or of any such
agreement, notification or document will be final and conclusive; provided, that
in the event the Compensation and Benefits Committee and the Compensation Review
Committee disagree (or either or both disagree with the Special Committee) with
respect to such interpretation, construction or determination, the Compensation
Review Committee's determination will be final and conclusive. No member of the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee will be liable for any such action or determination made in
good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Compensation Review Committee will have the exclusive authority and discretion
to take any action required or permitted to be taken under the provisions of
this Section, Section 12 and Section 13 with respect to Options granted under
the Plan that are intended to comply with the requirements of Section 162(m) of
the Code.
(d) Each 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 a Committee may not
delegate any discretionary authority to grant or amend an Option award or with
respect to the timing, eligibility, pricing, amount or other material terms of
Awards to executive officers subject to Section 16 of the Exchange Act. In
making any determination or in taking or not taking any action under this Plan,
each Committee may obtain and may rely upon the advice of experts, including
professional advisors to the Company.
5. ELIGIBILITY FOR PARTICIPATION
Participants will be selected from time to time by the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee. A director of the Company or any Subsidiary who is not also an
eligible employee of the Company or a Subsidiary will not be eligible to
participate in the Plan. Nothing contained in the Plan shall be construed to
limit the right of the Company or any Subsidiary to grant options otherwise than
under the Plan.
6. GRANTING OF OPTIONS
(a) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may from time to time authorize grants to any
Participant of Options upon such terms and conditions as such committee, as
applicable, may determine in accordance with provisions set forth in this
Section.
(b) Each grant will specify the number of shares of Common Stock to
which it pertains.
(c) Each grant will specify the Option exercise price, which will not
be less than 100% of the Fair Market Value per share on the Date of Grant.
(d) Each grant will specify whether the Option exercise price will be
payable (i) in cash or by check acceptable to the Company, (ii) by the
transfer to the Company of shares of Common Stock owned by the Participant for
at least six months (or, with the consent of the Compensation and Benefits
Committee, the Compensation Review Committee or Special Committee, as
applicable, for less than six months) having an aggregate Fair Market Value per
share at the date of exercise equal to the aggregate Option exercise price,
(iii) with the consent of the Compensation and Benefits Committee, the
Compensation Review Committee or the Special Committee, as applicable, by
authorizing the Company to withhold a number of shares of Common Stock otherwise
issuable to the Participant having an aggregate Fair Market Value per share on
the date of exercise
3
<PAGE>
equal to the aggregate Option exercise price, (iv) with the consent of the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, by promissory note, or other obligation for
the future payment in money, acceptable to such committee, or (v) by a
combination of such methods of payment; provided, however, that the payment
methods described in clauses (ii) and (iii) will not be available at any time
that the Company is prohibited from purchasing or acquiring such shares of
Common Stock. Any grant may provide for deferred payment of the Option exercise
price from the proceeds of sale through a bank or broker of some or all of the
shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or
not any Options previously granted to such Participant remain unexercised.
(f) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Options or installments thereof
will become exercisable, and any grant may provide, or may be amended to
provide, for the earlier exercise of the Options in the event of a change in
control of the Company (as defined in the stock option agreement evidencing such
grant or in any agreement referred to in such stock option agreement) or in the
event of any other similar transaction or event.
(g) Options granted under the Plan may be (i) options which are
intended to qualify under particular provisions of the Code, (ii) options which
are not intended to so qualify or (iii) combinations of the foregoing.
(h) The Company will not be required to issue any fractional share of
Common Stock pursuant to the Plan, and no cash will be issued in lieu of
fractional shares.
7. MAXIMUM TERM OF OPTIONS
Unless the stock option agreement provides otherwise, Options granted
hereunder shall be exercisable for a term of ten years from the Date of Grant.
8. EXERCISE OF OPTIONS
No Option may be exercised for a period of six months from the Date of
Grant. Options will be exercised by a Participant giving written notice of such
exercise to the Company. An Option will be exercisable during a Participant's
lifetime only by the Participant, or, if the Participant has become disabled, by
his legal representative.
9. WITHHOLDING TAXES
To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any benefit realized by an optionee
under the Plan, or is requested by an optionee to withhold additional amounts
with respect to such taxes, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the realization of such
benefit that the optionee make arrangements satisfactory to the Company for
payment of the balance of such taxes required or requested to be withheld. In
addition, if permitted by the Compensation and Benefits Committee, the
Compensation Review Committee or the Special Committee, an optionee may elect to
have any withholding obligation of the Company satisfied with shares of Common
Stock that would otherwise be transferred to the optionee on exercise of the
Option.
10. FORFEITURE OF BENEFITS
(a) Notwithstanding any other provision of this Plan or any provision
of a stock option agreement, any and all unexercised Options and all rights
under the Plan of a Participant who received such Option grant (or his
designated beneficiary or legal representatives) and the exercise thereof, will
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
4
<PAGE>
any activity in competition with, the Company without the Company's consent,
(ii) divulge without the Company's consent any secret or confidential
information belonging to the Company or any Subsidiary or (iii) engage in any
other activities which would constitute grounds for termination "for cause" as
defined in the Participant's stock option agreement, or in the absence of a
definition in such agreement, as defined in this Section.
(b) For purposes of the Plan, "for cause" means (i) the continued
failure by the Participant to substantially perform his duties with the Company
or a Subsidiary (other than any such failure resulting from his incapacity due
to physical or mental illness) or (ii) conduct by the Participant which is
materially injurious to the Company or a Subsidiary, monetarily or otherwise, in
either case as determined by the Company.
11. NON-TRANSFERABILITY OF OPTIONS
A Participant's rights and interests under this Plan (including the
right to exercise unexercised Options) may not be assigned or transferred
except, in the case of a Participant's death, to the person or persons to whom
the option shall have been transferred by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code, or Title I of the Employee Retirement Income Security Act of 1974, or
the rules thereunder.
12. ADJUSTMENTS FOR CERTAIN EVENTS
The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may make or provide for such adjustments in
the maximum number of shares specified in Section 3, in the number of shares of
Common Stock covered by outstanding Options granted hereunder, in the Option
exercise price applicable to any such Options, and/or in the kind of shares
covered thereby (including shares of another issuer), as such committee, as
applicable, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities or
any other corporate transaction or event having an effect similar to any of the
foregoing. In the event the Compensation and Benefits Committee and the
Compensation Review Committee disagree (or either or both disagree with the
Special Committee) with respect to the foregoing adjustments, the Compensation
Review Committee's determination will be final and conclusive. Any adjustment
pursuant to this Section may provide for the elimination of any fractional share
which might otherwise result from such adjustment.
13. AMENDMENT AND TERMINATION
(a) The Compensation and Benefits Committee, the Compensation Review
Committee or the Board may from time to time terminate, modify or amend the Plan
in any respect; provided, that, unless also approved or ratified by a vote of
the holders of the outstanding shares of the capital stock of the Company
entitled to a majority of the voting power of the Company, any such modification
or amendment will not (subject, however, to the provisions of Section 12) (i)
increase the maximum number of Common Shares for which Options may be granted
under the Plan; (ii) reduce the Option price at which Options may be granted;
(iii) extend the period during which Options may be granted or exercised beyond
the times originally prescribed; (iv) materially modify the requirements as to
eligibility for participation in the Plan; or (v) materially increase the
benefits accruing to Participants under the Plan. No such termination,
modification or amendment (other than as expressly permitted by the terms of the
stock option agreement or by Section 12) may adversely affect the rights of a
Participant under an outstanding Option without such Participant's written
consent.
(b) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may amend outstanding Options in a manner not
inconsistent with the terms of the Plan, but no such amendment (other than as
expressly permitted by the terms of the stock option agreement or by
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Section 12) may adversely affect the rights of a Participant under an
outstanding Option without such Participant's written consent.
14. RIGHTS OF A PARTICIPANT
No Participant or other person will have any claim or right to be
granted an Option under the Plan. Neither the Plan nor any action taken
hereunder will be construed as giving any Participant any right to be retained
in the employment or service of the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate a Participant's employment or other service at any
time.
15. RIGHTS AS A STOCKHOLDER
A Participant or a transferee of an Option will have no rights as a
stockholder with respect to any share of Common Stock covered by his Option
until he becomes the holder of record of such share, and, except for stock
dividends as provided in Section 12 hereof, no adjustment will be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights in respect of such share for which
the record date is prior to the date on which he becomes the holder of record
thereof.
16. AGREEMENTS WITH PARTICIPANTS
Each Option grant will be evidenced by a stock option agreement
executed on behalf of the Company by an executive officer of the Company (other
than the recipient), or his or her delegate, and delivered to the Participant,
and containing such terms and provisions, consistent with the Plan, as the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, may approve. By executing the stock option
agreement, 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 any Committee, the Board or their delegates. Unless
the stock option agreement otherwise expressly provides, there shall be no third
party beneficiaries of the obligations of the Company to the Participant under
the agreement.
17. REQUIREMENTS FOR ISSUANCE OF SHARES
No shares of Common Stock will be issued or transferred hereunder
unless and until all legal requirements applicable to the issuance or transfer
of such shares have been complied with to the satisfaction of the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee. The applicable committee may condition any award or the issuance of
Common Stock made to any Participant hereunder on such Participant's undertaking
in writing to comply with such restrictions on his subsequent disposition of
such shares as such committee deems necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
18. MISCELLANEOUS
(a) The Plan shall be effective as of March 1, 1991 and shall continue
in effect thereafter until terminated or suspended by the Committee or the
Board. The Plan was approved by stockholders prior to March 1, 1992. The Plan,
as amended and restated, is effective as of December 10, 1997.
(b) This Plan, Option agreements, and the grant, exercise, conversion,
operation and vesting of Options, and the issuance and delivery of shares of
Common Stock and/or other securities under this Plan, 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 Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions (and
the person acquiring such securities shall, if requested by the
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Company, provide such evidence, assurance and representations to the Company as
to compliance with any thereof) as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements.
(c) This Plan, Option 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.
(d) 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.
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EXHIBIT 10.8
CATELLUS DEVELOPMENT CORPORATION
AMENDED AND RESTATED EXECUTIVE STOCK OPTION PLAN
(Restated to Incorporate Amendments
through February 11, 1998)
1. PURPOSES
The purposes of the Catellus Development Corporation Amended and
Restated Executive Stock Option Plan (the "Plan") are to provide an incentive
program competitive in the real estate industry which will reward and retain
senior management whose performance will contribute to the long-term success and
growth of Catellus Development Corporation (the "Company") and to further the
identity of interests of senior management and the stockholders of the Company.
The Plan is also intended to further the identity of interests of the directors
of the Company with senior management and the stockholders. The Plan provides
the committees described below with the discretion to grant key employees
incentives relating to the Company's common stock utilizing nonqualified stock
options. The Plan also provides for automatic grants of nonqualified stock
options (pursuant to Section 18) to certain non-employee directors.
2. DEFINITIONS
(a) "Exchange Act" means the Securities Exchange Act of 1934 as in
effect from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(d) "Common Stock" means the common stock, par value $.01 per share,
of the Company or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Section 12.
(e) "Compensation and Benefits Committee" means the Compensation and
Benefits Committee of the Board, whose members are appointed by the Board from
time to time. Although the Compensation and Benefits Committee has the
authority under the Plan to make grants of Stock Options to any Participant, it
is anticipated that the Compensation and Benefits Committee will make grants of
Options only to those Participants who are not subject to Section 16 of the
Exchange Act or Section 162(m) of the Code and the rules promulgated thereunder.
(f) "Compensation Review Committee" means the Compensation Review
Committee of the Board, whose members are appointed by the Board from time to
time. All of the members of the Compensation Review Committee, which may not be
less than two, are intended at all times to qualify as "outside directors"
within the meaning of Section 162(m) of the Code, and as "non-employee
directors" within the meaning of Rule 16b-3; provided, however, that the failure
of a member of such committee to so qualify shall not be deemed to invalidate
any Option granted by such committee. Although the Compensation Review
Committee has the authority under the Plan to make grants of Options to any
Participant, it is anticipated that the Compensation Review Committee will make
grants of Options only to those Participants who are subject to Section 16 of
the Exchange Act and/or Section 162(m) of the Code and the rules promulgated
thereunder.
(g) "Date of Grant" means the date specified by the Compensation and
Benefits Committee, the Compensation Review Committee or the Special Committee,
as applicable, on which a grant of Options will become effective (which date
will not be earlier than the date on which such committee takes action with
respect thereto).
(h) "Fair Market Value" means the closing price of the relevant
security for 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
<PAGE>
national stock exchange, such other reporting system as selected by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable). The applicable committee will determine the
Fair Market Value of any security that is not publicly traded using criteria as
it determines, in such committee's discretion, to be appropriate for the
valuation.
(i) "Option" means the right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Section 6.
(j) "Participant" means a person who is selected by the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee, as applicable, to receive Options under Section 6 of the Plan and who
is at that time (i) an executive officer or other senior manager of the Company
or any Subsidiary, or (ii) subject to Section 18 of the Plan, a non-employee
member of the Board. Part-time employees (defined for purposes of the Plan as
individuals regularly working fewer than 30 hours per week) and temporary
employees of the Company or any Subsidiary are not eligible to participate in
the Plan.
(k) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Exchange Act
as such Rule is in effect from time to time.
(l) "Special Committee" means a committee consisting of one or more
members of the Board that is appointed by the Board from time to time. The
member or members of the Special Committee need not qualify as "outside
directors" within the meaning of Section 162(m) of the Code, or as "non-employee
directors" within the meaning of Rule 16b-3. Although the Special Committee has
the authority under the Plan, within limits (if any) authorized by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Board, to make grants of Options to any Participant, it is anticipated that the
Special Committee will make grants of Options only to those Participants who are
not subject to Section 16 of the Exchange Act or Section 162(m) of the Code and
the rules promulgated thereunder.
(m) "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly, not
less than 50% of the total combined voting power or equity interests represented
by all classes of stock issued by such corporation, partnership, joint venture
or other entity.
3. SHARES SUBJECT TO THE PLAN
The maximum aggregate number of shares as to which Options may at any
time be granted under the Plan will be 4,250,000 shares of Common Stock, subject
to adjustment in accordance with Section 12. Such Common Stock may be either
authorized but unissued shares or shares previously issued and reacquired by the
Company. If and to the extent Options granted under the Plan terminate, expire
or are canceled without having been exercised, the shares subject to such
Options will again be available for purposes of the Plan, provided, however,
that any terminated, expired or canceled Option (i) will continue to count
against the Individual Limit (described at Section 6(h)) of the Participant to
whom such Option was originally granted and (ii) will also count against the
Individual Limit of any Participant subsequently awarded such Option.
4. PLAN ADMINISTRATION
(a) The Plan and all Options granted under the Plan will be
administered by the Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee. For purposes of any action taken by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, whichever is applicable, a majority of the members will
constitute a quorum, and the action of the members present at any meeting at
which a quorum is present, or acts unanimously approved in writing, will be the
acts of the applicable committee.
(b) The Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee have the full authority and discretion to
administer the Plan and to take any action that is
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necessary or advisable in connection with the administration of the Plan,
including without limitation the authority and discretion to interpret and
construe any provision of the Plan or of any agreement, notification or document
evidencing the grant of an Option. The interpretation and construction by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, of any such provision and any determination by
the Compensation and Benefits Committee, the Compensation Review Committee or
the Special Committee pursuant to any provision of the Plan or of any such
agreement, notification or document will be final and conclusive; provided, that
--------
in the event the Compensation and Benefits Committee and the Compensation Review
Committee disagree (or either or both disagree with the Special Committee) with
respect to such interpretation, construction or determination, the Compensation
Review Committee's determination will be final and conclusive. No member of the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee will be liable for any such action or determination made in
good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Compensation Review Committee will have the exclusive authority and discretion
to take any action required or permitted to be taken under the provisions of
this Section, Section 12 and Section 13 with respect to Options granted under
the Plan that are intended to comply with the requirements of Section 162(m) of
the Code.
(d) Each 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 a Committee may not
delegate any discretionary authority to grant or amend an Option award or with
respect to the timing, eligibility, pricing, amount or other material terms of
Awards to executive officers subject to Section 16 of the Exchange Act. In
making any determination or in taking or not taking any action under this Plan,
each Committee may obtain and may rely upon the advice of experts, including
professional advisors to the Company.
5. ELIGIBILITY FOR PARTICIPATION
Participants other than non-employee directors will be selected from
time to time by the Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee. Subject to the provisions of Section 18 of
the Plan, certain non-employee directors of the Company elected or appointed
prior to May 22, 1996 will also be eligible to participate in the Plan. Nothing
contained in the Plan will be construed to limit the right of the Company to
grant options otherwise than under the Plan.
6. GRANTING OF OPTIONS
(a) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may from time to time authorize grants to any
Participant of nonqualified Options upon such terms and conditions as such
committee, as applicable, may determine in accordance with provisions set forth
in this Section. Options granted pursuant to the Plan are not intended to
qualify under particular provisions of the Code. Any grant of Options to a non-
employee member of the Board will be subject to the provisions of Section 18.
(b) Each grant will specify the number of shares of Common Stock to
which it pertains.
(c) Each grant will specify the Option exercise price, which will not
be less than 100% of the Fair Market Value per share on the Date of Grant.
(d) Each grant will specify whether the Option exercise price will be
payable (i) in cash or by check acceptable to the Company, (ii) by the
transfer to the Company of shares of Common Stock owned by the Participant for
at least six months (or, with the consent of the Compensation and Benefits
Committee, the Compensation Review Committee or Special Committee, as
applicable, for less than six months) having an aggregate Fair Market Value per
share at the date of exercise equal to the aggregate Option exercise price,
(iii) with the consent of the Compensation and Benefits Committee, the
Compensation Review Committee or the
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<PAGE>
Special Committee, as applicable, by authorizing the Company to withhold a
number of shares of Common Stock otherwise issuable to the Participant having an
aggregate Fair Market Value per share on the date of exercise equal to the
aggregate Option exercise price, (iv) with the consent of the Compensation and
Benefits Committee, the Compensation Review Committee or the Special Committee,
as applicable, by promissory note, or other obligation for the future payment in
money, acceptable to such committee, or (v) by a combination of such methods of
payment; provided, however, that the payment methods described in clauses (ii)
and (iii) will not be available at any time that the Company is prohibited from
purchasing or acquiring such shares of Common Stock. Any grant may provide for
deferred payment of the Option exercise price from the proceeds of sale through
a bank or broker of some or all of the shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or
not any Options previously granted to such Participant remain unexercised.
(f) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Options or installments thereof
will become exercisable, and any grant may provide, or may be amended to
provide, for the earlier exercise of the Options in the event of a change in
control of the Company (as defined in the stock option agreement evidencing such
grant or in any agreement referred to in such stock option agreement) or in the
event of any other similar transaction or event.
(g) The Company will not be required to issue any fractional share of
Common Stock pursuant to the Plan, and no cash will be issued in lieu of
fractional shares.
(h) Notwithstanding any other provision of the Plan or Option
agreement to the contrary, no Participant will receive any grant of an Option
under the Plan to the extent that the sum of (i) the number of shares of Common
Stock subject to such grant, and (ii) the number of shares of Common Stock
subject to all other prior grants to the Participant of Options under the Plan
during the three-year period ending on the Date of Grant, would exceed the
Participant's Individual Limit (as hereinafter defined) under the Plan. The
determination made under the foregoing provisions of this paragraph will be
based on the shares subject to grant at the Date of Grant, regardless of when
the Options became exercisable (or were exercised). A Participant's Individual
Limit will be 1,000,000 Common Shares. Awards to a Participant may be less than
the Participant's Individual Limit, but may never exceed such amount.
7. MAXIMUM TERM OF OPTIONS
Unless the stock option agreement provides otherwise, Options granted
to employees hereunder will be exercisable for a term of ten years from the Date
of Grant. No Option granted to a non-employee member of the Board will be
exercisable more than ten years from the Date of Grant.
8. EXERCISE OF OPTIONS
No Option may be exercised for a period of six months from the Date of
Grant. Options will be exercised by a Participant giving written notice of such
exercise to the Company. An Option will be exercisable during a Participant's
lifetime only by the Participant, or, if the Participant has become disabled, by
his legal representative.
9. WITHHOLDING TAXES
To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any benefit realized by an optionee
under the Plan, or is requested by an optionee to withhold additional amounts
with respect to such taxes, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the realization of such
benefit that the optionee make arrangements satisfactory to the Company for
payment of the balance of such taxes required or requested to be withheld. In
addition, if permitted by the Compensation and Benefits Committee, the
Compensation Review Committee or the
4
<PAGE>
Special Committee, an optionee may elect to have any withholding obligation of
the Company satisfied with shares of Common Stock that would otherwise be
transferred to the optionee on exercise of the Option.
10. FORFEITURE OF BENEFITS
(a) Notwithstanding any other provision of this Plan or any provision
of a stock option agreement, any and all unexercised Options and all rights
under the Plan of a Participant who received such Option grant (or his
designated beneficiary or legal representatives) and the exercise thereof, will
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 Company without the Company's consent, (ii) divulge
without the Company's consent any secret or confidential information belonging
to the Company or any Subsidiary or (iii) engage in any other activities which
would constitute grounds for termination "for cause" as defined in the
Participant's stock option agreement, or in the absence of a definition in such
agreement, as defined in this Section.
(b) For purposes of the Plan, "for cause" means (i) the continued
failure by the Participant to substantially perform his duties with the Company
or a Subsidiary (other than any such failure resulting from his incapacity due
to physical or mental illness) or (ii) conduct by the Participant which is
materially injurious to the Company or a Subsidiary, monetarily or otherwise, in
either case as determined by the Company.
11. NON-TRANSFERABILITY OF OPTIONS
A Participant's rights and interests under this Plan (including the
right to exercise unexercised Options) may not be assigned or transferred
except, in the case of a Participant's death, to the person or persons to whom
the option shall have been transferred by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code, or Title I of the Employee Retirement Income Security Act of 1974, or
the rules thereunder.
12. ADJUSTMENTS FOR CERTAIN EVENTS
The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may make or provide for such adjustments in
the maximum number of shares specified in Section 3, in the number of shares of
Common Stock covered by outstanding Options granted hereunder, in the Option
exercise price applicable to any such Options, and/or in the kind of shares
covered thereby (including shares of another issuer), as such committee, as
applicable, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities or
any other corporate transaction or event having an effect similar to any of the
foregoing. In the event the Compensation and Benefits Committee and the
Compensation Review Committee disagree (or either or both disagree with the
Special Committee) with respect to the foregoing adjustments, the Compensation
Review Committee's determination will be final and conclusive. Any adjustment
pursuant to this Section may provide for the elimination of any fractional share
which might otherwise result from such adjustment.
13. AMENDMENT AND TERMINATION
(a) The Compensation and Benefits Committee, the Compensation Review
Committee or the Board may from time to time terminate, modify or amend the Plan
in any respect; provided, that, unless also approved or ratified by a vote of
the holders of the outstanding shares of the capital stock of the Company
entitled to a majority of the voting power of the Company, any such modification
or amendment will not (subject, however, to the provisions of Section 12) (i)
increase the maximum number of Common Shares for which Options may be granted
under the Plan; (ii) reduce the Option price at which Options may be granted;
(iii) extend the period during which Options may be granted or exercised beyond
the times originally prescribed; (iv) materially
5
<PAGE>
modify the requirements as to eligibility for participation in the Plan; or (v)
materially increase the benefits accruing to Participants under the Plan. No
such termination, modification or amendment (other than as expressly permitted
by the terms of the stock option agreement or by Section 12) may adversely
affect the rights of a Participant under an outstanding Option without such
Participant's written consent.
(b) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may amend outstanding Options in a manner not
inconsistent with the terms of the Plan, but no such amendment (other than as
expressly permitted by the terms of the stock option agreement or by Section 12)
may adversely affect the rights of a Participant under an outstanding Option
without such Participant's written consent.
14. RIGHTS OF PARTICIPANTS
No Participant or other person will have any claim or right to be
granted an Option under the Plan. Neither the Plan nor any action taken
hereunder will be construed as giving any Participant any right to be retained
in the employment or service of the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate a Participant's employment or other service at any
time.
15. RIGHTS AS A STOCKHOLDER
A Participant or a transferee of an Option will have no rights as a
stockholder with respect to any share of Common Stock covered by his Option
until he becomes the holder of record of such share, and, except for stock
dividends as provided in Section 12 hereof, no adjustment will be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights in respect of such share for which
the record date is prior to the date on which he becomes the holder of record
thereof.
16. AGREEMENTS WITH PARTICIPANTS
Each Option grant will be evidenced by a stock option agreement
executed on behalf of the Company by an executive officer of the Company (other
than the recipient), or his or her delegate, and delivered to the Participant,
and containing such terms and provisions, consistent with the Plan, as the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, may approve. By executing the stock option
agreement, 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 any Committee, the Board or their delegates. Unless
the stock option agreement otherwise expressly provides, there shall be no third
party beneficiaries of the obligations of the Company to the Participant under
the agreement.
17. REQUIREMENTS FOR ISSUANCE OF SHARES
No shares of Common Stock will be issued or transferred hereunder
unless and until all legal requirements applicable to the issuance or transfer
of such shares have been complied with to the satisfaction of the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee. The applicable committee may condition any award or the issuance of
Common Stock made to any Participant hereunder on such Participant's undertaking
in writing to comply with such restrictions on his subsequent disposition of
such shares as such committee deems necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
6
<PAGE>
18. GRANTS TO DIRECTORS
A single grant was made automatically under the Plan to each member of
the Board (excluding Board members who are employees) of the Company as of
February 27, 1992 and each non-employee director elected or appointed after
February 27, 1992 and prior to May 22, 1996. Each such non-employee director
received an Option to purchase 5,000 shares of Common Stock and will not be
eligible to receive any future grant of Options as a non-employee director. The
exercise price for an Option granted to a non-employee director as of February
27, 1992 was $13.78, increasing 5%, compounded annually, on each anniversary of
the grant date, commencing February 1998. The exercise price for an Option
granted to a non-employee director thereafter was equal to 127.63% of the Fair
Market Value of a share of such stock on the date the Option was granted (which
will be deemed to be the date of such person's initial election or appointment
to the Board), increasing 5%, compounded annually, on each anniversary of such
grant date, commencing on the sixth anniversary of such grant date. Options
granted pursuant to this Section to non-employee directors will become
exercisable in installments on a cumulative basis at a rate of 20% each year
beginning on the first anniversary of the grant date.
19. MISCELLANEOUS
(a) The Plan was originally effective as of February 27, 1992. The
Plan, as amended and restated, is effective as of December 10, 1997.
(b) This Plan, Option agreements, and the grant, exercise, conversion,
operation and vesting of Options, and the issuance and delivery of shares of
Common Stock and/or other securities under this Plan, 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 Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions (and
the person acquiring such securities shall, if requested by the Company, provide
such evidence, assurance and representations to the Company as to compliance
with any thereof) as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements.
(c) This Plan, Option 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.
(d) 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.
7
<PAGE>
EXHIBIT 10.13
CATELLUS DEVELOPMENT CORPORATION
1995 STOCK OPTION PLAN
(Restated to Incorporate Amendments
through February 10, 1998)
1. PURPOSES
The purposes of the Catellus Development Corporation 1995 Stock Option
Plan (the "Plan") are (a) to provide incentives to those employees of Catellus
Development Corporation (the "Company") and its subsidiaries whose performance
will contribute to the long-term success and growth of the Company, (b) to
strengthen the ability of the Company to attract and retain employees of high
competence, (c) to further the identity of interests of such employees with
those of the Company's stockholders, and (d) to help build loyalty to the
Company through recognition and the opportunity for stock ownership. The Plan
provides the committees described below with the discretion to grant certain
employees incentives relating to the Company's common stock utilizing
nonqualified stock options.
2. DEFINITIONS
(a) "Exchange Act" means the Securities Exchange Act of 1934 as in
effect from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(d) "Common Stock" means the common stock, par value $.01 per share,
of the Company or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Section 12.
(e) "Compensation and Benefits Committee" means the Compensation and
Benefits Committee of the Board, whose members are appointed by the Board from
time to time. Although the Compensation and Benefits Committee has the
authority under the Plan to make grants of Options to any Participant, it is
anticipated that the Compensation and Benefits Committee will make grants of
Options only to those Participants who are not subject to Section 16 of the
Exchange Act or Section 162(m) of the Code and the rules promulgated thereunder.
(f) "Compensation Review Committee" means the Compensation Review
Committee of the Board, whose members are appointed by the Board from time to
time. All of the members of the Compensation Review Committee, which may not be
less than two, are intended at all times to qualify as "outside directors"
within the meaning of Section 162(m) of the Code, and as "non-employee
directors" within the meaning of Rule 16b-3; provided, however, that the failure
of a member of such committee to so qualify shall not be deemed to invalidate
any Option granted by such committee. Although the Compensation Review
Committee has the authority under the Plan to make grants of Options to any
Participant, it is anticipated that the Compensation Review Committee will make
grants of Options only to those Participants who are subject to Section 16 of
the Exchange Act and/or Section 162(m) of the Code and the rules promulgated
thereunder.
(g) "Date of Grant" means the date specified by the Compensation and
Benefits Committee, the Compensation Review Committee or the Special Committee,
as applicable, on which a grant of Options will become effective (which date
will not be earlier than the date on which such committee takes action with
respect thereto).
(h) "Fair Market Value" means the closing price of the relevant
security for the applicable date as reported on the composite tape of New York
Stock Exchange issues (or, if the security is not so listed, the
<PAGE>
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 selected by the Compensation and Benefits Committee, the Compensation
Review Committee or the Special Committee, as applicable). The applicable
committee will determine the Fair Market Value of any security that is not
publicly traded using criteria as it determines, in such committee's discretion,
to be appropriate for the valuation.
(i) "Option" means the right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Section 6.
(j) "Participant" means a person who is selected by the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee, as applicable, to receive Options under Section 6 of the Plan and who
is at that time an employee of the Company or any Subsidiary other than (i)
members of the Board or the board of directors of any Subsidiary, (ii) executive
officers of the Company or any Subsidiary, (iii) part-time employees (defined
for purposes of the Plan as individuals regularly working fewer than 30 hours
per week) and temporary employees of the Company or any Subsidiary, and (iv) if
not otherwise executive officers, the principal financial officer, principal
accounting officer and controller of the Company or any Subsidiary.
(k) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Exchange Act
as such Rule is in effect from time to time.
(l) "Special Committee" means a committee consisting of one or more
members of the Board that is appointed by the Board from time to time. The
member or members of the Special Committee need not qualify as "outside
directors" within the meaning of Section 162(m) of the Code, or as "non-employee
directors" within the meaning of Rule 16b-3. Although the Special Committee has
the authority under the Plan, within limits (if any) authorized by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Board, to make grants of Options to any Participant, it is anticipated that the
Special Committee will make grants of Options only to those Participants who are
not subject to Section 16 of the Exchange Act or Section 162(m) of the Code and
the rules promulgated thereunder.
(m) "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly, not
less than 50% of the total combined voting power or equity interests represented
by all classes of stock issued by such corporation, partnership, joint venture
or other entity.
3. SHARES SUBJECT TO THE PLAN
The maximum aggregate number of shares as to which Options (as defined
below) may at any time be granted under the Plan shall be 250,000 shares of
Common Stock, subject to adjustment in accordance with Section 12. Such shares
of Common Stock may be either authorized but unissued shares or shares
previously issued and reacquired by the Company. If and to the extent Options
granted under the Plan terminate, expire or are canceled without having been
exercised, the shares subject to such Option shall again be available for
purposes of the Plan.
4. PLAN ADMINISTRATION
(a) The Plan and all Options granted under the Plan will be
administered by the Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee. For purposes of any action taken by the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, whichever is applicable, a majority of the members will
constitute a quorum, and the action of the members present at any meeting at
which a quorum is present, or acts unanimously approved in writing, will be the
acts of the applicable committee.
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(b) The Compensation and Benefits Committee, the Compensation Review
Committee and the Special Committee have the full authority and discretion to
administer the Plan and to take any action that is necessary or advisable in
connection with the administration of the Plan, including without limitation the
authority and discretion to interpret and construe any provision of the Plan or
of any agreement, notification or document evidencing the grant of an Option.
The interpretation and construction by the Compensation and Benefits Committee,
the Compensation Review Committee or the Special Committee, as applicable, of
any such provision and any determination by the Compensation and Benefits
Committee, the Compensation Review Committee or the Special Committee pursuant
to any provision of the Plan or of any such agreement, notification or document
will be final and conclusive; provided, that in the event the Compensation and
Benefits Committee and the Compensation Review Committee disagree (or either or
both disagree with the Special Committee) with respect to such interpretation,
construction or determination, the Compensation Review Committee's determination
will be final and conclusive. No member of the Compensation and Benefits
Committee, the Compensation Review Committee or the Special Committee will be
liable for any such action or determination made in good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Compensation Review Committee will have the exclusive authority and discretion
to take any action required or permitted to be taken under the provisions of
this Section, Section 12 and Section 13 with respect to Options granted under
the Plan that are intended to comply with the requirements of Section 162(m) of
the Code.
(d) Each 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 a Committee may not
delegate any discretionary authority to grant or amend an Option award or with
respect to the timing, eligibility, pricing, amount or other material terms of
Awards to executive officers subject to Section 16 of the Exchange Act. In
making any determination or in taking or not taking any action under this Plan,
each Committee may obtain and may rely upon the advice of experts, including
professional advisors to the Company.
5. ELIGIBILITY FOR PARTICIPATION
All employees of the Company or any Subsidiary will be eligible to
participate in the Plan, except for (i) members of the Board or the board of
directors of any Subsidiary, (ii) executive officers of the Company or any
Subsidiary, (iii) part-time employees (defined for these purposes as those
persons regularly working fewer than 30 hours per week) and temporary employees
of the Company or any Subsidiary, and (iv) if not otherwise executive officers,
the principal financial officer, principal accounting officer and controller of
the Company or its Subsidiaries. Nothing contained in the Plan shall be
construed to limit the right of the Company or any Subsidiary to grant Options
otherwise than under the Plan.
6. GRANTING OF OPTIONS
(a) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may from time to time authorize grants to any
Participant of nonqualified Options upon such terms and conditions as such
committee, as applicable, may determine in accordance with provisions set forth
in this Section. Options granted pursuant to the Plan are not intended to
qualify under particular provisions of the Code.
(b) Each grant will specify the number of shares of Common Stock to
which it pertains.
(c) Each grant will specify the Option exercise price, which will not
be less than 100% of the Fair Market Value per share on the Date of Grant.
(d) Each grant will specify whether the Option exercise price will be
payable (i) in cash or by check acceptable to the Company, (ii) by the
transfer to the Company of shares of Common Stock owned by the Participant for
at least six months (or, with the consent of the Compensation and Benefits
Committee, the
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Compensation Review Committee or Special Committee, as applicable, for less than
six months) having an aggregate Fair Market Value per share at the date of
exercise equal to the aggregate Option exercise price, (iii) with the consent of
the Compensation and Benefits Committee, the Compensation Review Committee or
the Special Committee, as applicable, by authorizing the Company to withhold a
number of shares of Common Stock otherwise issuable to the Participant having an
aggregate Fair Market Value per share on the date of exercise equal to the
aggregate Option exercise price, (iv) with the consent of the Compensation and
Benefits Committee, the Compensation Review Committee or the Special Committee,
as applicable, by promissory note, or other obligation for the future payment in
money, acceptable to such committee, or (v) by a combination of such methods of
payment; provided, however, that the payment methods described in clauses (ii)
and (iii) will not be available at any time that the Company is prohibited from
purchasing or acquiring such shares of Common Stock. Any grant may provide for
deferred payment of the Option exercise price from the proceeds of sale through
a bank or broker of some or all of the shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or
not any Options previously granted to such Participant remain unexercised.
(f) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Options or installments thereof
will become exercisable, and any grant may provide, or may be amended to
provide, for the earlier exercise of the Options in the event of a change in
control of the Company (as defined in the stock option agreement evidencing such
grant or in any agreement referred to in such stock option agreement) or in the
event of any other similar transaction or event.
(g) The Company will not be required to issue any fractional share of
Common Stock pursuant to the Plan, and no cash will be issued in lieu of
fractional shares.
7. MAXIMUM TERM OF OPTIONS
Unless the stock option agreement provides otherwise, Options granted
hereunder shall be exercisable for a term of ten years from the Date of Grant.
8. EXERCISE OF OPTIONS
No Option may be exercised for a period of six months from the Date of
Grant. Options will be exercised by a Participant giving written notice of such
exercise to the Company. An Option will be exercisable during a Participant's
lifetime only by the Participant, or, if the Participant has become disabled, by
his legal representative.
9. WITHHOLDING TAXES
To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any benefit realized by an optionee
under the Plan, or is requested by an optionee to withhold additional amounts
with respect to such taxes, and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the realization of such
benefit that the optionee make arrangements satisfactory to the Company for
payment of the balance of such taxes required or requested to be withheld. In
addition, if permitted by the Compensation and Benefits Committee, the
Compensation Review Committee or the Special Committee, an optionee may elect to
have any withholding obligation of the Company satisfied with shares of Common
Stock that would otherwise be transferred to the optionee on exercise of the
Option.
10. Forfeiture of Benefits
(a) Notwithstanding any other provision of this Plan or any provision
of a stock option agreement, any and all unexercised Options and all rights
under the Plan of a Participant who received such Option grant (or his
designated beneficiary or legal representatives) and the exercise thereof, will
be forfeited if,
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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
Company without the Company's consent, (ii) divulge without the Company's
consent any secret or confidential information belonging to the Company or any
Subsidiary or (iii) engage in any other activities which would constitute
grounds for termination "for cause" as defined in the Participant's stock option
agreement, or in the absence of a definition in such agreement, as defined in
this Section.
(b) For purposes of the Plan, "for cause" means (i) the continued
failure by the Participant to substantially perform his duties with the Company
or a Subsidiary (other than any such failure resulting from his incapacity due
to physical or mental illness) or (ii) conduct by the Participant which is
materially injurious to the Company or a Subsidiary, monetarily or otherwise, in
either case as determined by the Company.
11. NON-TRANSFERABILITY OF OPTIONS
A Participant's rights and interests under this Plan (including the
right to exercise unexercised Options) may not be assigned or transferred
except, in the case of a Participant's death, to the person or persons to whom
the option shall have been transferred by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined by
the Code, or Title I of the Employee Retirement Income Security Act of 1974, or
the rules thereunder.
12. ADJUSTMENTS FOR CERTAIN EVENTS
The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may make or provide for such adjustments in
the maximum number of shares specified in Section 3, in the number of shares of
Common Stock covered by outstanding Options granted hereunder, in the Option
exercise price applicable to any such Options, and/or in the kind of shares
covered thereby (including shares of another issuer), as such committee, as
applicable, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities or
any other corporate transaction or event having an effect similar to any of the
foregoing. In the event the Compensation and Benefits Committee and the
Compensation Review Committee disagree (or either or both disagree with the
Special Committee) with respect to the foregoing adjustments, the Compensation
Review Committee's determination will be final and conclusive. Any adjustment
pursuant to this Section may provide for the elimination of any fractional share
which might otherwise result from such adjustment.
13. Amendment and Termination
(a) The Board, the Compensation and Benefits Committee or the
Compensation Review Committee may at any time and from time to time terminate,
modify or amend the Plan in any respect except as to those matters that, under
Delaware law, must be approved by the stockholders (or, in the case of a
committee, by the Board) of the Company. No such termination, modification or
amendment (other than as expressly permitted by the terms of the stock option
agreement or by Section 12) may adversely affect the rights of a Participant
under an outstanding Option without such Participant's written consent.
(b) The Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee may amend outstanding Options in a manner not
inconsistent with the terms of the Plan, but no such amendment (other than as
expressly permitted by the terms of the stock option agreement or by Section 12)
may adversely affect the rights of a Participant under an outstanding Option
without such Participant's written consent.
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14. RIGHTS OF PARTICIPANTS
No Participant or other person will have any claim or right to be
granted an Option under the Plan. Neither the Plan nor any action taken
hereunder will be construed as giving any Participant any right to be retained
in the employment or service of the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate a Participant's employment or other service at any
time.
15. RIGHTS AS A STOCKHOLDER
A Participant or a transferee of an Option will have no rights as a
stockholder with respect to any share of Common Stock covered by his Option
until he becomes the holder of record of such share, and, except for stock
dividends as provided in Section 12 hereof, no adjustment will be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights in respect of such share for which
the record date is prior to the date on which he becomes the holder of record
thereof.
16. AGREEMENTS WITH PARTICIPANTS
Each Option grant will be evidenced by a stock option agreement
executed on behalf of the Company by an executive officer of the Company (other
than the recipient), or his or her delegate, and delivered to the Participant,
and containing such terms and provisions, consistent with the Plan, as the
Compensation and Benefits Committee, the Compensation Review Committee or the
Special Committee, as applicable, may approve. By executing the stock option
agreement, 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 any Committee, the Board or their delegates. Unless
the stock option agreement otherwise expressly provides, there shall be no third
party beneficiaries of the obligations of the Company to the Participant under
the agreement.
17. REQUIREMENTS FOR ISSUANCE OF SHARES
No shares of Common Stock will be issued or transferred hereunder
unless and until all legal requirements applicable to the issuance or transfer
of such shares have been complied with to the satisfaction of the Compensation
and Benefits Committee, the Compensation Review Committee or the Special
Committee. The applicable committee may condition any award or the issuance of
Common Stock made to any Participant hereunder on such Participant's undertaking
in writing to comply with such restrictions on his subsequent disposition of
such shares as such committee deems necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
18. MISCELLANEOUS
(a) The Plan shall be effective as of November 29, 1995 (the
"Effective Date") and shall continue in effect thereafter until terminated or
suspended by the Committee or by the Board. The Plan, as amended and restated,
is effective as of December 10, 1997.
(b) This Plan, Option agreements, and the grant, exercise, conversion,
operation and vesting of Options, and the issuance and delivery of shares of
Common Stock and/or other securities under this Plan, 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 Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions (and
the person acquiring such securities shall, if requested by the Company, provide
such evidence, assurance and representations to the Company as to compliance
with any thereof) as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements.
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(c) This Plan, Option 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.
(d) 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.
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EXHIBIT 10.14
CATELLUS DEVELOPMENT CORPORATION
AMENDED AND RESTATED 1996 PERFORMANCE AWARD PLAN
(As Restated to Incorporate Amendments
through February 11, 1998)
<PAGE>
TABLE OF CONTENTS
Page
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. PURPOSE..................................................... 1
SECTION 2. DEFINITIONS; RULES OF CONSTRUCTION.......................... 1
SECTION 3. ELIGIBILITY................................................. 5
SECTION 4. AWARDS...................................................... 5
SECTION 5. SHARES OF STOCK AND UNITS AVAILABLE UNDER PLAN.............. 8
SECTION 6. AWARD AGREEMENTS............................................ 10
SECTION 7. ADJUSTMENTS; CHANGE OF CONTROL; ACQUISITIONS................ 12
SECTION 8. ADMINISTRATION.............................................. 15
SECTION 9. NON-EMPLOYEE DIRECTOR OPTIONS............................... 17
SECTION 10. NON-EMPLOYEE DIRECTOR STOCK UNITS........................... 19
SECTION 11. AMENDMENT AND TERMINATION OF THIS PLAN
AND AWARD AGREEMENTS....................................... 19
SECTION 12. MISCELLANEOUS............................................... 20
APPENDIX A. TERMS AND PROVISIONS APPLICABLE TO
DIRECTOR STOCK UNIT AWARDS.................................. A-1
SCHEDULE 1. STOCK UNIT AWARD AGREEMENT.................................. S-1
</TABLE>
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
AMENDED AND RESTATED 1996 PERFORMANCE AWARD PLAN
(As Restated to Incorporate Amendments
through February 10, 1998)
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, Section 9 or Section 10,
including stock units originally granted under the Deferral Plan that were
converted into Director Stock Units under this Plan effective May 1, 1997 by
action of the Board.
"AWARD AGREEMENT" means an agreement described in Section 6, Section 9 or
Section 10 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.
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"COMMITTEE" means each of the Compensation and Benefits Committee, the
Compensation Review Committee and the Special Committee, unless the context
requires otherwise.
"COMPENSATION AND BENEFITS COMMITTEE" means the Compensation and Benefits
Committee of the Board, whose members are appointed by the Board from time to
time. Although the Compensation and Benefits Committee has the authority under
the Plan to make grants of Awards to any Participant, it is anticipated that the
Compensation and Benefits Committee will make grants of Awards only to those
Participants who are not subject to Section 16 of the Exchange Act or Section
162(m) of the Code and the rules promulgated thereunder.
"COMPENSATION REVIEW COMMITTEE" means the Compensation Review Committee of the
Board, whose members are appointed by the Board from time to time. All of the
members of the Compensation Review Committee, which may not be less than two,
are intended at all times to qualify as "outside directors" within the meaning
of Section 162(m) of the Code, and as "non-employee directors" within the
meaning of Rule 16b-3; provided, however, that the failure of a member of such
committee to so qualify shall not be deemed to invalidate any Award granted by
such committee. Although the Compensation Review Committee has the authority
under the Plan to make grants of Awards to any Participant, it is anticipated
that the Compensation Review Committee will make grants of Awards only to those
Participants who are subject to Section 16 of the Exchange Act and/or Section
162(m) of the Code and the rules promulgated thereunder.
"CORPORATION" means Catellus Development Corporation.
"DEFERRAL PLAN" means the Corporation's Non-Employee Directors Deferred Stock
Compensation Plan, which has been terminated.
"DIRECTOR STOCK UNIT" means a non-voting unit of measurement which is deemed for
bookkeeping purposes to be equivalent to one outstanding share of Common Stock
of the Company (subject to adjustment) solely for purposes of this Plan.
"DIRECTOR STOCK UNIT ACCOUNT" means the bookkeeping account established under
Section 10 and maintained by the Company on behalf of each Participant and
credited with Director Stock Units in accordance with Section 10.
"DIRECTOR STOCK UNIT AWARD" means a deferred payment award payable in Common
Stock based on Director Stock Units credited to a Director Stock Unit Account
under Section 10.
"EMPLOYEE" means any employee (whether or not also a director) of the
Corporation or any of its Subsidiaries, but excludes any part-time employee
(defined for these purposes as a person regularly working fewer than 30 hours
per week) or a temporary employee, and (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.
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"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 closing price of the relevant security for 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.
"FOR CAUSE" means (i) the continued failure by the Participant to substantially
perform his or her duties with the Corporation or a Subsidiary (other than any
such failure resulting from his or her incapacity due to physical or mental
illness), or (ii) conduct by the Participant which is materially injurious to
the Corporation or a Subsidiary, 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 the
Corporation 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.
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"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.
"RETAINER" means the annual retainer payable by the Company to a Non-Employee
Director.
"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 and
Awards under Section 10.
"SHARE UNITS" means the number of units under a Share-Based Award that is
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.
"SPECIAL COMMITTEE" means a committee consisting of one or more members of the
Board that is appointed by the Board from time to time. The member or members
of the Special Committee need not qualify as "outside directors" within the
meaning of Section 162(m) of the Code, or as "non-employee directors" within the
meaning of Rule 16b-3. Although the Special Committee has the authority under
the Plan, within limits (if any) authorized by the Compensation and Benefits
Committee, the Compensation Review Committee or the Board, to make grants of
Awards to any Participant, it is anticipated that the Special Committee will
make grants of Awards only to those Participants who are not subject to Section
16 of the Exchange Act or Section 162(m) of the Code and the rules promulgated
thereunder.
"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 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 Stock
Trading Price 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.
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"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.
(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 or any Officer who is
designated by the Compensation and Benefits Committee, the Compensation Review
Committee or the Special Committee to receive an Award. Non-Employee Directors
shall not be eligible to receive any Awards except for (a) the Nonqualified
Stock Options granted automatically without action of any Committee under the
provisions of Section 9, and (b) Director Stock Unit Awards pursuant to Section
10.
SECTION 4. AWARDS
(a) TYPE OF AWARDS. Each 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.
(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
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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.
(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.
(4) Other Share-Based Awards. Each 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 of the 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).
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(b) SPECIAL PERFORMANCE-BASED AWARDS. Without limiting the generality of the
foregoing, any of the type of Awards listed in Section 4(a) also may be
granted by the Compensation Review Committee 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
awarded by the Compensation Review Committee 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 by the Compensation Review Committee
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 and Officers.
(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 Compensation Review 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 one calendar year to any one 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
canceled during the year shall be counted against this limit to the extent
required by Code Section 162(m).
(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 one calendar year to any one individual 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 Compensation Review 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).
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(5) Terms and Conditions of Awards; Committee Discretion to Reduce
Performance Awards. The Compensation Review 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 Compensation Review 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 Compensation Review 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 Compensation
Review 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 Compensation Review 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
Compensation Review 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. Except as provided in or pursuant to Section 10,
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 10
years after the date the Award was initially granted.
SECTION 5. SHARES OF STOCK AND 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 and Director Stock Units) is 4,000,000, subject to adjustment as
provided in this Section 5 or Section 7.
(b) AGGREGATE UNIT LIMIT. The maximum number of Share Units and Director Stock
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.
(c) REISSUE OF SHARES AND OTHER AWARDS. Any unexercised, unconverted or
undistributed portion of any expired, canceled, 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
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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 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 12(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 12(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 (or with the consent of the Committee, for less than six months),
(iv) a reduction in the amount of Stock or other amounts otherwise issuable
or payable pursuant to such Award, (v) 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 in money, the
terms and conditions of which shall be determined (subject to Section
12(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
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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) Nonassignability: The Award shall not be assignable nor transferable,
except (A) by will or by the laws of descent and distribution, or (B) 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), or
(C) 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, transfers without
consideration for estate and financial planning purposes, nor 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).
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(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 or any Subsidiary,
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 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. 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,
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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 OF 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, Share Units and Director
Stock 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 and Director Stock 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 and
Director Stock 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.
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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 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:
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(1) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in paragraph (ii)
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 of the adoption
of the Plan, held 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
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
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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. The Plan and all Awards granted under
the Plan will be administered by the Compensation and Benefits Committee,
the Compensation Review Committee and the Special Committee. For purposes
of any action taken by the Compensation and Benefits Committee, the
Compensation Review Committee or the Special Committee, whichever is
applicable, a majority of the members will constitute a quorum, and the
action of the members present at any meeting at which a quorum is present,
or acts unanimously approved in writing, will be the acts of the applicable
committee. Notwithstanding the foregoing, Awards under Section 9 and 10
have been authorized by the Board and may be administered by the Board.
(b) SELECTION AND GRANT. Each 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 Compensation and Benefits Committee,
the Compensation Review Committee and the Special Committee have the full
authority and discretion to administer the Plan and to take any action that
is necessary or advisable in connection with the administration of the
Plan, including without limitation the authority and discretion to
interpret and construe any provision of the Plan or of any agreement,
notification or document evidencing the grant of an Award. The
interpretation and construction by the Compensation and Benefits Committee,
the Compensation Review Committee or the Special Committee, as applicable,
of any such provision and any determination by the Compensation and
Benefits Committee, the Compensation Review Committee or the Special
Committee pursuant to any provision of the Plan or of any such agreement,
notification or document will be final and conclusive; provided, that in
the event the Compensation and Benefits Committee and the Compensation
Review Committee disagree (or either or both disagree with the Special
Committee) with respect to such interpretation, construction or
determination, the Compensation
15
<PAGE>
Review Committee's determination will be final and conclusive. If there is
any 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 each Committee's authority under other provisions of this
Plan (including Sections 7, 10, and 11), but subject to any express
limitations of this Plan (including under Sections 7, 10, and 11), each
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 or Officers, 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) EXCLUSIVE AUTHORITY FOR SECTION 162(M). Notwithstanding any provision of
the Plan to the contrary, the Compensation Review Committee will have the
exclusive authority and discretion to take any action required or permitted
to be taken under the provisions of this Section, Section 4(b), Section 7
and Section 11 with respect to Awards granted under the Plan that are
intended to comply with the requirements of Section 162(m) of the Code.
(f) RULE 16B-3 CONDITIONS; BIFURCATION OF PLAN. It is the intent of the
Corporation that Share-Based Awards be interpreted in a manner that, in the
case of Awards intended as exempt grants or purchases under Section 16 of
the Exchange Act to 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 and will not be subjected to avoidable liability thereunder.
(g) DELEGATION AND RELIANCE. Each 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 a 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 each 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.
(h) EXCULPATION AND INDEMNITY. Neither the Corporation nor any member of the
Board of Directors or of any 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
16
<PAGE>
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 Company
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 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, (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 or (iv) 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
17
<PAGE>
exercisable as to 25% of the Option shares when the Stock Trading Price of
the Stock equals 125% or more of the exercise price, as to 50% of the
Option shares when the Stock Trading Price of the Stock equals 150% or more
of the exercise price, as to 75% of the Option shares when the Stock
Trading Price of the Stock equals 175% or more of the exercise price, and
as to the entire Option when the Stock Trading Price of the Stock 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 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 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 (ii) 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 and shall
remain fully exercisable for one year after the date of such Change of
Control or until the expiration of the stated term of such Option,
whichever first occurs; 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 but (if not otherwise
terminated before such time) shall then be accelerated. To the extent that
any Option granted under this Section 9 is not exercised before (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.
18
<PAGE>
SECTION 10. NON-EMPLOYEE DIRECTOR STOCK UNITS.
Subject to the provisions of this Plan and such rules and procedures
as the Committee or the Board may establish from time to time, any Non-Employee
Director may irrevocably elect to defer or receive in Director Stock Units all
or a portion of the Retainer and/or fees payable to the Non-Employee Director
for services on the Board of Directors and its committees or for attendance at
Board meetings or committee meetings. The specific terms, conditions and
provisions for each Director Stock Unit Award and elections (and of deferred
compensation stock unit accounts under the Deferral Plan that have been
converted into Director Stock Unit Accounts under this Plan) are set forth in
Appendix A to this Plan, incorporated herein and in each Award Agreement under
this Section 10 by this reference.
SECTION 11. AMENDMENT AND TERMINATION OF THIS PLAN AND AWARD AGREEMENTS.
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 Board or 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 and any
applicable Code Section 162(m) considerations). Notwithstanding the foregoing,
no such action by the Board or a Committee shall, in any manner adverse to a
Participant (other than as expressly permitted by the terms of an Award
Agreement and Section 7), 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 12. 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 AND OFFICERS AND OTHER PARTICIPANTS.
(1) No Right to an Award. Status as an Employee or an Officer shall not be
construed as a commitment that any one or more Awards will be made under this
Plan to an Employee or Officer or to Employees or Officers 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
19
<PAGE>
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 and became effective upon approval of the
stockholders of the Corporation at the annual meeting held May 22, 1996.
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. Amendments to this Plan effective January 30, 1996, May 1,
1997 and February 11, 1998 were approved by the Board of Directors and
did not require stockholder approval, nor did they adversely affect any
Award holder's rights or benefits under this Plan or under the Deferral
Plan.
(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 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) NONEXCLUSIVITY 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.
20
<PAGE>
APPENDIX A
----------
CATELLUS DEVELOPMENT CORPORATION
TERMS AND PROVISIONS
APPLICABLE TO DIRECTOR STOCK UNIT AWARDS
UNDER SECTION 10 OF THE
AMENDED AND RESTATED 1996 PERFORMANCE AWARD PLAN
These Terms supplement the terms of the 1996 Plan and the provisions
of individual Award Agreements contemplated by the 1996 Plan and shall apply to
any deferral election made under the Deferral Plan (as defined below) or Section
10 of the 1996 Plan, to the same extent as if included therein. These Terms
also are incorporated by reference in the applicable Director Stock Unit Award
Agreement.
1 Eligibility.
-----------
(a) Rollover Participants. Each Non-Employee Director has had the
---------------------
opportunity to make an irrevocable election to defer the Retainer payable for
services from September 1, 1996 through December 31, 1997 pursuant to the terms
of and conditions of the Catellus Development Corporation Non-Employee Directors
Deferred Compensation Plan, as approved by the Board on July 16, 1996 ("Deferral
Plan").
(b) Other Participants. All Non-Employee Directors are eligible to
------------------
irrevocably elect to defer all or a portion of their Retainer in Director Stock
Units pursuant to Section 10 of the 1996 Plan, these Terms, and applicable Award
Agreements. An eligible person who satisfies these requirements and who
executes a Director Stock Unit Award Agreement will be considered a
"Participant" for purposes of these Terms and the 1996 Plan.
2 Timing of Deferral Election.
---------------------------
(a) Rollover Accounts. The Board has decided to terminate the
-----------------
Deferral Plan as a separate plan and include its essential provisions in this
Appendix A to the 1996 Plan. These Terms continue the rights and benefits of
each Participant in the Deferral Plan. Each Non-Employee Director who elected
to participate in the Deferral Plan shall be a Participant in the 1996 Plan to
the extent of and in accordance with the terms of the deferral elected by such
Participant for 1996 and 1997. As of May 1, 1997, all stock units previously
credited to the Participant's stock unit account under the Deferral Plan shall
be deemed transferred to and converted into a carryover Director Stock Unit
Account for the Participant under the 1996 Plan. Election agreements under the
Deferral Plan shall be deemed Award Agreements under the 1996 Plan.
(b) Ongoing Elections. A Non-Employee Director may irrevocably elect
-----------------
to defer a portion of his or her Retainer for services to be rendered during the
following calendar
A-1
<PAGE>
year in Director Stock Units by making an election on or before the December 31
preceding such calendar year, in accordance with procedures established by the
Committee. Effective with respect to fees earned in calendar years after 1997, a
Non-Employee Director may also irrevocably elect to defer a portion of his or
her fees for service on Board committees or for attendance at Board meetings or
committee meetings during a calendar year by making an election on or before the
December 31 preceding such calendar year, in accordance with procedures
established by the Committee. The Committee may permit any Non-Employee Director
who first becomes eligible to participate in the 1996 Plan on or after the first
day of any calendar year to make a Stock Unit deferral election within 30 days
following his or her eligibility. All elections shall be in writing in the form
of Schedule 1 or such other form as provided by the Committee.
(c) Installments Available. The portions of the Retainer and other
----------------------
fees subject to deferral under Section 2(b) of these Terms shall be limited to
increments of 25%, 50%, 75%, or 100%.
3 Stock Units; Stock Unit Accounts.
--------------------------------
(a) Crediting to Stock Unit Accounts. If a Participant elects to
--------------------------------
defer a portion of his or her Retainer, the Company shall, as of the beginning
of the year in which the Retainer will be earned (or, in the case of a
Participant who is first elected to the Board, as of the date of his or her
election) credit the Director's Stock Unit Account with a number of Stock Units
determined by dividing the applicable deferred portion of the Participant's
Retainer by 90% of the Fair Market Value of a share of Common Stock on the date
of the Award. If a Participant elects to defer a portion of his or her Board
meeting or committee meeting fees (collectively, the "Meeting Fees"), the
Company shall, as of the last day of the calendar year in which the fees are
earned, credit the Director's Stock Unit Account with a number of Stock Units
determined by dividing the applicable deferred portion of the Participant's fees
by 90% of the Fair Market Value of a share of Common Stock on such date.
Meeting Fees with respect to Board or committee meetings will be considered to
be earned in the calendar year in which the applicable meeting begins. A
Participant's Stock Unit Account shall consist of such subaccounts as are
necessary or convenient (the "Distribution Subaccounts") to separately account
for deferred Retainers and Meeting Fees, for deferrals in different years and
for Dividend Equivalents (as defined below) thereon which are subject to
different vesting provisions or distribution elections.
(b) Statements. The Company shall submit to each Participant, within
----------
120 days after the close of each calendar year, a statement in such form as the
Committee or its delegate deems desirable setting forth the balance of each
Participant's Director Stock Unit Account.
A-2
<PAGE>
4 Vesting of Stock Units .
----------------------
(a) Vesting. Director Stock Units credited to a Directors Stock Unit
-------
Account (other than Director Stock Units representing Dividend Equivalents which
are only credited to already vested Director Stock Units) for the calendar year
with respect to a Participant's deferred Retainer shall proportionately vest on
a per diem basis assuming a 365-day year and shall fully vest at the end of the
applicable calendar year. Director Stock Units credited to a Directors Stock
Unit Account with respect to deferred committee or meeting fees shall at all
times be fully vested. Units representing Dividend Equivalents shall at all
times be fully vested.
(b) Acceleration of Vesting of Accounts. The vesting of the rights of
-----------------------------------
each Participant in respect of any unvested Director Stock Units for a calendar
year shall be accelerated if a Participant ceases to be a member of the Board by
reason of death or disability during the year.
5 Limitations on Rights Associated with Units. A Participant's
-------------------------------------------
Director Stock Unit Account shall be a memorandum account on the books of the
Company. The Director Stock Units credited to a Participant Director's Stock
Unit Account shall be used solely as a device for the determination of the
number of shares of Common Stock to be eventually distributed to the Participant
under the 1996 Plan. The Director Stock Units shall not be treated as property
or as a trust fund of any kind. No Participant shall be entitled to any voting
or other stockholder rights with respect to Director Stock Units granted,
credited or vested under the 1996 Plan. The number of Director Stock Units
credited and vested (and the Common Stock to which the Participant is entitled
under the 1996 Plan) shall be subject to adjustment in accordance with Section 8
hereof and Section 7 of the 1996 Plan. These Terms shall create only a
contractual obligation on the part of the Company as to such amounts and shall
not be construed as creating a trust. The 1996 Plan, in and of itself, has no
assets. A Participant shall have only the rights of a general unsecured
creditor of the Company with respect to amounts credited and rights no greater
than the right to receive the Common Stock (or equivalent value) as a general
unsecured creditor.
6 Dividend Equivalent Credits to Stock Unit Account. As of the
-------------------------------------------------
applicable dividend payment date ("Award Date"), an Eligible Director's Stock
Unit Account shall be credited with additional Director Stock Units in an amount
equal to (x) the amount of the Dividend Equivalents representing dividends paid
on that number of shares equal to the aggregate Director Stock Units vested in
the Participant's Director Stock Unit Account as of that date divided by (y) 90%
of the Fair Market Value of a share of Common Stock as of that date.
7 Distribution of Benefits.
------------------------
(a) Time and Manner of Distribution with respect to Deferral of 1996
----------------------------------------------------------------
Retainers. With respect to all deferrals of Retainers earned in 1996, a
- ---------
Participant shall be entitled to receive a distribution of the vested amount
deferred under the method previously selected by such Participant from the
following options:
(i) A lump sum payable promptly upon termination of service on
the Board for any reason; or
<PAGE>
(ii) A specified number of annual installments (not to exceed
five) commencing upon termination of service on the Board for any reason.
(b) Time and Manner of Distribution with respect to Deferrals for
-------------------------------------------------------------
Years after 1996. With respect to an election filed for Retainers, Meeting Fees
- ----------------
and/or other fees earned after 1996, a Participant shall be entitled to receive
a distribution of the vested amount deferred under such election (together with
Dividend Equivalents credited pursuant to Section 8) in accordance with the
Participant's election made pursuant to the Participant's Award Agreement in
substantially the form of Schedule 1.
(c) Change in the Manner of Distribution. Subject to Section 12(a), a
------------------------------------
Participant may change the manner of any distribution election from a lump sum
to annual installments over a period of up to five years (or vice versa) made
with respect to any Retainer, Meeting Fees or other fee deferred under Section
2(b) by filing a new election with the Committee; provided, however, that no
-------- -------
such election shall be effective until 12 months after such election is filed
with the Committee, nor made with respect to any Distribution Subaccount after
benefits with respect to such Distribution Subaccount have commenced. An
election made pursuant to this Section 7(c) shall not affect the date of the
commencement of benefits.
(d) Change in Election of Timing of Distribution. Subject to Section
--------------------------------------------
12(a), a Participant may elect to accelerate or further defer the commencement
of any distribution with respect to the Retainer, Meeting Fees or other fee
deferred under Section 2(b), for any calendar year by filing a new election with
the Committee; provided, however, that no such election shall be effective until
12 months after such election is filed with the Committee, nor made with respect
to any Distribution Subaccount after benefits with respect to such Distribution
Subaccount have commenced; further provided that no such new election shall be
valid if it would not have been valid had it been made as the Participant's
initial election. An election made pursuant to this Section 7(d) shall not
affect the manner (i.e., lump sum versus installments) of distribution.
----
(e) Effect of Death, Disability or Change in Control. Notwithstanding
------------------------------------------------
Sections 7(a), (b), (c) and (d), if a Participant dies or becomes disabled or a
Change in Control shall occur and the Participant's service as a Director shall
terminate, the Participant's Director Stock Unit Accounts to the extent then
credited and whether or not then vested for the remainder of the then current
calendar year shall be fully vested and shall be distributed immediately in a
lump sum.
(f) Form of Distribution. Director Stock Units credited to an
--------------------
Eligible Director's Distribution Subaccounts shall be distributed in an
equivalent whole number of shares of the Company's Common Stock. Fractions
shall be disregarded in connection with any distribution, but may be
accumulated. Notwithstanding anything else contained herein to the contrary, if
the number of Units remaining in the Director Stock Unit Account is less than
100, then the remaining balance shall be distributed in a lump sum.
8 Adjustments in Case of Changes in Common Stock.
----------------------------------------------
A-4
<PAGE>
If any stock dividend, stock split, recapitalization, merger,
consolidation, combination or other reorganization, exchange of shares, sale of
all or substantially all of the assets of the Company, split-up, split-off,
spin-off, extraordinary redemption, liquidation or similar change in
capitalization or any distribution to holders of the Company's Common Stock
(other than cash dividends and cash distributions) shall occur, proportionate
and equitable adjustments consistent with the effect of such event on
stockholders generally (but without duplication of benefits if Dividend
Equivalents are credited) shall be made in the number and type of shares of
Common Stock or other securities, property and/or rights contemplated hereunder
and of rights in respect of Director Stock Units and Director Stock Unit
Accounts credited under the 1996 Plan so as to preserve the benefits intended.
9 Company's Right to Withhold.
---------------------------
The Company shall satisfy any income tax withholding obligation
arising upon distribution of a Participant's Stock Unit Account by reducing the
number of shares of Common Stock otherwise deliverable to the Participant. The
appropriate number of shares required to satisfy such tax withholding obligation
in the case of Stock Units will be based on the Fair Market Value of a share of
Common Stock on the day prior to the date of distribution. If the Company, for
any reason, cannot satisfy the withholding obligation in accordance with the
preceding sentence, the Participant shall pay or provide for payment in cash of
the amount of any taxes which the Company may be required to withhold with
respect to the benefits hereunder.
10 Limitation on Eligible Directors'. Participation in the 1996
---------------------------------
Plan shall not give any person the right to continue to serve as a member of the
Board or any rights or interests other than as herein provided.
11 Beneficiaries.
-------------
(a) Beneficiary Designation. Upon forms provided by and subject to
-----------------------
conditions imposed by the Company, each Participant may designate in writing the
Beneficiary or Beneficiaries (as defined in Section 8.2(b)) whom such
Participant desires to receive any amounts payable under the 1996 Plan after his
or her death. The Company and the Committee may rely on the Participant's
designation of a Beneficiary or Beneficiaries last filed in accordance with the
terms of the 1996 Plan.
(b) Definition of Beneficiary. A Participant's "Beneficiary" or
-------------------------
"Beneficiaries" shall be the person, persons, trust or trusts (or similar
entity) designated by the Participant or, in the absence of a designation,
entitled by will or the laws of descent and distribution to receive the
Participant's benefits under the 1996 Plan in the event of the Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.
A-5
<PAGE>
12 Other Provisions.
----------------
(a) Irrevocability of Payout Elections. Subject to Section 8.6 of the
----------------------------------
1996 Plan, a Participant may, subject to the approval of the Committee,
prospectively change an election under Section 7(b) or (c) by a subsequent
election that will take effect at least 12 months after the subsequent election
is received by the Company if, in the opinion of counsel to the Company, the
subsequent election would not adversely affect the efficacy of deferrals under
the Code in respect of other Participants in the 1996 Plan. Notwithstanding the
preceding sentence, a Participant shall not be permitted to change an election
with respect to any Distribution Subaccount from which benefits have commenced
to be distributed.
(b) Notices. Any notices to be given under the terms of the 1996
-------
Plan, these Terms or a Stock Unit Award Agreement shall be in writing and
addressed to the Company at its principal executive office, to the attention of
the Corporate Secretary and to the Participant at the address given beneath the
Participant's signature on the Stock Unit Award Agreement or to his or her last
address of record in the records of the Company.
(c) Amendments. The Board shall have the right to amend these Terms
----------
in whole or in part from time to time, subject to Section 8.7 of the 1996 Plan.
(d) Governing Law; Severability. The validity of these Terms or any
---------------------------
of its provisions and provisions of Stock Unit Award Agreements shall be
construed, administered and governed in all respects under and by the laws of
the State of California. If any provisions of these Terms shall be held by a
court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue to be fully effective.
(e) Compliance with Laws. The 1996 Plan, these Terms, and the offer,
--------------------
issuance and delivery of shares of Common Stock through the deferral of
compensation under the 1996 Plan are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law) and to such approvals by any listing, agency
or regulatory or governmental authority as may, in the opinion of counsel for
the Company, be necessary or advisable in connection therewith. Any securities
delivered under the 1996 Plan shall be subject to such restrictions, and the
person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable securities laws
and other legal requirements.
(f) Restrictions on Transfer. Neither the Stock Units, nor any
------------------------
interest therein, nor amount payable or Common Stock deliverable in respect
thereof, may be sold, assigned, transferred, pledged or otherwise disposed of,
alienated or encumbered, either voluntarily or involuntarily, other than by will
or the laws of descent and distribution. Common Stock issued upon payment of a
Director Stock Unit Account shall be subject to only such restrictions on
transfer as may be necessary or advisable, in the opinion of legal counsel to
the Company, to assure compliance with applicable securities laws.
A-6
<PAGE>
SCHEDULE 1
----------
CATELLUS DEVELOPMENT CORPORATION
STOCK UNIT AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
(DEFERRAL FOR 199__ PLAN YEAR)
THIS DIRECTOR STOCK UNIT AWARD AGREEMENT ("AGREEMENT") is dated as of
the ____ day of _______, 199 , between CATELLUS DEVELOPMENT CORPORATION, a
Delaware corporation (the "COMPANY"), and _____________________ (the
"PARTICIPANT").
In consideration of the services rendered and to be rendered by the
Participant, the Company and the Participant agree as follows:
1 Stock Unit Deferral Election. The Participant hereby irrevocably
----------------------------
elects to defer under Section 10 of the Company's Amended and Restated 1996
Performance Award Plan (the "1996 PLAN") the following percentage(s) of the
Retainer(s) and/or Meeting Fees that will become payable to the Participant for
services to be rendered during the year commencing January 1, _____ (the "Plan
Year") (fill in percentage and initial your election):
-
RETAINER ____% (Fill in 0%, 25%, 50%, 75% or 100%)
MEETING FEES ____% (Fill in 0%, 25%, 50%, 75% or 100%)
ChaIRMAN'S RETAINER ____% (Fill in 0%, 25%, 50%, 75% or 100%)
Such amounts shall be credited in Stock Units in accordance with Section 10 of
the 1996 Plan. Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the 1996 Plan.
2 Timing and Manner of Distribution of Stock Units. Participant
------------------------------------------------
hereby further irrevocably elects to receive a distribution of his or her vested
Stock Units deferred, in accordance with the choice indicated below (check one
and initial the option you choose):
[ ] ____ A single lump sum deliverable on the January 1 following his or
her termination of service on the Board; or
[ ] ____ Substantially equal annual installments over ______ [specify
number, not to exceed five] years commencing on the January 1
following his or her termination of service on the Board; or
<PAGE>
S-1
[ ] ____ A single lump sum deliverable on the earlier of January 1, ____
------- --
[fill in year which is not less than three years after the Plan
Year*] or on the January 1 following his or her termination of
service on the Board; or
[ ] ____ Substantially equal annual installments over _____ [specify
number, not to exceed five] years commencing on the earlier of
------- --
January 1, ______ [fill in year which not less than three years
after the Plan Year] or on the January 1 following his or her
termination of service on the Board; or
[ ] ____ A single lump sum deliverable on the later of January 1, _____
----- --
[fill in year which is not less than three years after the Plan
Year] or on the January 1 following his or her termination of
service on the Board; or
[ ] ____ Substantially equal annual installments over _____ [specify
number, not to exceed five] commencing on the later of January 1,
----- --
_____ [fill in year which not less than three years after the
Plan Year] or on the January 1 following his or her termination
of service on the Board.
Distributions will be made on or as soon as administratively practicable after
the specified delivery date.
3 General Terms. The deferral in and vesting of Stock Units and
-------------
this Agreement are subject to, and the Company and the Participant agree to be
bound by, the applicable provisions of the 1996 Plan, incorporated herein by
this reference. The Participant acknowledges receiving a copy of the 1996 Plan
and understanding its applicable provisions. Provisions of the Plan that grant
further discretionary authority to the Company, the Board or the Committee shall
not create any rights in the Participant, unless such rights are expressly set
forth herein.
4 Effect of Agreement. This Agreement shall only be effective with
-------------------
respect to the Retainer and fees for the Plan Year. The Participant and the
Company must enter into a separate Stock Unit Award Agreement in order to
provide for the deferral of any Retainer or Meeting Fees in respect of future
calendar years.
- -----------------------
/1/ For example, for deferral of the 1998 Retainer, the year may be no earlier
than 2001.
S-2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
CATELLUS DEVELOPMENT CORPORATION
"Company"
By:
--------------------------------
Title:
--------------------------------
PARTICIPANT
--------------------------------
(Signature)
--------------------------------
(Print Name)
--------------------------------
(Address)
--------------------------------
(City, State, Zip Code)
--------------------------------
(Social Security Number)
S-3
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Director Stock Unit
Award Agreement, I, _________________, the spouse of the Participant herein
named, do hereby join with my spouse in executing the Agreement and do hereby
agree to be bound by all of the terms and provisions thereof and of the 1996
Plan and the General Provisions.
DATED: _______________, 19__. ____________________________
Signature of Spouse
<PAGE>
EXHIBIT 10.17
EXECUTION COPY
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
KATHLEEN SMALLEY
DATED AS OF
SEPTEMBER 16, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
EMPLOYMENT RELATIONSHIP............. 2
1.1 Employment........................................ 2
----------
1.2 Term.............................................. 4
----
1.3 Base Salary....................................... 5
-----------
1.4 Bonuses........................................... 5
-------
1.5 Stock Option...................................... 6
------------
1.6 Places of Performance............................. 7
---------------------
1.7 Termination of Employment......................... 7
-------------------------
1.8 Benefits Upon Termination......................... 11
-------------------------
1.9 Benefits.......................................... 14
--------
1.10 Expenses.......................................... 16
--------
1.11 Indemnity......................................... 16
---------
1.12 Relocation Expenses............................... 17
-------------------
1.13 Housing Arrangement............................... 18
-------------------
ARTICLE II
COVENANTS.................. 18
2.1 Covenant Against Competition....................... 18
----------------------------
2.2 Confidential Information........................... 19
------------------------
ARTICLE III
CHANGE OF CONTROL............. 20
3.1 Change of Control Payments........................ 20
--------------------------
ARTICLE IV
ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS.... 25
4.1 Amendment........................................ 25
---------
4.2 Severability; Governing Law...................... 25
---------------------------
4.3 Title and Headings............................... 26
------------------
4.4 Notices.......................................... 26
-------
4.5 Nonassignability................................. 26
----------------
4.6 Attorneys' Fees and Costs for Proceedings........ 27
-----------------------------------------
4.7 Full Settlement.................................. 27
---------------
4.8 Waiver........................................... 27
------
4.9 Arbitration of All Disputes...................... 28
---------------------------
4.10 Personnel Policies and Legal Compliance Manuals.. 29
-----------------------------------------------
4.11 Expenses......................................... 30
--------
Signatures............................................. 33
i
<PAGE>
EXHIBIT A OPTION AGREEMENT
EXHIBIT B TERMS AND CONDITIONS FOR PURCHASE OF NEW HOME IN SAN FRANCISCO AREA
FOR EXECUTIVE
EXHIBIT C CATELLUS DEVELOPMENT CORPORATION BENEFITS SUMMARY 1995
ii
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
CATELLUS DEVELOPMENT CORPORATION
AND
KATHLEEN SMALLEY
This Amended and Restated Employment Agreement (this "Agreement") is
made and entered into as of the 16th day of September, 1997 by and between
KATHLEEN SMALLEY ("Executive") and CATELLUS DEVELOPMENT CORPORATION, a Delaware
corporation, with its principal office located in San Francisco, California (the
"Company").
RECITALS
A. The Executive and the Company entered into an Employment Agreement
on December 3, 1996 (the "Employment Agreement").
B. The Executive and the Company desire to amend the Employment
Agreement to provide for dual location service and certain other changes in the
terms and conditions of her employment with the Company.
C. The Executive and the Company desire to restate and amend the
Employment Agreement through this Agreement.
1
<PAGE>
The Company desires to continue to secure the services of Executive as
Senior Vice President and General Counsel of the Company and Executive desires
to perform such services for the Company on the amended terms and conditions
hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, Executive and the Company hereby agree as follows:
ARTICLE I
EMPLOYMENT RELATIONSHIP
1.1 Employment.
----------
(a) The Company hereby employs Executive as Senior Vice President and
General Counsel of the Company, with a term of service which commenced on
January 1, 1997 (the "Commencement Date"). Executive shall report directly to
the Chief Executive Officer of the Company and shall have such duties as may be
prescribed by the Chief Executive Officer and shall be part of the senior
management group of the Company. The Company agrees that the duties which may
be assigned to Executive shall be the usual and customary duties of the offices
to which she may from time to time be elected or appointed and shall not be
inconsistent with the provisions of the charter documents of the Company or
applicable law (both as in effect from time to time).
2
<PAGE>
(b) During the term of this Agreement, Executive shall, except as
described in clause (c) below and subject to the other provisions hereof, devote
her full-time energy and talent to her employment and shall not engage in any
other business activities which would represent a material conflict with her
duties to the Company. Executive may make and manage personal business
investments of her choice, provided that such activities and services do not
substantially interfere or conflict with the performance of duties hereunder or
create any conflict of interest with such duties.
(c) Notwithstanding the foregoing, Executive may devote reasonable
time to activities other than those required under this Agreement, including
supervision of personal investments and activities involving professional,
charitable, educational, political, religious and similar types of
organizations, speaking engagements, memberships of boards of directors of other
organizations and similar activities, provided that Executive shall not serve on
the board of directors of any other business or hold any other position with any
business without the consent of the Chief Executive Officer of the Company.
Company recognizes that Executive serves as a Lecturer at Harvard Law School and
as Chairman of the Visiting Committee of Harvard Law School and agrees that
Executive shall continue to serve in these capacities at her discretion.
(d) Paid vacations of three weeks (subject to increase in accordance
with the Company's policy with regard to vacation for senior executives) every
12 months shall be permitted and Executive shall be entitled to take such
vacations at such time or times as she shall choose.
3
<PAGE>
(e) The Executive shall not be required to perform services under this
Agreement during any period that she is disabled. The Executive shall be
considered "disabled" during any period in which she has a physical or mental
disability which renders her incapable, after reasonable accommodation, of
performing her duties under this Agreement and is eligible to receive income
replacement benefits during such period under a long-term disability plan or
disability insurance provided by the Company. In the event of a dispute as to
whether Executive is disabled, the Company may refer the same to a licensed
practicing physician of the Company's choice, and the Executive agrees to submit
to such tests and examinations as such physician shall deem appropriate.
1.2 Term.
----
This Agreement commenced on December 3, 1996, and shall continue in
effect through December 31, 1999 (as such date may be extended in accordance
with this Section 1.2, the "Expiration Date"), subject to the termination
provisions contained in Section 1.7 hereof; provided, however, that (i) unless
the Company gives notice of termination to Executive on or before the December
31 immediately preceding the Expiration Date, the Expiration Date shall be
automatically extended by an additional 12 months to the next succeeding
December 31 and (ii) the Company's obligations under Sections 1.8, 1.12 and 1.13
hereof and Executive's obligations under Section 2.2 hereof shall survive the
termination of this Agreement.
4
<PAGE>
1.3 Base Salary.
-----------
Executive shall receive a minimum annual base salary (the "Base
Salary") payable in substantially equal installments no less than twice monthly,
with the first payment having been made on or about January 15, 1997 for
services commencing on the Commencement Date. The Base Salary shall be reviewed
every 12 months by the Chief Executive Officer of the Company and, as a result
of that review, shall be subject to possible increase but not decrease based
upon the attainment of reasonable performance goals as mutually determined by
Executive and the Chief Executive Officer of the Company. Any increase to Base
Salary which results from that review will be effective on each February 1st by
the amount which results from that review and such revised base salary shall
thereafter represent the minimum annual base salary. Executive's initial
annual Base Salary under this Agreement shall be $231,000.
1.4 Bonuses.
-------
(a) Executive shall be eligible to receive an annual bonus (the "Base
Bonus") equal to up to 60% of Base Salary commencing with the year ended
December 31, 1997. For all periods beginning on or after January 1, 1998,
Executive's Base Salary for purposes of this Section 1.4 shall be deemed to be
the Executive's Base Salary determined in accordance with Section 1.3. The Base
Bonus each year shall be determined on the basis of the achievement of
performance goals negotiated in good faith annually in advance with
5
<PAGE>
Executive by the Chief Executive Officer of the Company on or before February 28
of each year. The Base Bonus shall be payable each year no later than March 31.
(b) Executive shall be eligible to receive an additional bonus (the
"Additional Bonus") equal to up to 60% of Base Salary commencing with the year
ended December 31, 1997. The Additional Bonus each year shall be determined on
the basis of the achievement of performance goals negotiated in good faith
annually in advance with Executive by the Chief Executive Officer of the Company
on or before February 28 of each year; provided that the Additional Bonus may
not exceed the Base Bonus in any year. Such Additional Bonus will be payable
for outstanding service determined on the basis of reasonably attainable
performance goals. The Additional Bonus shall be payable each year no later
than March 31.
(c) All bonus payments shall be subject to appropriate withholding
payments deducted therefrom.
1.5 Stock Option.
------------
As of January 1, 1997, Executive was granted non-qualified stock
options covering an aggregate of 75,000 shares of Common Stock of the Company in
accordance with the Company's existing Amended and Restated Executive Stock
Option Plan and as approved by the Compensation and Benefits Committee of the
Board of Directors of the Company, and the Option Agreement is in the form of
Exhibit A attached hereto.
6
<PAGE>
Additional option and other awards, if any, shall be made to Executive
in an equitable manner consistent with Executive's senior position and otherwise
in a manner consistent with the Company's executive compensation policies;
provided, however, the Company acknowledges that it is contemplated that options
for an additional 75,000 shares would be granted to Executive during the 1997
fiscal year if Executive's performance is of high quality. The issuance of any
shares of Common Stock of the Company issuable upon exercise of such options
shall be registered under the Securities Act of 1933.
1.6 Places of Performance.
---------------------
In connection with her employment hereunder, Executive shall be based
at the San Francisco and Dallas offices of the Company, except for required
business travel for the Company and for any leave of absence.
1.7 Termination of Employment.
-------------------------
(a) If at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
(A) termination for Cause, (B) disability at a time when Executive is receiving
disability benefits under a long-term disability plan or disability insurance
provided by the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii) Executive
terminates employment with the Company for Good Reason
7
<PAGE>
(as defined below), then Executive shall be entitled to the benefits provided in
Section 1.8 hereof.
(b) For purposes of this Agreement, the following definitions are set
forth below:
(i) Termination by the Company for "Cause" shall mean termination upon the
willful and continued failure by Executive to substantially perform
her material duties with the Company (other than any such failure
resulting from her incapacity due to physical or mental illness) after
a Notice of Termination as set forth in this Section 1.7(b)(i) is
delivered to Executive by the Chief Executive Officer of the Company,
which Notice specifically identifies the manner in which the Board of
Directors believes that Executive has not substantially performed her
duties. For purposes of this Section, no act, or failure to act, on
Executive's part shall be deemed "willful" unless done, or omitted to
be done, by Executive not in good faith and without reasonable belief
that Executive's action or omission was not inconsistent with the best
interest of the Company.
Notwithstanding the foregoing, Executive shall not be terminated
for Cause pursuant to this Section 1.7(b)(i) unless and until
Executive (A) has received notice of a proposed termination for cause
with a written explanation of the grounds for such proposed
termination, (B) Executive has had an
8
<PAGE>
opportunity to confer with the Chief Executive Officer of the Company,
and (C) Executive has had 60 days after receipt of such notice to cure
any alleged non-performance of her duties. If at the end of such
sixty-day period the nonperformance has not been cured to the
satisfaction of the Chief Executive Officer, then the Company, upon
the determination of the Compensation and Benefits Committee of the
Board of Directors of the Company, may terminate this Agreement for
Cause.
(ii) "Good Reason" shall exist if, without Executive's express written
consent, any of the following occurs:
(A) a reduction by the Company in Executive's Base Salary as in effect
on the date hereof or as the same may be increased from time to time; or
(B) a demotion from the position or title of Senior Vice President and
General Counsel of the Company or an assigning of duties to Executive that
are inconsistent in any substantial respect with or are a reduction in any
substantial respect from the position, authority, or responsibilities
associated with the position of Senior Vice President and General Counsel
of the Company; or
(C) the failure of the Company to fulfill its obligations under this
Agreement; or
9
<PAGE>
(D) the intentional failure of the Company, without Executive's
consent, to pay to Executive any portion of her salary, earned bonus, or
other current compensation (if any), or to pay to Executive any portion of
any installment of deferred compensation under any deferred compensation
program of the Company within ten business days of the date such
compensation is due or to issue shares of Common Stock of the Company in
accordance with the terms of stock options granted to Executive upon valid
exercise thereof; or
(E) a relocation of the Company headquarters or requirement for
Executive to be based anywhere other than within 25 miles from the site of
the current headquarters of the Company; provided, however, that
-------- -------
Executive's service in Dallas shall not be deemed a "relocation" or
"requirement" under this Section 1.7(b)(ii)(E).
(iii) For purposes of this Agreement, "Date of Termination" shall mean
the effective date specified in the Notice of Termination as of
which Executive's employment terminates (which shall not be less
than 60 days after the date such Notice of Termination is given)
or, in the event of termination of employment other than for
Cause, the date as of which Executive's employment terminates.
(c) Executive may terminate her employment hereunder at any time by
giving the Company prior written notice, which notice shall be effective not
less than 30 days after it is given to the Company.
10
<PAGE>
1.8 Benefits Upon Termination.
-------------------------
(a) If, at any time during the term of this Agreement, (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
(A) termination for Cause, (B) disability at a time when Executive is receiving
disability benefits under a long-term disability plan or disability insurance
provided by the Company, (C) death, or (D) normal retirement under the Company's
pension plan or a qualified retirement plan of the Company or (ii) Executive
terminates employment with the Company for Good Reason (as defined below), then
the amount of benefits payable (as hereinafter described) on account of such
termination shall be equal to the sum of:
(i) unpaid salary with respect to any vacation days accrued but not taken
as of the Date of Termination; and
(ii) in the event that the termination of employment occurs prior to the
first anniversary of the Commencement Date, the sum of (1) the number
of full months remaining in this Agreement, but not to exceed 24,
multiplied by Executive'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; and (2) the
number of full or partial months remaining in the period commencing on
the first day following the most recent period in respect of which the
Base Bonus has been paid and
11
<PAGE>
ending on the Expiration Date, but not to exceed 24, multiplied by
$138,600 divided by 12; or
(iii) in the event that the termination of employment occurs after the
first anniversary of the Commencement Date, the sum of (1) the number
of full months remaining in this Agreement, but not to exceed 24,
multiplied by the average monthly Base Salary (determined without
regard to amounts payable under any bonus program, or other forms of
extraordinary compensation) for the immediately preceding two-year
period or, if Executive has not served the Company for 24 months, then
the average monthly Base Salary (determined without regard to amounts
payable under any bonus program, or other forms of extraordinary
compensation) for such shorter period; and (2) the number of full or
partial months remaining in the period commencing on the first day
following the most recent period in respect of which the Base Bonus
has been paid and ending on the Expiration Date, but not to exceed 24,
multiplied by the average monthly Base Bonus and Additional Bonus for
the immediately preceding two-year period or, if Executive has not
served the Company for 24 months, then the average monthly Base Bonus
and Additional Bonus for such shorter period,
provided, however, that the amount of such benefits shall be reduced by any
- -------- -------
other benefits provided upon termination of employment to which Executive may be
entitled under any severance agreement with the Company.
12
<PAGE>
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off against the amounts payable to
Executive under this Agreement any amounts owed to the Company by Executive, any
amounts earned by Executive in other employment after termination of her
employment with the Company, or any amounts which might have been earned by
Executive in other employment had she sought such other employment.
The Company shall pay Executive, no later than the fifth day following
the Date of Termination, a lump sum payment, in cash, equal to the amount due
under Section 1.8(a) hereof; provided, however, Executive may elect any time
-------- -------
prior to the Date of Termination to receive the amounts due under Section 1.8(a)
hereof on an installment basis as may be mutually agreed by the Company and
Executive.
(b) If, at any time during the term of this Agreement, Executive
ceases to be an employee for any reason described in Section 1.8(a) hereof,
during the remainder of the term of this Agreement, Executive shall continue to
be treated as an employee for purposes of the Company's group health and dental
programs, but not for purposes of life, dependent care reimbursement, business
travel accident insurance, or long- or short-term disability programs (except to
the extent Executive is drawing benefits at the time of termination), tax-
qualified retirement plans, or any other employee benefit plan or program of the
Company, and shall receive benefits substantially comparable to those in effect
on the
13
<PAGE>
day before the Date of Termination subject to any reduction or termination of
such benefits similarly affecting all senior management personnel of the
Company.
(c) If, at any time during the term of this Agreement, Executive
ceases to be an employee for any other reason, then Executive shall be entitled
to the sum of (i) unpaid accrued salary, (ii) unpaid salary with respect to any
vacation days accrued but not taken as of the Date of Termination and (iii) any
bonus or portion thereof to which Executive is entitled under any then effective
bonus plan or program.
1.9 Benefits.
--------
Executive shall be entitled to receive employee benefits (including,
but not limited to, pension, medical, insurance and disability benefits) and
perquisites no less favorable than those provided to other senior executives of
the Company (other than the Chief Executive Officer).
With respect to medical coverage, Executive shall be entitled to
coverage for her family for the term of this Agreement unless Executive is
terminated for Cause in which case coverage shall terminate on the Date of
Termination except for any applicable COBRA coverage. If, at any time during
the term of this Agreement, Executive involuntarily ceases to be employed by the
Company for any reason other than Termination for Cause or Executive terminates
employment with the Company for Good Reason, then Executive shall
14
<PAGE>
be entitled to medical insurance for the full term of this Agreement as provided
in Section 1.8(b) hereof.
Executive shall, to the extent available at a commercially reasonable
rate of premium, receive from the Company disability income replacement coverage
under the Company's enhanced disability program benefits which will provide for
replacement of 70% of Base Salary during any period in which Executive is
disabled if the disability arose during the term of this Agreement and prior to
the Date of Termination. During any period while Executive is disabled, and is
otherwise entitled to receive salary under this Agreement, any salary payments
to Executive shall be reduced by the amount of any benefits paid for the same
period of time pursuant to such disability income replacement coverage.
Executive also will be entitled to ample office space and appropriate
furniture and all other customary supplies and equipment to fulfill the
requirements of her corporate position as well as to a full-time secretary.
In addition to the benefits described above, Executive shall be
entitled to participate in a retirement program under the Company's 401-K Plan.
The Company's current benefit programs are described on Exhibit C
attached hereto and such benefits and the benefits described in this Section 1.9
shall not be materially altered except for across the board modifications
applicable to all Company executives.
15
<PAGE>
1.10 Expenses.
--------
Executive shall be entitled to monthly reimbursement for all
reasonable business and business-related entertainment expenses, including an
automobile allowance in an amount not less than $981.05 per month as well as
reimbursement for cellular phone expenses. The term "reasonable business and
business-related expense" as used in the preceding sentence shall, commencing on
the date hereof, be deemed to include travel expense for travel between Dallas
and San Francisco in an amount, for any 12-month period, up to $10,000 plus such
additional expense, if any, as shall be incurred by Executive in connection with
travel between Dallas and San Francisco at the Company's specific request. The
Company and Executive agree that such travel expense may be funded for a 24-
month period through the purchase of a $20,000 24-month "Airpass."
1.11 Indemnity.
---------
To the fullest extent permitted by applicable law and the Bylaws of
the Company, as the same now exist or may hereafter be amended, the Company
shall indemnify Executive and hold Executive harmless for any acts or decisions
made in good faith while performing services for the Company, and the Company
shall use its best efforts to obtain coverage for Executive under any liability
insurance policy or policies now in force or hereafter obtained during the term
of this Agreement that cover other officers of the Company having comparable or
lesser status and responsibility and to obtain professional malpractice
insurance coverage for Executive. To the same extent, the Company will pay
16
<PAGE>
and advance all expenses, including reasonable attorneys' fees and costs of
court approved settlements, actually incurred by Executive in connection with
the defense of or settlement of any action, suit or proceeding and in connection
with any appeal thereon, which has been brought against Executive by reason of
Executive's service as an officer or agent of the Company or as a director,
officer or agent of any subsidiary of the Company.
1.12 Relocation Expenses.
-------------------
(a) Executive has received a lump sum payment of $108,707 which is
designed to cover costs of moving personal property, including (i) the cost of
an interim move of personal property of Executive to temporary storage; (ii) the
cost of additional storage for personal property of Executive for up to seven
months following the Commencement Date; (iii) miscellaneous related expenses;
and (iv) federal and state taxes, if any, payable by reason of the income effect
of the items described in this Section 1.12(a).
(b) In addition to the lump sum payment to Executive described in
clause (a) above, Executive also will receive, from time to time during fiscal
year 1997 and thereafter, the following: (i) $4,000 per month until the earlier
of (A) the sale of Executive's condominium in Dallas and (B) ten months after
the Commencement Date (provided that amounts payable with respect to the tenth
month shall be payable on or before March 31, 1998); (ii) the cost of furniture
rental for the same period referenced in clause (b)(i) above; (iii) a lump sum
payment of $5,000 payable on or before April 15, 1998; (iv) closing costs
incurred in connection with the purchase of a new residence in the San
17
<PAGE>
Francisco area for Executive; and (v) federal and state taxes, if any, payable
by reason of the income effect of the items described in this Section 1.12(b).
Such payments shall be payable promptly upon receipt by the Company of a
statement setting forth, in reasonable detail, the calculation of such amounts.
1.13 Housing Arrangement.
-------------------
Executive and the Company shall enter into arrangements for the
purchase of a new residence in the San Francisco area in accordance with the
terms and conditions set forth in Exhibit B attached hereto.
ARTICLE II
COVENANTS
2.1 Covenant Against Competition. Executive agrees that for the
----------------------------
period ending on the earlier of the expiration of the term of this Agreement or
when employment is terminated hereunder, Executive will not, except as provided
in Section 1.1(c) hereof, without the prior written approval of the Chair of the
Board of Directors of the Company, directly or indirectly, as owner, partner,
officer or employee, engage in any business which is substantially competitive
with any business then actively conducted by the Company or by any of its
subsidiaries or undertake to consult with or advise any such competitive
business, or otherwise, directly or indirectly, engage in any activity which is
substantially competitive with or in any way adversely and substantially
affecting any activity of the Company or any
18
<PAGE>
of its subsidiaries; provided, however, that ownership by Executive of rental
-------- -------
homes, of not more than 5% of the outstanding shares of stock of any such
business listed on any national stock exchange or quoted on an automated
quotation system, or of not more than 15% of the stock of any such business not
so listed or quoted, shall not be deemed a violation of this covenant, and
provided further that Executive may, without further approval, perform services,
including but not limited to consulting, providing legal advice, conducting
negotiations, and directing outside counsel, to Trammell Crow Interests Company
d/b/a Crow Family Holdings ("CFH"), as appropriate to assist in transition as
her responsibilities at CFH are transferred to other persons.
2.2 Confidential Information. In further consideration of the
------------------------
payments to be made to Executive hereunder, Executive agrees that:
(a) During the term of her employment under this Agreement and for a
period of five years thereafter, she will not divulge to anyone, other than to
persons designated by the Company in writing or as may be required by law, any
confidential information concerning the Company or its business as to which
Executive at any time during her employment shall become informed and which is
not then generally known to the public or recognized as standard practice and
shall use reasonable precautions to ensure that such information remains
confidential; and
(b) During the employment period, upon termination of employment under
this Agreement or at any subsequent time upon request, Executive will return
promptly to the
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Company as its property, all corporate documents and records in whatever form
they may exist, which are then in her custody, possession or control, including
those related to trade secrets or other confidential information, provided that
Executive may retain copies of any form files and any nonconfidential
information.
ARTICLE III
CHANGE OF CONTROL
3.1 Change of Control Payments.
--------------------------
In the event that a Change of Control (as defined in Section 3.1(c)
hereof) occurs during the term of this Agreement while Executive is employed by
the Company, Executive shall be entitled to certain payments as follows:
(a) If, following the execution of an agreement providing for a Change
of Control or within 12 months after the occurrence of the Change of Control,
Executive's employment by the Company or its successor is terminated by the
Company without Cause (as defined in Section 1.7(b)(i) hereof) or by Executive
pursuant to Section 1.7(b)(ii) hereof (relating to Termination for Good Reason),
then Executive shall be entitled to receive from the Company or such successor,
in lieu of, and not in addition to, the amounts otherwise payable to Executive
pursuant to Section 1.8 hereof, a lump sum payment in an amount which is equal
to three times the "base amount" in respect of Executive as defined in Section
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280G of the Internal Revenue Code of 1986, as amended (the "Code"), or any
successor to that provision. In addition, the stock options described in
Section 1.5 hereof shall become fully vested in such event.
(b) If any payments under this Agreement, after taking into account
all other payments to which Executive is entitled from the Company, or any
affiliate thereof, are more likely than not to result in a loss of a deduction
to the Company by reason of Section 280G of the Code or any successor provision
to that section, such payments shall be reduced to the extent required to avoid
such loss of deduction. Executive shall be entitled to select the order in
which payments are to be reduced in accordance with the preceding sentence.
If reasonably requested by the Company, Executive shall provide
complete compensation and tax data on a timely basis to the Company and to an
accounting or law firm designated by the Company in order to enable the Company
to determine the extent to which payments from the Company and its affiliates
may result in a loss of a deduction. If Executive incurs fees or expenses in
accumulating such information, the Company shall reimburse Executive for any
reasonable fees and expenses so incurred.
If Executive and the Company disagree as to whether a payment under
this Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by an opinion of independent tax counsel chosen by the
Company's independent auditors. The Company shall pay the fees and expenses of
such counsel, and shall make
21
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available such information as may be reasonably requested by such counsel to
prepare the opinion.
If, by reason of the limitations of this Section 3.1(b), the maximum
amount payable to Executive cannot be determined prior to the due date for such
payment, the Company shall pay on the due date the minimum amount which it in
good faith determines to be payable and shall pay the remaining amount, with
interest at a rate compounded semi-annually, equal to 120% of the applicable
Federal rate determined under Section 1274(d) of the Code, as soon as such
remaining amount is determined in accordance with this Section 3.1(b).
(c) A "Change of Control" of the Company 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 clause (b)
below) of the Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (an "Acquiror") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934) of 25% or more
of the combined voting power of the then outstanding shares of Common Stock
and other stock of the Company entitled to vote generally in the election
of directors, but excluding for this purpose:
22
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(i) any such acquisition (or holding) by California Public
Employees' Retirement System ("CalPERS"), which as of the Effective
Date holds approximately 40% of the issued and outstanding Common
Stock of the Company, 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;
(ii) any such acquisition (or holding) by the Company or any of
its Subsidiaries, or any employee benefit plan (or related trust) of
the Company or such Subsidiaries; or
(iii) 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 Common
Stock and other voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
outstanding shares of Common Stock of the Company and of the combined
voting power of the then
23
<PAGE>
outstanding voting securities of the Company entitled to vote
generally in the election of directors;
(2) individuals who, as of the date hereof, constitute the Board of
Directors (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 Company, 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 Company (as such term is used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934); or
(3) approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation of the Company, 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 and voting
securities of the Company immediately prior to such reorganization, merger
or consolidation do not, 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
24
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reorganization, merger or consolidation, or (ii) a complete liquidation or
dissolution of the Company, or (iii) the sale or other disposition of all
or substantially all of the assets of the Company.
ARTICLE IV
ADMINISTRATION, ENFORCEMENT AND OTHER MATTERS
4.1 Amendment.
---------
No amendments to this Agreement may be made except by a writing signed
by both parties.
4.2 Severability; Governing Law.
---------------------------
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. This Agreement shall be
interpreted under, and governed by, the laws of the State of California.
25
<PAGE>
4.3 Title and Headings.
------------------
Title and headings are for ease of reference and convenience only and
shall not be construed to affect the meaning of any provision of this Agreement.
4.4 Notices.
-------
Any notices to the Company required or permitted hereunder shall be
given in writing to the Company, either by personal service or by registered or
certified mail, postage prepaid, duly addressed to the secretary of the Company
at its then principal place of business. Any such notice to Executive shall be
given in like manner, and if mailed shall be addressed to Executive at her home
address as recorded in the employment records of the Company. For the purpose
of determining compliance with any time limit herein, a notice shall be deemed
given at the time of postmark date.
4.5 Nonassignability.
----------------
This Agreement shall not be transferable or assignable by either
Executive or the Company, except to the successor of the Company in the event of
its reorganization, merger or consolidation, approved in writing by Executive.
The terms, covenants and conditions of this Agreement shall be binding upon the
Company and its successors in the event of dissolution, reorganization,
consolidation or merger of the Company, approved in writing by Executive.
26
<PAGE>
4.6 Attorneys' Fees and Costs for Proceedings.
-----------------------------------------
If any action at law or in equity, or any proceeding pursuant to
Section 4.9 hereof, is commenced to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which she
or it may be entitled.
4.7 Full Settlement.
---------------
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others.
4.8 Waiver.
------
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision,
or provisions, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.
27
<PAGE>
4.9 Arbitration of All Disputes.
---------------------------
Any controversy or claim arising out of or relating to this Agreement
(or the breach thereof) shall be settled by binding and non-appealable
arbitration in San Francisco, California by an arbitrator. Executive and the
Company shall initially confer and attempt to reach agreement on the individual
to be appointed as such arbitrator. If no agreement is reached, the parties
shall request from the San Francisco office of the Judicial Arbitration and
Mediation Services ("JAMS") a list of five retired judges affiliated with JAMS.
Executive and the Company shall each alternately strike names from such list
until only one name remains and such person shall thereby be selected as the
arbitrator. Except as otherwise provided for herein, such arbitration shall be
conducted in conformity with the procedures specified in the California
Arbitration Act (Cal. C.C.P. (S)(S) 1280 et seq.). The arbitrator shall not be
authorized to award punitive damages with respect to any claim, dispute or
controversy. The parties intend that this Section 4.9 shall be valid, binding,
enforceable and irrevocable and shall survive the termination of this Agreement
and that any arbitration proceeding hereunder shall be concluded within 60 days
after the initiation thereof. The Company and Executive shall jointly so
instruct the Arbitrator chosen to arbitrate any dispute arising hereunder and
agree that the criteria used by them to select such Arbitrator shall include his
or her availability to act expeditiously within not more than the 60-day period
referred to herein. The parties hereto agree that the final decisions of the
Arbitrator so chosen may be enforced by a court of competent jurisdiction.
28
<PAGE>
4.10 Personnel Policies and Legal Compliance Manuals.
-----------------------------------------------
Executive acknowledges that she has received a copy of the document
entitled Personnel Policies Manual, revised February 4, 1995, and the Legal
Compliance Manual dated February 16, 1996. Executive understands and agrees
that it is her responsibility to read and familiarize herself with the
provisions contained in the Personnel Policies Manual and to abide by the rules,
policies and standards set forth in the Personnel Policies Manual. All
policies, rules and regulations contained in the Personnel Policies Manual are
subject to change, with or without notice, at the Company's discretion. In
addition, Executive acknowledges that she has reviewed and understands the
provisions of the Legal Compliance Manual and agrees to comply with the
Company's policies and guidelines contained therein and to strictly follow all
laws relating to the performance of her duties. This Agreement will control in
the event there are any inconsistencies between this Agreement and such
policies.
4.11 Expenses.
--------
The Company shall be responsible for the fees payable to Francis &
Associates, CPAs, and to Vinson & Elkins L.L.P., for the tax and legal advice
provided to Executive in connection with the preparation and implementation of
this Agreement, so long as the aggregate expenses for both the Employment
Agreement and this Agreement do not exceed $10,000. All fees in excess thereof
shall be paid by Executive.
29
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and Executive has executed this Agreement as
of the date first above written.
"COMPANY"
CATELLUS DEVELOPMENT CORPORATION
By _____________________________
Nelson C. Rising
Chief Executive Officer
"EXECUTIVE"
By _____________________________
Kathleen Smalley
30
<PAGE>
EXHIBIT A
CATELLUS DEVELOPMENT CORPORATION
1996 PERFORMANCE AWARD PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
(Executive)
This Award Agreement ("Agreement") is entered into as of
January 1, 1997 (the "Date of Grant") between Catellus Development Corporation,
a Delaware corporation ("Catellus"), and
Kathleen Smalley
an employee of Catellus (the "Executive").
The Board of Directors (the "Board") of Catellus wishes to encourage
high levels of performance by individuals who contribute to the success of
Catellus and to further the identity of interests of the Executive with the
stockholders of Catellus by granting the Executive a non-qualified stock option
to acquire common stock of Catellus, par value $.01 per share ("Common Stock"),
pursuant to the 1996 Performance Award Plan (the "Plan").
Catellus and the Executive hereby agree as follows:
1. NUMBER OF OPTION SHARES. This Agreement evidences the grant by
Catellus to the Executive, on the terms, conditions and restrictions set forth
herein and in the Plan, of a non-qualified stock option (the "Option") to
purchase, from time to time, a total of
75,000
shares of Common Stock (the "Option Shares").
2. OPTION PURCHASE PRICE. Upon exercise, the Executive shall pay to
Catellus $11.05 per Option Share (the "Option Purchase Price").
3. OPTION EXPIRATION DATE. Unless terminated sooner in accordance
with the provisions of the Plan or this Agreement, the right to exercise the
Option shall expire on January 1, 2007 (the "Expiration Date").
4. VESTING RESTRICTIONS. The Option shall be exercisable in
accordance with the following provisions:
a. Except as otherwise provided herein, no portion of the
Option may be exercised for any reason until at least six months have elapsed
following the Date of Grant.
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<PAGE>
b. Subject to the provisions of Section 5 of this Agreement, the
Option shall become exercisable (i) as to the entire number of the Option Shares
on and after the eighth anniversary of the Date of Grant or (ii) if earlier, in
the amounts indicated on and after the dates set forth below (each, a "Vesting
Date") in accordance with the provisions of Section 4c of this Agreement:
(A) The Option may be exercised as to up to 25% of the Option
Shares on and after the first anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(B) The Option may be exercised as to up to 50% of the Option
Shares on and after the second anniversary of the Date of Grant provided
the conditions specified in Section 4c of this Agreement are met.
(C) The Option may be exercised as to up to 75% of the Option
Shares on and after the third anniversary of the Date of Grant provided the
conditions specified in Section 4c of this Agreement are met.
(D) The Option may be exercised as to up to the entire number of
the Option Shares on and after the fourth anniversary of the Date of Grant
provided the conditions specified in Section 4c of this Agreement are met.
c. The Option may be exercised as to (i) 25% of the Option
Shares provided the average of the Closing Price (as defined below) of a Common
Share (as defined in the Plan) for any 30 consecutive trading days following the
Date of Grant is at least $13.26; (ii) 50% of the Option Shares provided the
average of the Closing Price of a Common Share for any 30 consecutive trading
days following the Date of Grant is at least $15.91; (iii) 75% of the Option
Shares provided the average of the Closing Price of a Common Share for any 30
consecutive trading days following the Date of Grant is at least $19.09; and
(iv) 100% of the Option Shares provided the average of the Closing Price of a
Common Share for any 30 consecutive trading days following the Date of Grant is
at least $22.90.
For purposes of this Section 4c, the term "Closing Price" shall mean,
for any trading day, the closing price of a Common Share on such day (i) on the
New York Stock Exchange ("NYSE"), if the Common Shares are then listed on such
exchange, (ii) if the Common Shares are not listed on the NYSE, on the principal
national stock exchange on which the Common Shares are then listed, or (iii) if
not listed on any national stock exchange, as reported by NASDAQ. If the Common
Shares are not then listed on any national stock exchange or reported by NASDAQ,
then the Closing Price shall be determined in any reasonable manner approved by
the Committee (as defined in the Plan).
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<PAGE>
5. EFFECT OF CERTAIN EVENTS ON VESTING AND EXERCISE.
a. TERMINATION OF EMPLOYMENT.
(i) General. In the event of the Executive's termination
-------
of employment for any reason, any portion of the Option that (A) has
not vested as of such termination, or (B) is vested as of such
termination or becomes vested as a result of such termination in
accordance with Section 5a(ii), 5a(iii), or 5b of this Agreement and
is not exercised within the period specified in Section 5d of this
Agreement, shall be forfeited.
(ii) Termination as a Result of Retirement, Disability or
----------------------------------------------------
Death. In the event of the Executive's termination of employment
-----
prior to the first anniversary of the Date of Grant by reason of (A)
retirement at or after age 65, (B) disability (as defined in the
Plan), or (C) death, a portion of the Option will vest equal to the
number of Option Shares subject to the Option multiplied by a
fraction, the numerator 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.
(iii) Termination Without Cause or for Good Reason. In the
--------------------------------------------
event the Executive terminates her employment with Catellus for Good
Reason, or in the event the Executive involuntarily ceases to be an
employee of Catellus for any reason other than as a result of
retirement, disability, death or for Cause, the Option will vest as to
the entire number of Option Shares (and will be exercisable as to such
entire number of Option Shares without regard to the conditions of
Section 4a, 4b or 4c of this Agreement). "Good Reason" and "Cause"
shall have the meaning set forth in the Employment Agreement, dated as
of December 3, 1996, between the Executive and Catellus (the
"Employment Agreement").
(iv) Termination for Cause. Notwithstanding any other
---------------------
provision herein, in the event of the Executive's termination of
employment for Cause (as defined in the Employment Agreement), any
unexercised portion of the Option, whether vested or unvested, shall
be immediately forfeited.
b. CHANGE OF CONTROL. If, following the execution of an agreement
providing for a Change of Control or within 12 months after the occurrence of a
Change of Control, the Executive's employment by Catellus or its successor is
terminated by Catellus without Cause (as defined in the Employment Agreement) or
by the Executive for Good Reason (as defined in the Employment Agreement), the
Option shall vest immediately as to the entire number of Option Shares (and will
be exercisable as to such entire number of Option Shares without regard to the
conditions of Section 4a, 4b or 4c of this Agreement). For purposes of this
Agreement, a "Change of Control" of Catellus shall be deemed to have occurred
upon the happening of any of the following events:
33
<PAGE>
(i) the acquisition or holding, other than in or as a result of a
transaction approved by the Continuing Directors (as defined in clause
(ii) below) of Catellus, by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934) (an "Acquiror") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934) of 25% or more of the combined voting power of the then
outstanding shares of Common Stock and other stock of Catellus
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 40% of the issued and outstanding Common
Stock of Catellus, 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 Catellus or any of
its subsidiaries, or any employee benefit plan (or related trust) of
Catellus 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 Common
Stock and other voting securities of Catellus immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then
outstanding shares of Common Stock of Catellus and of the combined
voting power of the then outstanding voting securities of Catellus
entitled to vote generally in the election of directors;
(ii) individuals who, as of the date hereof, constitute
the Board of Directors (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 Catellus,
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
34
<PAGE>
election of the directors of Catellus (as such term is used in Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934); or
(iii) approval by the stockholders of Catellus of (A) a
reorganization, merger or consolidation of Catellus, 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 Catellus immediately prior to such
reorganization, merger or consolidation do 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 Catellus, or (C) the sale or other
disposition of all or substantially all of the assets of Catellus.
c. FORFEITURE. Notwithstanding any other provision herein, any
unexercised portion of the Option, whether vested or unvested, shall be
immediately forfeited if the Executive (i) is employed by a competitor of, or
engaged in any activity in competition with, Catellus without Catellus' consent,
(ii) divulges without Catellus'
consent any secret or confidential information belonging to Catellus, or (iii)
is engaged in any other activities which would constitute grounds for
termination "for cause" (as defined in the Plan).
d. EXERCISE PERIOD FOLLOWING TERMINATION OF EMPLOYMENT.
(i) In the event of the Executive's termination of employment by
reason of death, any unexercised portion of the Option that is or
becomes vested upon her death in accordance with Section 5a(ii) of
this Agreement may be exercised by the Executive's personal
representative or by the person or persons to whom the Option shall
have been transferred by will or the laws of descent and distribution
at any time within one year following her death, but in no event after
the Expiration Date.
(ii) In the event of the Executive's termination of employment
(A) for any reason (1) other than death or (2) other than for Cause
(as defined in the Employment Agreement) or (B) by reason of the
resignation of the Executive, any unexercised portion of the Option
that is or becomes vested upon such termination in accordance with
Section 5a(ii), 5a(iii), or 5b of this Agreement (unless such
unexercised portion is forfeited in accordance with Section 5a(iv) or
5c of this Agreement) may be exercised by the Executive at any time
within three months following such termination of employment, but in
no event after the Expiration Date.
35
<PAGE>
6. EXERCISE OF OPTION.
a. All or a portion of the Option may be exercised in
accordance with procedures (including requisite holding periods) established
from time to time by the Committee. If shares of Common Stock are tendered as
payment, such shares of Common Stock shall be valued at their Fair Market Value
(as defined in the Plan) on the date of exercise of the Option.
b. No fractional shares, or cash in lieu thereof, shall be
issued under the Option.
c. As a condition to the grant of the Option, the Executive
agrees (i) that Catellus may deduct from any payments of any kind otherwise due
to the Executive from Catellus the aggregate amount of any federal, state or
local taxes of any kind required by law to be withheld with respect thereto or,
if no such payments are due or to become due to the Executive, that the
Executive shall pay to Catellus, or make arrangements satisfactory to Catellus
regarding the payment to it of, such taxes and (ii) that Catellus or its
subsidiaries may withhold from the shares of Common Stock to be issued upon
exercise of the Option that number of shares of Common Stock that is equivalent
(valuing such shares of Common Stock at their Fair Market Value on the date of
exercise of the Option) to the amount of any federal, state or local withholding
or other taxes due upon the exercise of the Option. The Committee has approved
without further condition the offset of shares of Common Stock for such purposes
(subject to any applicable legal limitations) and the Executive irrevocably
elects this means of payment of such taxes. If any such taxes should become due
after the date of exercise, the Executive must pay, or arrange (to the
satisfaction of Catellus) to pay, the amount due.
d. No shares of Common Stock shall be issued or transferred
upon exercise of the Option unless and until all legal requirements applicable
to the issuance or transfer of such Common Stock have been complied with to the
satisfaction of the Committee.
7. CHANGE IN CAPITALIZATION. In the event of a change in the
capitalization of Catellus due to a stock split, stock dividend,
recapitalization, merger, consolidation, combination or similar event, an
appropriate adjustment shall be made in the number of Common Shares subject to
the Plan and the terms of the Option may be adjusted by the Committee to reflect
such change. Any adjustments pursuant to this Section shall be determined by
the Committee in its sole discretion.
8. NO ASSIGNABILITY. The Option is not assignable or transferable
by the Executive, other than by will, by the laws of descent and distribution or
pursuant to a qualified domestic relations order (as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act of 1974, or the rules thereunder), and may be exercised during the
lifetime of the Executive only by the Executive or, if the Executive becomes
disabled, by her legal representative.
36
<PAGE>
9. OTHER PROVISIONS.
a. Nothing in this Agreement or in the Plan shall confer any
right to continue employment with Catellus nor restrict Catellus from
termination of the employment relationship of the Executive at any time in
accordance with the Employment Agreement.
b. Nothing in this Agreement or in the Plan shall confer any
rights as a stockholder upon the Executive or any other person entitled to
exercise the Option with respect to any Option Shares covered by the Option
until such time as the Executive or such other person shall have become the
holder of record of such Option Shares.
c. The Executive acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. In the event of a conflict between the terms of this Agreement
and the Plan, the Plan shall be the controlling document. Capitalized terms
used but not defined herein shall have the respective meanings ascribed to them
in the Plan.
d. The Executive acknowledges that Catellus has the right to
terminate, modify or amend the Plan at any time, but that no such termination,
modification or amendment may, without the Executive's consent, adversely affect
the rights of the Executive under the Option. The Executive further
acknowledges that the grant of the Option or of any other option in one year or
at one time does not in any way obligate Catellus to make a grant of an option
at any future time or in any given amount.
e. In the event that any provision of this Agreement is held to
be invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Agreement.
f. The rights and obligations under this Agreement shall inure
to the benefit of, and shall be binding upon, Catellus, the Executive and the
Executive's representatives and beneficiaries.
g. Any communication under this Agreement shall be in writing
and addressed to Catellus at 201 Mission Street, San Francisco, California
94105, Attention: Secretary and to the Executive at the address given beneath
the Executive's signature, or at such other address as either party may
hereafter designate in writing to the other.
h. The interpretation, performance and enforcement of the
Option and this Agreement shall be governed by the laws of the State of
California.
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"CATELLUS"
CATELLUS DEVELOPMENT CORPORATION
By:_______________________________
Stephen P. Wallace
Chief Financial Officer
ATTEST:
_______________________
Assistant Secretary "EXECUTIVE"
__________________________________
Kathleen Smalley
c/o Catellus Development Corporation
201 Mission Street
San Francisco, CA 94105
38
<PAGE>
EXHIBIT B
DO NOT DESTROY THIS NOTE: WHEN PAID, THIS NOTE, WITH DEED OF TRUST SECURING SAME
MUST BE SURRENDERED TO TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE
MADE.
NOTE SECURED BY DEED OF TRUST
$400,000 San Francisco, California October ___, 1997
For value received, the undersigned ("MAKER") promises to pay to Catellus
Development Corporation, a Delaware corporation ("HOLDER"), or order at 201
Mission Street, San Francisco, California 94105, the principal sum of FOUR
HUNDRED THOUSAND DOLLARS ($400,000) without interest, as such principal sum may
be adjusted pursuant hereto. Principal payable in lawful money of the United
States. This Note Secured by Deed of Trust (this "NOTE") is secured by a Deed
of Trust and certain other security documents (collectively, the "Security
Documents") encumbering Maker's interest in those certain premises known as 1333
Jones Street, Apartment 1204, San Francisco, California 94109 (the "CURRENT
RESIDENCE"; the Current Residence and any subsequent residence acquired through
an Interim Sale (as defined below), are each referred to herein, individually,
as a "RESIDENCE"). The entire principal balance of this Note, shall be due and
payable on the date of the Final Sale (as defined below), or such earlier date
as may be provided herein or in the Security Documents.
So long as Maker is employed by Holder: if Maker sells a Residence, (A)
Maker may: (i) pay to Holder the entire principal balance of this Note, without
interest or penalty, and this Note shall be discharged, or (ii) deposit with
Holder, cash in an amount not less than the entire principal balance of this
Note (the "Holding Deposit") without paying any amount due under this Note for a
period of nine (9) months from the closing date of the sale of such Residence
(the "Holding Period"); (B) if Maker does not purchase a new Residence within
the Holding Period, this Note shall become due and payable; (C) if Maker
purchases a new Residence within the Holding Period (the sale of a Residence and
the purchase of a new Residence within the Holding Period is referred to herein
as an "Interim Sale"), Maker shall
<PAGE>
have the option, to be exercised upon written notice to Holder; (i) to withdraw
the Holding Deposit from Holder and to secure this Note with a first priority
deed of trust encumbering such new Residence having an Appraised Value not less
than $500,000, or (ii) to finance the purchase of the new Residence on the terms
and conditions set forth on Exhibit B attached hereto (referred to herein as the
---------
"Participating Mortgage Alternative"); and (D) if Maker elects the Participating
Mortgage Alternative, Maker and Holder agree to execute such documents and
perform such acts as may be necessary or appropriate to accomplish the intent of
the Participating Mortgage Alternative. Any sale of a Residence that is not
made pursuant to an Interim Sale shall be deemed to be a "Final Sale."
If Maker's employment with Holder is terminated for any reason by either
party ("Termination"), and Maker has not elected the Participating Mortgage
Alternative, the Maker shall repay this Note within twenty four (24) months of
Maker's receipt of Holder's demand for repayment, which demand may be made at
any time after the Termination. If this Note is not fully repaid by the end of
such period, the Holder will have the right to buy Maker's interest in such
Residence at ninety-four percent (94%) of the excess of the Appraised Value over
the principal balance of this Note, and this Note shall be deemed discharged.
If the Holder does not make such a demand or exercise its right to purchase
Maker's interest, the next sale of such Residence will be the "Final Sale."
For purposes hereof, "Appraised Value" means the value of such Residence
determined by an MAI appraiser selected by Maker. The costs of such appraisal
shall be borne by Holder.
Maker may prepay this Note at any time in whole or in part.
If this Note conflicts with the provisions of the Security Documents, then
this Note shall control. Specifically, without limitation, the indebtedness
evidenced by this Note shall only be due and payable when and as provided in
this Note, and Holder may not accelerate the payment hereof,
Maker shall have sole authority to make all determinations regarding every
aspect of the use, ownership, maintenance and repair of the Residence,
including, without limitation, when and at what price to sell the Residence, the
proper level of maintenance, security and insurance coverage, and whether and to
what extent alterations, additions and improvements
<PAGE>
to the Residence will be made. All insurance proceeds payable for damage to the
Residence shall be paid to Maker to repair such damage or, at Maker's option, to
repayment of the Note.
Holder may not assign the Note. The Security Documents shall only secure
the indebtedness evidenced by the Note and the liens and security interests
created thereby shall be released upon payment in full of the Note. Holder's
recourse with respect to obligations under the Note and the Security Documents
shall be solely the property securing the Note.
____________________________________
Kathleen Smalley
<PAGE>
EXHIBIT B
PARTICIPATING MORTGAGE ALTERNATIVE
1. Structure. The Holder's investment in a Residence will be structured as an
---------
interest-free second participating mortgage (any Residence so financed being
referred to as a "Participating Mortgage Residence").
2. Terms.
-----
Investment:
- ----------
Maker will invest the first $400,000 from any combination of personal funds and
first mortgage loan proceeds; the Holder will loan up to $400,000 as an
interest-free second participating mortgage; Maker will invest any additional
funds, from any combination of personal funds and first mortgage loan proceeds.
The total Holder loan amount must be used to acquire a residence (within the
meaning of Section 217 of the Internal Revenue Code and the regulations
thereunder). The Holder will cooperate reasonably with Maker as necessary to
prevent the Holder's interest from affecting first mortgage financing.
Control:
- -------
Maker will be the controlling owner of the Participating Mortgage Residence, and
the Holder will have no rights of control. In particular, Maker will have the
sole right to determine (i) when to sell the Participating Mortgage Residence
and the sales price, (ii) the proper level of maintenance, (iii) appropriate
security and insurance, and (iv) improvements.
Participation:
- -------------
There will be no current return payable on the Holder's loan. Upon the Final
Sale (as defined below), the Holder will receive, as full satisfaction for
Maker's obligations under the Note, an amount equal to the product of the net
proceeds (after expenses of sale and repayment of the first mortgage loan) of
the Participating Mortgage Residence and a fraction the numerator of which is
the principal balance of the Note and the denominator of which is the total
basis of the Participating Mortgage Residence (including subsequent improvements
B-1
<PAGE>
made by Maker). Maker will have no responsibility, beyond forwarding the
Holder's share of proceeds, for the return to the Holder and will be protected
from liability for any loss or poor performance of the investment.
Expenses:
- --------
Maker will be responsible for taxes, insurance, and maintenance. Maker will
determine the appropriate level of insurance and deductible; the Holder will be
a named insured to the extent of its interest. In the event of earthquake
damage, any deductible that exceeds the deductible for any other damage under
the homeowner's policy will be borne first by the Holder.
Maker Option to Purchase:
- ------------------------
Maker will have the option to purchase, at any time, the Note for an amount
equal to the product of 94% of the Appraised Value and a fraction the numerator
of which is the amount of the principal balance of the Note and the denominator
of which is the total basis of the Participating Mortgage Residence.
Interim Sale:
- ------------
If Maker sells the Participating Mortgage Residence while employed by the Holder
and reinvests in a new Residence, the Holder will reinvest its share of the
proceeds of the sale of the Participating Mortgage Residence in the new
Residence in the same proportion that Maker reinvests her share of the proceeds
from the sale of the Participating Mortgage Residence in the new Residence,
provided that Maker must always have at least $400,000 invested in the new
Residence.
Termination of Employment:
- -------------------------
If Maker's employment is terminated for any reason by either party
("Termination"), the Holder may, within 30 days of Termination, demand that a
"Final Sale" of the Participating Mortgage Residence occur within 24 months of
the end of the term of that certain Employment Agreement, dated as of December
3, 1996, by and between Holder and Maker,
B-2
<PAGE>
as such agreement may be amended, restated and modified from time to time. If
no sale of the Participating Mortgage Residence to a third party has occurred by
the end of that period, the Holder will have the right to buy Maker's interest
in the Participating Mortgage Residence for an amount equal to the product of
the amount equal to ninety-four percent (94%) of the Appraised Value multiplied
by a fraction the numerator of which is the total basis in the Participating
Mortgage Residence less the principal balance of the Note and the denominator of
which is the total basis in the Participating Mortgage Residence. If the Holder
does not make such a demand or exercise its right to purchase Maker's interest,
the Holder's debt will be deemed to have been converted to an equity investment,
but otherwise subject to the remaining conditions of this agreement, and the
next sale of the Participating Mortgage Residence will be the "Final Sale."
Appraised Value: For purposes hereof, "Appraised Value" means the value of the
- ---------------
Participating Mortgage Residence determined by an MAI appraiser selected by
Maker. The costs of such appraisal shall be borne by Maker in the event of an
exercise of her option to purchase the Holder note and by the Holder in the
event of an exercise of its option to require the sale of the Participating
Mortgage Residence or to purchase Maker's interest.
B-3
EXHIBIT C
(see attached)
<PAGE>
EXHIBIT C
C A T E L L U S
[LOGO OF CATELLUS]
CATELLUS DEVELOPMENT CORPORATION
BENEFITS SUMMARY
1995
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
INSTRUCTIONS FOR OPEN ENROLLMENT
NOVEMBER 9 - 18, 1994
. If you are not making any changes to your plans, you need only to complete
---
the Flexible Benefits Plan Enrollment Form.
. If you are changing plans or adding/dependents, please obtain appropriate
forms from the Administrative Support person at your location.
. Medical-Prudential will continue to provide our medical coverage with an
HMO and PruCare Plus option. Kaiser will remain in place only for those
employees currently covered under the plan.
. Dental - Our dental plan will continue to be offered through Phoenix Home
Life.
. Supplemental Life/AD&D - This benefit will continue to be provided by
Phoenix Home Life at your cost. All employees presently covered will have
their coverage automatically carried over.
. All other benefits are paid for by Catellus and enrollment is automatic.
These benefits include:
. Vision Coverage
. Short Term/Long Term Disability
. Basic Life/AD&D
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
BENEFIT CHANGES
. January 1, 1995 will see two minor changes to Catellus Development
Corporation's benefit program.
. Flexible Benefit Plan Benefit Increased
Unreimbursed medical expenses increased to S1,500 per year.
. Vision Plan Modified
New eyeglass frames can be purchased once every 24 months.
1995 MONTHLY COST OF HEALTH BENEFITS: SAME AS l994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Salary Range Employee/Dependent HMO Cost PruCare Plus* Dental Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up to $25,000 Employee $5 $15 $4
Dependent $10 $30 $6
- --------------------------------------------------------------------------------
$25,001 - $35,000 Employee $16.51 $26.51 $8
Dependent $23.63 $53.63 $12
- --------------------------------------------------------------------------------
$35,001 - $50,000 Employee $21.51 $36.51 $10
Dependent $33.63 $73.63 $14
- --------------------------------------------------------------------------------
$50,001 - $70,000 Employee $26.51 $41.51 $13
Dependent $43.63 $103.63 $18
- --------------------------------------------------------------------------------
$70,001 AND UP Employee $31.51 $51.51 $15
Dependent $73.63 $133.63 $23
- --------------------------------------------------------------------------------
</TABLE>
*All Health Options Include Vision Coverage through VSP
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HMO
Benefits PruCare
- --------------------------------------------------------------------------------
Services from or through your
Prudential Primary Care Physician
<S> <C>
Annual Deductible None
(amount you pay before plan pays)
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay
- --------------------------------------------------------------------------------
Hospital Stay 100%
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay*
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay
(well baby care, physicals)
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay**
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
* In Dallas, the copay is $50
** In Dallas, the copay is $5 for generic and $10 for brand name drugs
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
OPEN ENROLLMENT
MEDICAL CHOICES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Point-of-Service (POS)
Benefits PruCare Plus
- --------------------------------------------------------------------------------
Services from or Non-Network
through your Providers
Prudential Primary
Care Physician
- --------------------------------------------------------------------------------
<S> <C> <C>
Annual Deductible None $200 individual
(amount you pay before
plan pays) $500 family
- --------------------------------------------------------------------------------
Doctor Visits 100% after $10 copay 70% after deductible
- --------------------------------------------------------------------------------
Hospital Stay 90% 70% after deductible
- --------------------------------------------------------------------------------
Emergency Room Visit 100% after $25 copay 70% after deductible
- --------------------------------------------------------------------------------
Preventive Care 100% after $10 copay 70% after deductible
(well baby care, physicals) Well Child Care:
Maximum eligible
charges: $15/visit,
$10/immunizations,
$100/year
- --------------------------------------------------------------------------------
Prescription Drugs 100% after $5 copay
- --------------------------------------------------------------------------------
Out-of-Pocket Maximum $2,000 per individual
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
DENTAL
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
In-Network Out-of-Network
Deductible $25 individual/$75 family
- --------------------------------------------------------------------------------
<S> <C> <C>
Preventive 100% deductible waived 100% deductible waived
Basic 90% 80%
Major 60% 50%
Orthodontia 50% 50%
</TABLE>
Calendar Year maximum $l,000 per individual
Orthodontia Lifetime Maximum $1,000 per individual
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
<S> <C>
Elimination Period: 90 days
Monthly Benefit: 66.67% of basic monthly earnings to a maximum
monthly benefit of $10,000.
Definition of Disability You cannot perform each of the material duties of
your regular occupation; and after benefits have
been paid for 24 months you cannot perform each of
the material duties of any gainful occupation for
which you are reasonably fitted by training,
education or experience.
- --------------------------------------------------------------------------------
SHORT TERM DISABILITY
CIGNA
- --------------------------------------------------------------------------------
Elimination Period: 7 days accident
7 days illness
Monthly Benefit: 66.67% of basic monthly earnings to
a maximum of $2,037
Benefit Period: 13 weeks maximum (90 days).
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
CORE LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Employee: 1.5 times basic annual earnings to a maximum benefit of
$300,000
- --------------------------------------------------------------------------------
SUPPLEMENTAL LIFE/AD&D
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Option 1: 1.5 times basic annual earnings to a maximum benefit of $300,000
Option 2: 2.5 times basic annual earnings to a maximum benefit of S300,000
Rates: 100% employee paid
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
16-29 .11 50-54 .587
30-34 .135 55-59 .953
35-39 .154 60-64 1.411
40-44 .250 65-69 2.300
45-49 .364 70-74 3.433
- --------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL LIFE/AD&D - FAMILY LIFE BENEFITS
PHOENIX HOME LIFE
- --------------------------------------------------------------------------------
Spouse: In $10,000 units to a maximum benefit of $100,000
- --------------------------------------------------------------------------------
Rates for Spousal Benefit - Spouses rates based on Employee's spouse age
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate per $1,000 Rate per $1,000
Age Bands per month Age Bands per month
<S> <C> <C> <C>
up to 20 .11 45-49 .364
20-24 .11 50-54 .587
25-29 .11 55-59 .953
30-34 .135 60-64 1.411
35-39 .154 65-69 2.30
40-44 .250 70-74 Terminates
- --------------------------------------------------------------------------------
</TABLE>
Child(ren) In $2,500 units to a maximum benefit of $10,000
- --------------------------------------------------------------------------------
Rates for Children(ren): $.60 per $2,500 per month
- --------------------------------------------------------------------------------
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
FLEXIBLE SPENDING ACCOUNTS
Catellus Development Corporation will continue to offer the tax advantage of
Flexible Spending Arrangements in 1995. These benefits include:
. Pre-tax treatment of all employee contributions for health coverages.
. Pre-tax treatment of up to $1,500 in unreimbursed medical expenses.
. Pre-tax treatment of up to $5,000 in dependent care costs.
In 1995 Catellus Development Corporation will continue to use Lipman
Administrators of Fremont, California to administer its flexible spending
program.
. Reimbursement checks will continue to be paid twice monthly.
. Claims may be filed on a timely basis by fax machine.
Carefully determine your flexible spending account contributions for 1995.
Remember the use it or lose it provision governing these benefits.
. Complete the election form, sign it and return it with your other
enrollment forms.
This summary of benefits is a brief outline of your
insurance coverages. Please see the booklets for
the complete plan descriptions.
<PAGE>
EXHIBIT 10.21
CATELLUS DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN
Catellus Development Corporation, a Delaware corporation, (the "Company"),
hereby establishes the Catellus Development Corporation Deferred Compensation
Plan (the "Plan"), effective March 1, 1997, for the purpose of attracting high-
quality executives and promoting in its executives increased efficiency and an
interest in the successful operation of the Company by providing certain key
executives an opportunity to defer base salary and bonus payments in accordance
with the provisions of the Plan. Capitalized terms used in the Plan have the
meaning set forth in Article 1, unless the context clearly requires a different
meaning.
ARTICLE 1
Definitions
1.1 ACCOUNT shall mean the record-keeping device used by the Company to
measure and determine the amounts to be paid to a Participant under the Plan.
1.2 ADMINISTRATOR shall mean the Compensation and Benefits Committee of
the Board of Directors of the Company.
1.3 BASE SALARY shall mean the Participant's total annual base salary
payable to such Participant at the salary rate in effect on the date specified,
but without reduction for any salary reduction contributions (i) to cash or
deferred arrangements under Section 401(k) of the Code, (ii) to a cafeteria plan
under Section 125 of the Code, or (iii) to a nonqualified deferred compensation
plan. Base salary shall not take into account any incentive bonuses, reimbursed
expenses, credits or benefits under any plan of deferred compensation to which
the Company contributes, or any additional cash compensation or compensation
payable in a form other than cash.
1.4 BENEFICIARY shall mean the person or persons or entity designated as
such in accordance with Article 9 of the Plan.
1.5 BONUS shall mean an amount awarded to the Participant under any cash
bonus plan or other cash incentive award program maintained by the Company which
the Administrator determines to be eligible for deferral under this Plan.
1.6 CHANGE IN CONTROL 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 Company, by any
<PAGE>
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934) (an "Acquiror") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934) of 25% or more of the combined voting power of the then outstanding
shares of Common Stock and other stock of the Company 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"), 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 Company or any of its Subsidiaries,
or any employee benefit plan (or related trust) of the Company 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 Common Stock
and other voting securities of the Company immediately before the acquisition in
substantially the same proportion as their ownership, immediately before the
acquisition, of the then-outstanding shares of Common Stock of the Company and
of the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors.
(2) individuals who, as of the date hereof, constitute the Board of
Directors (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 Company, 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
Company (as such term is used in Rule 14a-11 of Regulation 14A promulgated under
the Securities Exchange Act of 1934); or
(3) approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation of the Company, 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 and voting securities of the
Company immediately before the reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entity to vote generally in the election of directors of the
corporation or other entitle resulting from the reorganization, merger or
consolidation, or (ii) a complete liquidation or dissolution of the Company, or
(iii) the sale or other disposition of all or substantially all of the assets of
the Company.
1.7 COMPANY shall mean Catellus Development Corporation, a Delaware
corporation, and its successors and assigns.
<PAGE>
1.8 COMPENSATION shall mean the sum of the Participant's Base Salary and
Bonus for a Plan Year.
1.9 DECLARED RATE shall mean an effective annual interest rate determined
from time to time by the Administrator. Unless otherwise determined by the
Administrator, the Declared Rate for any Plan Year shall be equal to the 120
month rolling average rate of ten-year United States Treasury Notes as of August
31 of the preceding calendar year.
1.10 PLAN shall mean this Catellus Development Corporation Deferred
Compensation Plan as set forth herein, as amended from time to time.
1.11 DISABILITY shall have the same meaning as under the Company's long-
term disability plan. If a participant is considered disabled under the
Company's long term disability Plan, he shall be considered disabled under this
Plan.
1.12 EARLY RETIREMENT shall mean termination of employment by a
Participant who has attained age 55 and has completed ten or more Years of
Service.
1.13 EARNINGS ENHANCEMENT shall mean the additional earnings credited to a
Participant's account in accordance with Section 5.2.
1.14 ELIGIBLE EMPLOYEE shall mean an employee of the Company or a
Subsidiary who is determined by the Administrator to be a member of a "select
group of management or highly compensated employees" within the meaning of
Sections 201, 301 and 401 of ERISA, and who is designated by the Administrator
as eligible to participate in the Plan. Until further action is taken by the
Administrator, each Vice President or above of the Company and each Senior Vice
President or above of a Subsidiary shall be eligible to participate in this
Plan. Designations of Eligible Employees by the Administrator need not be
uniform and may be made selectively by the Administrator among the employees of
the Company and its Subsidiaries. No employee will be eligible to participate in
the Plan if the Administrator determines that the employee's eligibility or
participation could violate any applicable provision of Federal or state
securities law.
1.15 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.16 HARDSHIP shall mean a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
a dependent of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant.
1.17 INVESTMENT OPTIONS shall mean the simulated financial investments
(including the Declared Rate) designated by the Administrator from time to time
for purposes of calculating gains or losses to be credited to a Participant's
Accounts.
<PAGE>
1.18 NORMAL RETIREMENT shall mean termination of employment by a
Participant who has attained age 59 1/2.
1.19 PARTICIPANT shall mean an individual who has elected to participate in
the Plan pursuant to Article 2 and who has not received a complete distribution
of his or her Accounts.
1.20 PLAN YEAR shall mean the calendar year except the first Plan Year
shall be March 1 to December 31, 1997.
1.21 SCHEDULED WITHDRAWAL means a lump sum distribution in the year elected
by the Participant for the payment of an Account.
1.22 SETTLEMENT DATE means the date as of which benefits under the Plan are
scheduled to be made or commence.
1.23 SUBSIDIARY shall mean any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly, 50%
or more of the total combined voting power or equity interest represented by all
classes of stock or equity issued by such corporation, partnership, joint
venture or other entity.
1.24 TERMINATION OF EMPLOYMENT shall mean the Participant's employment with
the Company and its Subsidiaries ceases for any reason whatsoever, whether
voluntary or involuntary, other than disability or death. The transfer of
employment between the Company and a Subsidiary, or between Subsidiaries, shall
not be considered to be a termination of employment for purposes of the Plan.
1.25 UNSCHEDULED WITHDRAWAL shall mean a distribution of all or a portion
of the vested amount credited to the Participant's Account as requested by the
Participant pursuant to the provisions of Article 6 of the Plan.
1.26 VALUATION DATE shall mean the date through which earnings or losses
are credited to a Participant's Account(s) for the purpose of calculating the
value of benefit payments under the Plan. With respect to lump sum
distributions, the regular Valuation Date for an Account shall be the last day
of the month in which an event occurs which triggers a distribution from such
Account (e.g., Termination of Employment), or for distributions delayed pursuant
to Section 6.3, the last day of the month prior to distribution. With respect to
installment payments, the regular Valuation Date shall be November 30
immediately preceding the date of the installment payment. The Administrator may
establish, in a uniform and nondiscriminatory manner, one or more interim or
additional valuation dates.
1.27 YEARS OF SERVICE shall mean, unless otherwise determined by the
Administrator for a Participant, the continuous period of time during which an
employment relationship exists between the Company or a Subsidiary and an
employee including the period of time such relationship existed prior to the
time when the employee became a Participant. Notwithstanding
<PAGE>
the foregoing, employment with an entity which is or becomes a Subsidiary shall
be taken into account only during the period of time the entity is a Subsidiary.
ARTICLE 2
Participation
2.1 ELECTION TO PARTICIPATE. An Eligible Employee may elect to
participate in the Plan by filing a completed election form with the
Administrator during the enrollment period designated by the Administrator.
Except as provided herein, a deferral election must be filed with the
Administrator before the first day of the Plan Year in which the Eligible
Employee would earn the Compensation covered by the such election by the
performance of services, and shall be effective as of the first day of such Plan
Year. (For example, an Eligible Employee may complete an election form in 1997
covering Base Salary to be earned and paid in 1998, and covering Bonuses to be
earned in 1998 and payable in 1999). Notwithstanding the foregoing, upon
commencement of the Plan Eligible Employees may elect before December 31, 1996
to defer Bonuses earned in 1996 and payable in 1997. Deferral elections must
be made in accordance with procedures established by the Administrator from time
to time.
2.2 INITIAL YEAR OF PARTICIPATION. Subject to any procedures established
by the Administrator, an Eligible Employee who first becomes eligible to
participate in the Plan during a Plan Year may, no later than 30 days after
becoming an Eligible Employee, elect to participate in the Plan for such Plan
Year and any Plan Year thereafter by filing a completed election form with the
Administrator, and his or her deferral election shall be effective with respect
to Base Salary and Bonus payable after the date of such election.
2.3 MODIFICATION/RENEWAL OF ELECTIONS. A Participant may modify a deferral
election prospectively by filing a new election form during the enrollment
period established by the Administrator, effective as of the first day of the
following Plan Year. A Participant's deferral election shall continue to be
effective for each subsequent Plan Year until the Participant files a new
election during a designated enrollment period. Upon a finding that a
Participant has suffered a Hardship, the Administrator may in its sole
discretion permit the Participant to cease any ongoing deferrals.
2.4 AUTOMATIC CANCELLATION OF ELECTIONS. In the event a Participant ceases
to be an Eligible Employee, the Participant's deferral election shall cease
automatically with respect to any Compensation payable after the date the
Participant ceases to be eligible to participate in the Plan. A Participant's
deferral election shall cease automatically with respect to any Compensation
payable upon the Participant's Termination of Employment or upon the
Participant's death. In addition, if a Participant suffers a Disability during
the period covered by a deferral election and is no longer receiving
Compensation, his or her deferrals shall automatically cease.
2.5 TERMINATION OF PARTICIPATION - TOP HAT STATUS. Notwithstanding any
other provisions of the Plan to the contrary, if the Administrator determines
that any Participant may
<PAGE>
not qualify as a "management or highly compensated employee" within the meaning
of ERISA or regulations thereunder, such Participant shall cease to be eligible
to participate in the Plan. Upon such determination, the Administrator shall
cause an immediate lump sum distribution of the Participant's Accounts, provided
that the Administrator retains the right to pay out benefits over a two-year
period with 50% as an immediate distribution and the remainder to be paid no
later than the anniversary of the initial payment. Upon complete distribution of
such Participant's Accounts no benefit shall thereafter be payable under the
Plan either to the Participant or any Beneficiary of the Participant, and all of
the Participant's elections as to the time and manner of payment of his or her
Accounts shall be deemed to be canceled.
ARTICLE 3
PARTICIPANT DEFERRALS
3.1 AMOUNT OF DEFERRAL. A Participant's deferral election shall designate
a specified percentage of Base Salary and/or a specified percentage of Bonus to
be deferred in accordance with the Plan. With respect to Bonus deferrals, a
Participant's deferral election may designate a percentage of Bonus in excess of
a specified dollar amount. The designated percentage must be expressed as a
whole percentage.
3.2 MINIMUM DEFERRAL. All deferral elections shall be subject to any
minimum percentage or dollar amount established by the Administrator. Until
further action by the Administrator, the minimum deferral is 5% or $5,000
(whichever is greater) of the Participant's Base Salary and/or 5% or 5% over a
specified amount of the Participant's Bonus.
3.3 MAXIMUM DEFERRAL. All deferral elections shall be subject to any
maximum percentage or dollar amount established by the Administrator. Until
further action by the Administrator, a deferral with respect to Base Salary for
a Plan Year may not exceed 25% of the Participant's Base Salary, and may not
cause the non-deferred portion of the Participant's Base Salary to be less than
$100,000. A deferral election with respect to Bonus for a Plan Year may not
exceed 100% of the Participant's Bonus, less applicable withholding.
3.4 OTHER REQUIRED INFORMATION. An Eligible Employee's election shall
specify whether the deferred compensation shall be credited to an Account for
distribution at Termination of Employment and/or to an account for a Scheduled
Withdrawal, and such allocation between Accounts may not be changed except for
future deferrals. With respect to any Scheduled Withdrawal, the election shall
designate the Scheduled Withdrawal distribution year (subject to the limits set
forth in Article 6). Each election shall specify the form of benefit
distribution, and any other information or elections required by the
Administrator from time to time.
3.5 VESTING. The Participant's right to receive the portion of his or her
Accounts attributable to Compensation deferred under this Article 3, and
earnings thereon, shall be 100% vested at all times. A Participant shall not
have any vested interest in the Earnings Enhancement
<PAGE>
provided in Article 5 until the Valuation Date as of which the Earnings
Enhancement is actually credited to his or her Account.
ARTICLE 4
DEFERRAL ACCOUNTS
4.1 ESTABLISHMENT OF ACCOUNTS. Solely for record keeping purposes, the
Company shall establish on its books such Accounts for each Participant who
defers Compensation under the Plan as the Administrator considers appropriate.
Such accounts shall be credited with the deferrals made by the Participant and
credited (or charged, as the case may be) with the hypothetical investment gains
or losses determined pursuant to Article 5. The Administrator may also establish
one or more subaccounts within a Participant's Accounts to the extent the
Administrator determines it to be necessary or desirable for the administration
of the Plan. The Administrator is not required to physically segregate any
assets with respect to the Accounts under this Plan from any other assets of the
Company and may commingle any such assets with any other moneys, securities and
properties of any kind of the Company. Establishment of separate bookkeeping
Accounts or records for the respective Participants' benefit under the Plan
shall not be considered as creating a lien of any nature whatsoever on or as
segregating any of the assets with respect to the Accounts under this Plan from
any other funds or property of the Company.
4.2 CREDITING OF DEFERRALS. The Company shall credit to a Participant's
Accounts the Participant's deferrals under the Plan as of the same day of the
month in which the Compensation would have been paid to the Participant but for
the deferral.
4.3 BOOKKEEPING ACCOUNTS. The Accounts are solely an accounting device for
measuring the benefits that may become payable to a Participant under this Plan.
Participants and Beneficiaries shall at all times be general unsecured creditors
of the Company for the payment of benefits, with no special or prior right to
any fund, trust, account, insurance contract or other asset of the Company or
any Subsidiary for payment of any obligations hereunder.
4.4 STATEMENT OF ACCOUNTS. The Administrator shall provide periodically to
each Participant a statement setting forth the balance of the Account(s)
maintained for such Participant.
4.5 GENERAL CREDITING. The Company shall credit income, gains and losses
to the Accounts as of each Valuation Date in accordance with the Investment
Options selected by the Participant or Beneficiary, taking into account any fees
or charges which would have been incurred if the Accounts actually had been
invested in the Investment Options and subject to any applicable administrative
charges determined or approved by the Administrator with respect to the
Investment Options. Unless otherwise determined by the Administrator, earnings
with respect to the Declared Rate will be credited to Accounts daily and
compounded annually, and earnings and losses with respect to each other
Investment Option will be credited and compounded daily.
<PAGE>
ARTICLE 5
HYPOTHETICAL INVESTMENTS
5.1 INVESTMENT DIRECTIONS. Amounts credited to a Participant's Accounts
shall be credited or charged with income, gains and losses as if such Accounts
were invested in accordance with the investment directions provided by the
Participant, based on the hypothetical Investment Options adopted by the
Administrator from time to time. Each Participant shall make his or her
investment election concurrently with the deferral election. The available
Investment Options, and the rules and procedures for allocating the Accounts
among such options (including the frequency of changes to such allocations both
before and after retirement), shall be determined by the Administrator from time
to time. Neither the Administrator, the Company, the Board of Directors of the
Company, and member of the Board nor any agent, employee or advisor of any of
such persons or entities shall be liable for the performance or lack of
performance of any Investment Option.
5.2 EARNINGS ENHANCEMENT. A Participant who (i) has completed 10 or more
Years of Service, or (ii) terminates for Normal Retirement on or after age 59
1/2 regardless of the Participant's Years of Service, shall be eligible to have
a one-time Company contribution credited to his or her Account in accordance
with this Section (the "Earnings Enhancement"). The Earnings Enhancement shall
be determined separately for each Account of an eligible Participant, and shall
be equal to 25% of the "aggregate earnings" (as hereinafter defined) with
respect to such Account. For purposes of this Section, "aggregate earnings"
means the amount by which the total balance of the Account exceeds the
Participant's cumulative deferrals that have been allocated to such Account
(taking into account earnings and losses allocated to such Account from the date
the Participant began participation in the Plan), as determined by the
Administrator in a uniform and nondiscriminatory manner. The Earnings
Enhancement with respect to an Account shall be credited only once, without
compounding, as of the Valuation Date immediately preceding the date on which
distribution of the Account will be made or commence. In the event an Account is
distributed in installments, the one-time Earnings Enhancement credited to such
Account will be subject to adjustment thereafter for income, gains and losses in
the same manner as applies to the Account in general. Prior to the date that the
Earnings Enhancement is credited to a Participant's Account, the Administrator
may provide information to the Participant with respect to the estimated
Earnings Enhancement that would be applied if the Participant were eligible for
the Earnings Enhancement and if the Earnings Enhancement were calculated on the
basis of the Participant's Account balance at that time, but no Participant
shall have any vested right with respect to such estimated amount, nor shall the
estimated amount constitute part of the Participant's Account balance. If the
balance of a Participant's Account as of the applicable Valuation Date is less
than the Participant's cumulative deferrals allocated to such Account, no
Earnings Enhancement shall be credited to such Participant with respect to such
Account.
5.3 INVESTMENT AFTER PARTICIPANT'S DEATH. Upon a Participant's death, and
for all periods of time thereafter until distribution to the Participant's
Beneficiary, the entire balance of the Participant's Accounts shall be deemed to
be invested in the Declared Rate option.
<PAGE>
ARTICLE 6
DISTRIBUTION OF BENEFITS
6.1 COMMENCEMENT - GENERAL RULE. Except as otherwise provided in this
Article, a Participant shall be entitled to receive a distribution of his or her
Account balance upon the earlier to occur of Termination of Employment or the
Scheduled Withdrawal date elected by the Participant for such Account. The
Settlement Date for distributions other than Scheduled Withdrawals shall be the
January following Termination of Employment or death, or within 60 days
following Termination of Employment or death if so elected at the time of the
deferral election. With respect to Scheduled Withdrawals, the Settlement Date
shall be the date specified by the Participant at the time of the deferral
election, or as soon thereafter as administratively practicable.
Notwithstanding the foregoing, the Administrator may defer commencement of the
payment of benefits for one year if it determines, in its sole discretion, that
the Company would lose the tax deduction for Compensation paid to Participant
under Internal Revenue Code section 162(m) for payment of the benefit if the
benefit were paid earlier.
6.2 VALUATION OF ACCOUNTS. For purposes of all distributions under the
Plan, the balance of a Participant's Account will be determined as of the
Valuation Date immediately preceding the date of distribution.
6.3 DEFERRED COMMENCEMENT. For Early Retirement or Normal Retirement
only, a Participant may elect to defer commencement of any Account that is not
subject to a Scheduled Withdrawal election for one or more years from the
January following retirement, but no later than the January following the
Participant attaining age 70, and the deferred Settlement Date shall be the date
so elected by the Participant or as soon thereafter as administratively
practicable. To be effective, a written election for deferred commencement (or
a written election to modify a previously elected deferred commencement
election) must be received by the Company at initial enrollment into the Plan or
at least 13 months prior to the Participant's Termination of Employment. The
Administrator, in its sole discretion, may disregard any change in the
commencement date elected by the Participant if it determines that the attempted
change may cause the Account benefit to become taxable to the Participant prior
to actual receipt of the benefit payments.
6.4 FORM OF PAYMENT - RETIREMENT BENEFITS. Upon Early or Normal Retirement
or Termination of Employment with at least 10 Years of Service, the Company
shall pay the balance of any Account that is not subject to a Scheduled
Withdrawal election in a lump sum or in annual installments over 5, 10, 15 or 20
years, as elected by the Participant in his or her election form. The amount of
the annual installments shall be redetermined effective as of November 30 of
each year based on the remaining Account balance, divided by the remaining
number of annual payments. Absent an election by the Participant, the benefit
shall be paid in annual installments over 15 years.
6.5 ELECTION/MODIFICATION OF FORM OF PAYMENT. A Participant's election
with respect to the form of payment shall be as indicated on the election form
on which the Participant
<PAGE>
first elected deferrals to such Account, unless the Participant elects a
different form of benefit by a written election filed with the Administrator at
least 13 months prior to Early or Normal Retirement or Termination, in which
case the different form elected shall control. A Participant whose benefit has
commenced may convert installment payments to a lump sum distribution subject to
a penalty, which shall be forfeited to the Company, equal to ten percent (10%)
of the distribution amount. The penalty shall be 5% for the 24 month period
following a Change in Control. Except as provided in this Section, after benefit
payments have commenced a Participant may not change the period of time for
which benefits are payable. The Administrator, in its sole discretion, may
disregard any change in the form of payment elected by the Participant if the
Administrator determines that the attempted change may cause the Account benefit
to become taxable to the Participant prior to actual receipt of the benefit
payments.
6.6 SCHEDULED WITHDRAWALS. The provisions of this Section apply to any
Account with respect to which a Participant elects a Scheduled Withdrawal date
on the election form creating such Account. The election of a Scheduled
Withdrawal, and the date specified for such withdrawal, shall be irrevocable.
Once the specified distribution for a Scheduled Withdrawal has been paid out,
the Participant shall have the option of designating a Scheduled Withdrawal
applicable to deferrals credited in subsequent Plan Years. At the time deferrals
commence into an Account designated for Scheduled Withdrawal, the scheduled
distribution date must be at least two years after the first deferral into the
Account. Payment of Scheduled Withdrawals shall be made in a lump sum in April
of the year elected by the Participant. Upon a Participant's Termination of
Employment, any Account designated for Scheduled Withdrawal shall be paid out in
a lump sum within 90 days.
6.7 DISABILITY. If the Participant is receiving disability benefits under
the Company's long-term disability program, deferrals under the Plan shall cease
and any Account shall be paid out to the Participant in the form the Participant
elected for Termination of Employment with ten Years of Service with the Company
and shall commence the January following the Participant attaining age 59 1/2.
Any Account for which a Scheduled Withdrawal date has been elected shall be paid
out at the Scheduled Withdrawal date elected by the Participant or in a lump sum
the January following Participant attaining age 59 1/2, whichever is earlier.
Notwithstanding the above, the Participant may petition the Administrator for an
earlier distribution under the financial Hardship provisions.
6.8 TERMINATION OF EMPLOYMENT BEFORE 10 YEARS. Upon a Participant's
Termination of Employment with less than 10 Years of Service for reasons other
than Normal Retirement, the Participant's Account balances shall be paid out at
the Company's discretion either (i) in a lump sum within 90 days after the last
day of the month in which the termination occurred or (ii) annually over a
period of time not to exceed three years.
6.9 HARDSHIP DISTRIBUTION. Upon a finding that the Participant or the
Beneficiary has suffered a financial Hardship, the Administrator may in its sole
discretion permit the Participant to cease any on-going deferrals and accelerate
distribution of benefits under the Plan in the amount reasonably necessary to
alleviate such financial Hardship. If a distribution is to be made to a
Participant for a financial Hardship, deferrals shall cease and the Participant
shall not be permitted
<PAGE>
to participate in the Plan until the next enrollment following one full year
from the date of the Hardship distribution.
6.10 UNSCHEDULED WITHDRAWALS. A Participant (or Beneficiary) may request
an unscheduled withdrawal of all or any portion of the entire amount credited to
any or all of the Participant's Accounts subject to the following restrictions:
(i) the minimum withdrawal shall be 25% of the balance of the specified Account,
(ii) an election to withdraw 75% or more of the Account balance shall be deemed
to be an election to withdraw the entire Account balance, (iii) an unscheduled
withdrawal may be made only once a year, and (iv) the Company shall deduct (and
retain) from the withdrawal a forfeiture amount of 10% of the amount withdrawn.
In addition, if the Participant is employed by the Company at the time of the
withdrawal, (i) deferrals for the year in which the election for an unscheduled
withdrawal is made shall cease, and (ii) the Participant shall not be permitted
to participate in the Plan until the next enrollment following one full year
from the date of the withdrawal. If the Participant's election for an
unscheduled withdrawal occurs within two years after a Change in Control, the
provisions under this Section shall apply, except that the forfeiture amount
shall be reduced to 5% of the amount withdrawn.
6.11 SURVIVOR BENEFITS. If the Participant dies prior to Termination of
Employment and before benefits commence, the Company shall pay to the
Participant's Beneficiary a survivor benefit equal to the balance of the
Participant's Accounts. The Company shall pay such amount to the Beneficiary in
a cash lump sum. If a Participant dies while receiving installment payments, the
remaining installment payments not yet paid to the Participant shall be paid to
the Participant's Beneficiary over the same period of time such payments would
have been paid to the Participant. If a Participant dies after Termination of
Employment but before benefit payments have commenced, the Company shall pay the
Participant's beneficiary the balance of the Participant's Accounts commencing
at the same time and paid over the same period of time such benefits would have
been paid to the Participant.
6.12 SMALL BENEFIT EXCEPTION. Notwithstanding any of the foregoing, if
any Account that has a balance remaining which is less than $50,000, the
Administrator may, in its sole discretion, elect to pay such Account balance in
a single lump sum. If the annual payments are less than $5,000 each, the
Administrator may, in its sole discretion, elect to shorten the benefit payment
period in five year increments.
ARTICLE 7
CONDITIONS RELATED TO BENEFITS
7.1 NONASSIGNABILITY. The benefits provided under the Plan may not be
alienated, assigned, transferred, pledged or hypothecated by or to any person
or entity, at any time or any manner whatsoever. These benefits shall be exempt
from the claims of creditors of any Participant or other claimants and from all
orders, decrees, levies, garnishment or executions against any Participant to
the fullest extent allowed by law.
<PAGE>
7.2 NO RIGHT TO COMPANY ASSETS. The benefits paid under the Plan shall be
paid from the general funds of the Company or any Subsidiary that employed the
Participant, and nothing contained in the Plan shall require the Company or any
Subsidiary to set aside or hold in trust any funds for the benefit of a
Participant or Beneficiary, who shall be no more than general unsecured
creditors of the Company with no special or prior right to any fund, trust,
account, insurance contract or other asset of the Company or any Subsidiary for
payment of any obligations hereunder. Notwithstanding the foregoing provisions
of this Section, the Company may, in its discretion, establish one or more
grantor trusts for the purpose of providing for payment of benefits under the
Plan. Such trust or trusts may be irrevocable, but the assets thereof shall be
subject to the claims of the Company's creditors. Benefits paid to the
Participant from any such trust shall be considered paid by the Company for
purposes of meeting the obligations of the Company under the Plan.
7.3 OBLIGATIONS OF PARTICIPANTS. Each Participant shall cooperate with the
Company by furnishing any and all information requested by the Administrator for
purposes of complying with applicable laws (including applicable Federal and
state securities laws) or facilitating administration of the Plan. In the event
the Company elects to purchase one or more insurance policies insuring the life
of any Eligible Employee in connection with payment of the Company's obligations
hereunder, the Eligible Employee shall be required, as a condition to
participation in the Plan, to cooperate in any underwriting process required by
the insurer with respect to such policies, including without limitation the
requirement of a medical examination.
7.4 WITHHOLDING. The Participant or the Beneficiary shall make
appropriate arrangements with the Company for satisfaction of any federal, state
or local income tax withholding requirements and Social Security or other
employee tax requirements applicable to benefits provided under the Plan. If no
other arrangements are made, the Company may provide, at is discretion, for such
withholding and tax payments as may be required from a Participant's non-
deferred compensation.
ARTICLE 8
ADMINISTRATION OF PLAN
The general administration of the plan and the responsibility for carrying
out its provisions shall be vested in the Administrator. The Administrator
shall have the sole and absolute authority and discretion to administer the
Plan, including without limitation the authority and discretion to (i) interpret
the Plan and correct any defect, supply any omission or reconcile any
inconsistency or ambiguity in the Plan in the manner and to the extent that the
Administrator deems desirable to carry out the purpose of the Plan, (ii) resolve
all questions relating to the eligibility of individuals to become Participants
or Eligible Employees, (iii) determine the amount of benefits payable to
Participants and authorize and direct the Company with respect to the payment of
benefits under the Plan, (iv) make all other determinations and resolve all
questions of fact necessary or advisable for the administration of the Plan, and
(v) make, amend and rescind such rules as it deems necessary for the proper
administration of the Plan.
<PAGE>
Any action taken or determination made by the Administrator shall, except
as otherwise provided in Article 10, be conclusive on all parties. No member of
the Administrator shall vote on any matter relating specifically to such member.
In the event that a majority of the members of the Administrator shall be
specifically affected by any action proposed to be taken (as opposed to being
affected in the same manner as each other Participant in the Plan), such action
shall be taken by the Board of Directors of the Company.
ARTICLE 9
BENEFICIARY DESIGNATION
The Participant shall have the right, at any time, to designate any person
or persons as Beneficiary (both primary and contingent) to whom payment under
the Plan shall be made in the event of the Participant's death. The Beneficiary
designation shall be effective when it is submitted in writing to the
Administrator during the Participant's lifetime on a form prescribed by the
Administrator. The submissions of a new Beneficiary designation shall cancel
all prior Beneficiary designations.
If a Participant fails to designate a Beneficiary as provided above, or if
the Beneficiary designation is revoked by divorce, or otherwise without
execution of a new designation, or if every person designated as Beneficiary
predeceases the Participant or dies prior to complete distribution of the
Participant's benefits, then the Administrator shall direct the distribution of
such benefits to the Participant's estate.
ARTICLE 10
CLAIMS AND REVIEW PROCEDURES
10.1 CLAIMS PROCEDURE. If a participant does not receive the benefits
which the Participant believes he or she is entitled to receive under the Plan,
the Participant may file a claim for benefits with the Administrator or a person
designated by the Administrator, which person shall be a named fiduciary under
Section 402(a)(2) of ERISA for purposes of this Section. All claims shall be
made in writing and shall be signed by the claimant. The Administrator or its
designee shall notify a Participant in writing, within 90 days after his or her
written application for benefits, of his or her eligibility or noneligibility
for benefits under the Plan. If the Plan Administrator or its designee denies a
claim for benefits in whole or in part, the written notice shall set forth, in a
manner calculated to be understood by the claimant, (i) the specific reasons for
such denial, (ii) a specific reference to the provisions of the Plan on which
the denial is based, (iii) a description of any additional information or
material necessary for the claimant to perfect his or her claim, and a
description of why it is needed, and (iv) an explanation of the Plan's claims
review procedure and other appropriate information as to the steps to be taken
if the Participant wishes to have the claim reviewed. If the Plan Administrator
or its designee determines that there are special circumstances requiring
additional time to make a decision, the Plan Administrator or its
<PAGE>
designee shall notify the Participant of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 90 period.
10.2 REVIEW PROCEDURE. A claimant may appeal a denial of his or her claim
by requesting a review of the decision by the Administrator or a person
designated by the Administrator, which person shall be a named fiduciary under
Section 402(a)(2) of ERISA for purposes of this Section. An appeal must be
submitted in writing within six months after the denial and must (i) request a
review of the claim for benefits under the Plan, (ii) set forth all of the
grounds upon which the claimant's request for review is based and any facts in
support thereof, and (iii) set forth any issues or comments which the claimant
deems pertinent to the appeal. The Administrator or the named fiduciary
designated by the Administrator shall make a full and fair review of each appeal
and any written materials submitted in connection with the appeal. The
Administrator or the named fiduciary designated by the Administrator shall act
upon each appeal within 60 days after receipt thereof unless special
circumstances require an extension of the time for processing, in which case a
decision shall be rendered as soon as possible but not later than 120 days after
the appeal is received. The claimant shall be given the opportunity to review
pertinent documents or materials upon submission of a written request to the
Administrator or other named fiduciary, provided the Administrator or named
fiduciary finds the requested documents or materials are pertinent to the
appeal. On the basis of its review, the Administrator or other named fiduciary
shall make an independent determination of the claimant's eligibility for
benefits under the Plan. The decision of the Administrator or other named
fiduciary on any claim for benefits shall be final and conclusive upon all
parties thereto. In the event the Administrator or other named fiduciary denies
an appeal in whole or in part, it shall give written notice of the decision to
the claimant, which notice shall set forth in a manner calculated to be
understood by the claimant the specific reasons for such denial and which shall
make specific reference to the pertinent Plan provisions on which the decision
was based. In the event of the death of a Participant, the procedures set forth
in this Article shall apply to the Participant's Beneficiaries.
ARTICLE 11
AMENDMENT AND TERMINATION OF PLAN
11.1 AMENDMENT. The Company may at any time amend the Plan in whole or in
part, provided, however, that such amendment (i) shall not decrease the balance
of the Participant's Accounts at the time of such amendment and (ii) shall not
retroactively decrease the applicable earnings factors or hypothetical
investment performance of the Plan prior to the time of such amendment. The
Company may amend the Investment Options or other earnings or contribution
factors of the Plan prospectively, in which case the Company shall notify the
Participant of such amendment in writing within 30 days after such amendment.
11.2 TERMINATION. The Company may at any time terminate the Plan. If the
Company terminates the Plan, the date of such termination shall be treated as
the date of Termination of Employment for the purpose of calculating Plan
benefits, and the Company shall pay to the Participant the benefits the
Participant is entitled to receive under the Plan as annual installments
<PAGE>
over a three-year period commencing within 90 days. Notwithstanding the
foregoing, the Company reserves the right to accelerate payments at its
discretion.
11.3 CHANGE IN CONTROL. Notwithstanding the foregoing, the Company may
not amend or terminate the Plan for two entire Plan Years following the end of
the Plan Year in which a Change in Control occurs unless the Company receives
the written consent of (i) a majority in number of the Participants, and (ii)
Participants whose Accounts represent a majority of the Account balances under
the Plan. In addition, following a Change in Control no amendment to the Plan
may change the timing or form of benefit payment which had been elected by a
Participant who terminated employment with the Company prior to the Change in
Control. The limitation contained in the foregoing sentence shall not prevent
the Administrator from making any distribution that the Administrator determines
is required or permitted by the provisions of Section 11.4 (constructive
receipt) or Sections 2.5 or 11.5 (relating to status of Participant or the Plan
under ERISA top hat requirements).
11.4 CONSTRUCTIVE RECEIPT DISTRIBUTIONS. In the event that Administrator
determines that any amounts deferred under the Plan have been constructively
received by Participants and must be recognized as income for federal income tax
purposes before such amounts would otherwise be paid hereunder, such amounts
shall be distributed to Participants as may be determined by the Administrator.
The determination of the Administrator under this Section shall be binding and
conclusive.
11.5 TOP HAT STATUS. The Plan is intended to provide benefits for a
select group of management or highly compensated employees within the meaning of
Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the
provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan shall
terminate and no further benefits shall accrue hereunder in the event it is
determined by a court of competent jurisdiction or by an opinion of counsel to
the Company that the Plan constitutes an employee pension benefit plan within
the meaning of Section 3(2) of ERISA which is not exempt from the provisions of
Parts 2, 3 and 4 of Title I of ERISA. In addition, in the absolute discretion
of the Administrator, the benefit of each Participant accrued under the Plan on
the date of termination shall be paid immediately to such Participant in a
single lump sum cash payment.
ARTICLE 12
MISCELLANEOUS
12.1 SUCCESSORS OF THE COMPANY. The rights and obligations of the Company
under the Plan shall inure to the benefit of, and shall be binding upon, the
successors and assigns of the Company.
12.2 EMPLOYMENT NOT GUARANTEED. Nothing contained in the Plan nor any
action taken hereunder shall be construed as a contract of employment or as
giving any Participant any right to continued employment with the Company.
<PAGE>
12.3 GENDER, SINGULAR AND PLURAL. All pronouns and variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
12.4 CAPTIONS. The captions of the articles and paragraphs of the Plan
are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
12.5 VALIDITY. If any provision of the Plan is held to be invalid, void
or unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provisions of the Plan.
12.6 WAIVER OF BREACH. The waiver by the Company of any breach of any
provision of the Plan by the Participant shall not operate or be construed as a
waiver of any subsequent breach by the Participant.
12.7 NOTICE. Any notice or filing required or permitted to be given to
the Company under the Plan shall be sufficient if in writing and hand-delivered,
or sent by first class mail to the principal office of the Company, directed to
the attention of the Administrator. Such notice shall be deemed given as of the
date of delivery, or, if delivery is made by mail, as of the date shown on the
postmark.
12.8 GOVERNING LAW. THE PLAN SHALL BE CONSTRUED AND GOVERNED IN ALL
RESPECTS IN ACCORDANCE WITH APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT
PREEMPTED BY SUCH FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
CATELLUS DEVELOPMENT CORPORATION
By:
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES AND JOINT VENTURES OF CATELLUS DEVELOPMENT CORPORATION
<TABLE>
<CAPTION>
ENTITY PERCENTAGE OWNED BY CATELLUS JURISDICTION OF ENTITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Santa Fe Towers Land Company 100% California
- ------------------------------------------------------------------------------------------------------------------------------------
Torrance Investment Company 66.66%(1) California
- ------------------------------------------------------------------------------------------------------------------------------------
Seabridge Properties, Inc. 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
JMB/Santa Fe Bayfront Venture 50%(2) California
- ------------------------------------------------------------------------------------------------------------------------------------
Harbor Drive Company 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Market Investment Company 50%(3) California
- ------------------------------------------------------------------------------------------------------------------------------------
New Orleans International Hotel 14.15%(18) Louisiana
- ------------------------------------------------------------------------------------------------------------------------------------
New Orleans Rivercenter (12) Louisiana
- ------------------------------------------------------------------------------------------------------------------------------------
International Rivercenter 25.16% Louisiana
- ------------------------------------------------------------------------------------------------------------------------------------
SF Pacific Properties Inc. 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Golden Empire Investment Corporation 100%(4) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Sequoia Pacific Realco 95.33%(5) California
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Design Center 75%(6) California
- ------------------------------------------------------------------------------------------------------------------------------------
Design Properties, Inc. (21) California
- ------------------------------------------------------------------------------------------------------------------------------------
Design Center Services 75%(6) California
- ------------------------------------------------------------------------------------------------------------------------------------
The South Portal Company (7) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
ANT, LLC (8) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Management Corporation 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Collinsville Property Corporation 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Construction Corporation 100%(9) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Union Station, Inc. 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Union Station Partners 50%(10) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Group, Inc. 100% California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Design Center, Inc. 100%(13) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Communities, Inc. 100%(13) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Homes Corp. I 100%(13) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Westchester, L.L.C. 50%(15) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Akins-Seyen General Partnership 50%(14) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Vista Ladera L.L.C. 50%(15) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Ridgemoor, Inc. 100%(13) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Marbella, Inc. 100%(13) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Ridgemoor Homes, Inc. 100%(13) California
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Ocean Ridge, Inc. 100%(13) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Construction, Inc. 100%(13) Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
CRG-CDI Oxnard LLC 50% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Tustin II LLC 50% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Riding-Catellus Golden Gate LLC 80% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Catellus Residential Financial Services, LP 70% California
- ------------------------------------------------------------------------------------------------------------------------------------
Riding/Catellus LLC 80% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Dallas International Ltd. 25.21%(11) Texas
- ------------------------------------------------------------------------------------------------------------------------------------
Desman Road Partners 37.82% California
- ------------------------------------------------------------------------------------------------------------------------------------
Gilman Property Corporation 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
RVL, Inc. 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
Union Station Venture One Corporation 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
GGF Properties, LLC 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
GGF Holdings, LLC 100% Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) 66.66% partnership interest owned through Santa Fe Towers Land Company.
(2) 50% partnership interest owned through Seabridge Properties, Inc.
(3) 50% partnership interest owned through Harbor Drive Company.
(4) 100% owned through SF Pacific Properties Inc.
(5) Owned by SF Pacific Properties, Inc., through Golden Empire Investment
Corporation which holds a 95.33% partnership interest
(6) Partnership interest owned directly by Sequoia Pacific Realco.
(7) 2.174% owned through SF Pacific Properties, Inc. and also owned through
Sequoia Pacific Realco, L.P., which owns 97.826%
(8) Owned through The South Portal Company, which holds a 100% membership
interest.
(9) California State Contractor License No. 695604; to perform construction
services for a fee.
(10) 50% partnership interest owned through Catellus Union Station, Inc.
(11) Catellus owns 25.21% of capital, 24.19% of profit and loss.
(12) 38.75% owned through Harbor Drive Company. Also owned through New Orleans
International Hotel, which holds a 22.5% interest.
(13) 100% ownership through Catellus Residential Group, Inc.
(14) 50% partnership interest owned through Catellus Residential Group, Inc.,
through Catellus Residential Homes Corp. I.
(15) 50% partnership interest owned through Catellus Residential Group, Inc.,
through Catellus Residential Homes Corp. I, 50% membership interest
owned by Ssangyong
(16) 50% partnership interest owned through Catellus Residential Group, Inc.,
50% membership interest owned by Community Dynamics, Inc.
(17) 50% partnership interest owned through Catellus Residential Group, Inc.,
50% membership interest owned by Ssangyong
(18) Limited partnership interest through Harbor Drive.
(19) 80% membership interest owned through Catellus Residential Group, Inc., 20%
membership interest owned by The Riding Group
(20) 70% partnership interest owned through Catellus Residential Group, Inc.,
30% partnership interest owned by Duxford Financial Services
(21) Owned through Pacific Design Center.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 of the Catellus
Development Corporation Amended and Restated Executive Stock Option Plan and
the Stock Option Agreement (Joseph R. Seiger), the Registration Statement on
Form S-8 of the Catellus Development Corporation Profit Sharing & Savings Plan
& Trust, the Registration Statement on Form S-8 of the Catellus Development
Corporation Long Term Incentive Compensation Plan, Stock Purchase Program,
Incentive Stock Compensation Plan and Stock Option Plan, the Registration
Statement on Form S-8 of the Catellus Development Corporation 1995 Stock
Option Plan and the Registration Statement of 58143, 33-38827, 33-42124,
333-01215 and 333-04293, respectively) of our report dated February 12, 1997,
appearing on page F-2 of this Form 10-K. We also consent to the incorporation
by reference of our report on the Financial Statement Schedules, which appears
on page S-1 of this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
March 31, 1998
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 24, 1998 /s/ Joseph Alibrandi
--------------------
Joseph Alibrandi
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 24, 1998 /s/ Daryl J. Carter
-------------------
Daryl J. Carter
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 24, 1998 /s/ Richard D. Farman
---------------------
Richard D. Farman
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 12, 1998 /s/ Christine Garvey
--------------------
Christine Garvey
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 19, 1998 /s/ William M. Kahane
---------------------
William M. Kahane
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 24, 1998 /s/ Donald J. McNamara
----------------------
Donald J. McNamara
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 9, 1998 /s/ Leslie D. Michelson
-----------------------
Leslie D. Michelson
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 7, 1998 /s/ Nelson C. Rising
--------------------
Nelson C. Rising
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 16, 1998 /s/ Jacqueline R. Slater
------------------------
Jacqueline R. Slater
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 9, 1998 /s/ Thomas M. Steinberg
-----------------------
Thomas M. Steinberg
Director
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes Nelson C. Rising, Stephen P. Wallace and
Paul A. Lockie, or any of them, with full power of substitution, to sign on his
or her behalf, in the capacity stated below, the Annual Report on Form 10-K (the
"10-K") of Catellus Development Corporation and to file the 10-K, together with
exhibits thereto, and any amendment to the 10-K and other documents in
connection therewith, with the Securities and Exchange Commission.
Dated: March 20, 1998 /s/ Beverly Benedict Thomas
---------------------------
Beverly Benedict Thomas
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,294
<SECURITIES> 0
<RECEIVABLES> 52,733
<ALLOWANCES> 2,121
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,358,807
<DEPRECIATION> 235,832
<TOTAL-ASSETS> 1,241,019
<CURRENT-LIABILITIES> 0
<BONDS> 568,699
0
0
<COMMON> 1,065
<OTHER-SE> 450,834
<TOTAL-LIABILITY-AND-EQUITY> 1,241,019
<SALES> 153,341
<TOTAL-REVENUES> 303,415
<CGS> 135,115
<TOTAL-COSTS> 220,843
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 257
<INTEREST-EXPENSE> 39,988
<INCOME-PRETAX> 42,584
<INCOME-TAX> 17,343
<INCOME-CONTINUING> 25,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,241
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
