<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Catellus Development Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF CATELLUS]
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Catellus Development Corporation which will be held at the Bank of America,
Giannini Auditorium, 555 California Street, San Francisco, California on
Thursday, May 28, 1998 at 10:00 A.M. (local time).
At the Annual Meeting, stockholders will be asked to elect eleven directors
and vote on a stockholder proposal. Information about these matters is
contained in the attached Proxy Statement.
The Company's management would appreciate your attendance at the Annual
Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, IT IS
MOST IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly, please sign, date
and return the enclosed proxy card which will indicate your vote upon the
matters to be considered. If you do attend the meeting and desire to vote in
person, you may do so by withdrawing your proxy at that time.
I sincerely hope you will be able to attend the Annual Meeting and look
forward to seeing you on May 28, 1998.
Sincerely,
/s/ Nelson C. Rising
-----------------------------------
Nelson C. Rising
President and Chief Executive Officer
April 13, 1998
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
The Annual Meeting of Stockholders of Catellus Development Corporation (the
"Company") will be held on Thursday, May 28, 1998 at 10:00 A.M. (local time)
at the Bank of America, Giannini Auditorium, 555 California Street, San
Francisco, California for the following purposes:
(1)To elect eleven Directors;
(2)To act upon the stockholder proposal set forth in the attached Proxy
Statement; and
(3)To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on March 30, 1998 will
be entitled to notice of, and to vote at, the Annual Meeting or at any
adjournment thereof. Each stockholder, even though he or she may presently
intend to attend the Annual Meeting, is requested to sign and date the
enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any stockholder present at the Annual Meeting may withdraw his or
her proxy card and vote in person on each matter properly brought before the
Annual Meeting.
Please sign, date, and mail the enclosed proxy card promptly in the enclosed
envelope, so that your shares of stock may be represented at the meeting.
By Order of the Board of Directors,
/s/ Kathleen Smalley
----------------------------
Kathleen Smalley
Secretary
April 13, 1998
San Francisco, California
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished to the stockholders of Catellus
Development Corporation (the "Company") in connection with the solicitation of
proxies for use at the Company's Annual Meeting of Stockholders to be held on
Thursday, May 28, 1998, at 10:00 A.M. (local time) and at any adjournment
thereof. The Annual Meeting of Stockholders will be held at the Bank of
America, Giannini Auditorium, 555 California Street, San Francisco,
California.
This solicitation is being made on behalf of the Board of Directors of the
Company, whose principal executive offices are located at 201 Mission Street,
San Francisco, California 94105, telephone (415) 974-4500. This Proxy
Statement, proxy card, and Notice of Annual Meeting of Stockholders and the
Company's 1997 Annual Report are being mailed to stockholders on or about
April 13, 1998.
The shares represented by any proxy in the enclosed form, if the proxy is
properly executed and is received by the Company before or at the Annual
Meeting, will be voted in accordance with the specifications made on the
proxy. Proxies received by the Company on which no specification has been made
by the stockholder will be voted in favor of the nominees to the Board of
Directors listed in this Proxy Statement and against the stockholder proposal.
Any stockholder may revoke his or her proxy at any time before it is voted
at the Annual Meeting by giving written notice of such revocation to the
Secretary of the Company at the address of the Company indicated above, which
notice may be given by the filing of a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
Stockholders of record at the close of business on March 30, 1998 are
entitled to notice of and to vote at the Annual Meeting. On March 30, 1998,
the issued and outstanding voting securities of the Company consisted of
106,601,235 shares of Common Stock, each of which is entitled to one vote with
respect to the election of directors and on any other matters which may
properly come before the Annual Meeting or any adjournment thereof.
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum for the transaction of any business at the Annual Meeting.
Assuming the presence of a quorum, the election of Directors will require the
affirmative vote of a plurality of the votes cast in person or by proxy at the
Annual Meeting. Assuming the presence of a quorum, the adoption of the
stockholder proposal set forth below will require the affirmative vote of a
majority of the votes cast in person or by proxy at the Annual Meeting.
The inspector of elections appointed by the Company will count all votes
cast in person or by proxy at the Annual Meeting. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining
the presence of a quorum but will not be treated as votes cast for purposes of
determining the approval of any matter submitted for a vote of the
stockholders. If a broker or nominee indicates on its proxy that it does not
have discretionary authority to vote on a particular matter as to certain
shares, those shares will be counted for general quorum purposes but will not
be considered as present and entitled to vote with respect to that matter.
The cost of this proxy solicitation will be borne by the Company. Brokers
and nominees should forward soliciting materials to the beneficial owners of
the stock held of record by such persons. The Company will reimburse such
persons for their reasonable forwarding expenses. In addition to the use of
the mails, proxies may be solicited by Directors, officers and regular
employees of the Company, who will not receive additional compensation
therefor, by personal contact or by telephone or other means of communication.
<PAGE>
ELECTION OF DIRECTORS
Eleven Directors are to be elected to serve until the Company's next Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. The following table presents information regarding each nominee to
be presented by the Board of Directors for election as a Director of the
Company at the Annual Meeting. Each nominee has indicated his or her
willingness to serve if elected, but if any nominee should become unable to
serve, the proxies solicited hereby will be voted for the election of such
other person or persons as the Board of Directors shall select. The
information below concerning each nominee has been furnished to the Company by
such nominee.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME OF NOMINEE BUSINESS EXPERIENCE AGE DIRECTOR
--------------- ------------------- --- ----------
<C> <S> <C> <C>
Joseph F. Alibrandi Mr. Alibrandi has served as a Director of 69 1989
the Company since May 1989. From 1985 to
the present, Mr. Alibrandi has served as
Chairman of Whittaker Corporation, a
diversified company with business
activities in the aerospace and
communications field. From 1974 to 1994
and from 1996 to the present, he has also
served as Chief Executive Officer of
Whittaker Corporation. Mr. Alibrandi is
currently a director of Whittaker
Corporation, Jacobs Engineering Group,
Burlington Northern Santa Fe Corporation,
Bank of America NT & SA, BankAmerica
Corporation, and NewMed Corporation.
Daryl J. Carter Mr. Carter has served as a Director of 42 1995
the Company since May 1995. From 1992 to
the present, Mr. Carter has served as Co-
Chairman of Capri Capital, L.P. (or a
predecessor company), a real estate
investment management company. From 1990
to 1992, he was President of Carter
Property Company, a real estate asset
management company. From 1985 to 1990, he
served as Vice President of Westinghouse
Credit Corporation, a real estate
investment company. Mr. Carter is
currently a director of Acacia Bank.
Richard D. Farman Mr. Farman has served as a Director of 62 1997
the Company since May 1997. He has been
President, Chief Operating Officer and
Director of Pacific Enterprises, an
energy services company, since 1993. From
1989 to 1993, he served as Chairman and
Chief Executive Officer of Southern
California Gas Company, a subsidiary of
Pacific Enterprises. Mr. Farman is
currently a director of Sentinel Group
Funds, Inc. and Union Bank of California.
Christine Garvey Ms. Garvey has served as a Director of 52 1995
the Company since May 1995. From April
1997 to the present, Ms. Garvey has
served as Group Executive Vice President,
Commercial Real Estate Services Group of
Bank of America NT&SA. From 1992 to March
1997, Ms. Garvey served as Executive Vice
President, Corporate Real Estate, Other
Real Estate Owned, Sales and Property
Management of Bank of America NT & SA.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
William M. Kahane Mr. Kahane has served as a Director of the 49 1997
Company since May 1997. From 1992 to the
present, Mr. Kahane has served as Managing
Partner of Milestone Partners Limited, an
investment banking and financial advisory
company, and Chief Investment Officer of
Robert H. Burns Holdings Ltd., a private
investment company. Mr. Kahane is a
director (advisory) of Yue-Sai Kan
Cosmetics, and a director of Robert H.
Burns Holdings Ltd. and Robert H. Burns
Ventures Ltd.
Donald J. McNamara Mr. McNamara has served as a Director of 45 1997
the Company since May 1997. From 1988 to
the present, Mr. McNamara has served as the
Chairman of The Hampstead Group, an
investment company founded by Mr. McNamara.
He is also Chairman of Bristol Hotel
Company and various private enterprises.
Leslie D. Michelson Mr. Michelson has served as a Director of 47 1997
the Company since May 1997. From 1988 to
the present, Mr. Michelson has served as
Chairman and Chief Executive Officer of
Value Health Sciences, Inc., an applied
health services research firm. He is also a
director of G&L Realty, Inc.
Nelson C. Rising Mr. Rising has served as President and 56 1994
Chief Executive Officer and a Director of
the Company since September 1994. From 1984
to September 1994, Mr. Rising was a Senior
Partner with Maguire Thomas Partners, a Los
Angeles-based commercial developer. He is
currently a Director of the Federal Reserve
Bank of San Francisco.
Jacqueline R. Slater Ms. Slater has served as Chairman of the 45 1993
Board of Directors of the Company since May
1997 and as a Director of the Company since
February 1993. From 1995 to the present,
Ms. Slater has served as Managing Director,
The Chase Manhattan Bank and President,
Chase Commercial Mortgage Securities Corp.
From 1990 to 1995, she was Managing
Director, responsible successively for
commercial real estate restructuring and
REO (real estate owned) sales.
Thomas M. Steinberg Mr. Steinberg has served as a Director of 41 1994
the Company since June 1994. From December
1996 to the present, Mr. Steinberg has
served as President of Tisch Family
Interests. In this capacity, he manages and
supervises investments for members of the
Laurence A. Tisch and Preston R. Tisch
families. From 1991 until 1997, he served
as Managing Director of Tisch Family
Interests.
Beverly Benedict Thomas Ms. Thomas has served as a Director of the 55 1995
Company since May 1995. Ms. Thomas
currently heads her own public affairs
consulting firm, BBT Strategies. From 1995
to 1997, Ms. Thomas served as Vice
President of UT Strategies Inc., a public
affairs firm. From 1991 to 1995, she was
Assistant Treasurer of the State of
California. She is currently a Commissioner
of the Los Angeles City Employees
Retirement System.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES LISTED ABOVE. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED
UNLESS A CONTRARY CHOICE IS INDICATED.
3
<PAGE>
ARRANGEMENTS REGARDING NOMINEES
Under the terms of Mr. Rising's employment agreement with the Company, the
Board of Directors is required, through December 31, 2000, to use its best
efforts to cause Mr. Rising to continue to be elected as a member of the Board
of Directors. See "Employment Agreements--Agreement with Mr. Rising."
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive an annual retainer
fee of $30,000, a fee of $1,250 for each meeting of the Board of Directors
attended, and a fee of $1,000 for each Board committee meeting attended. The
chairman of each committee receives an annual fee of $3,000. Directors are
also reimbursed for their out-of-pocket expenses for each Board or committee
meeting attended.
Pursuant to the Company's Amended and Restated Executive Stock Option Plan
(the "Executive Stock Option Plan"), each of the current non-employee
Directors first elected or appointed to the Board of Directors before the 1996
Annual Meeting of Stockholders received an option to purchase 5,000 shares of
Common Stock upon his or her initial appointment or election to the Board of
Directors. Each such option is exercisable in installments on a cumulative
basis at a rate of 20% each year, commencing on the first anniversary of the
date of grant, and expires on the tenth anniversary of the date of grant. Each
such option has an exercise price of 127.63% of the Fair Market Value (as
defined in the Executive Stock Option Plan) of the Common Stock on the grant
date, which increases by 5%, compounded annually, on each anniversary of the
date of grant, commencing on the sixth anniversary of the grant date.
Pursuant to the Amended and Restated 1996 Performance Award Plan ("1996
Plan"), each non-employee Director who was first elected or appointed to the
Board of Directors after the 1996 Annual Meeting of Stockholders received an
option to purchase 5,000 shares of Common Stock upon his or her election or
appointment. In addition, promptly following the date of each Annual Meeting
of Stockholders, each non-employee Director elected by the stockholders will
receive an automatic grant of an option to purchase 5,000 shares of Common
Stock; provided, however, that no non-employee Director will receive more than
one such automatic grant in any calendar year. Each such option has an
exercise price of 100% of the Fair Market Value (as defined in the 1996 Plan)
of the Common Stock on the grant date and expires on the tenth anniversary of
the date of grant. Each such option becomes exercisable in accordance with a
schedule based upon the achievement of certain price levels for the Common
Stock as follows: if the average price of the Common Stock (calculated on an
average price basis over 30 consecutive trading days) is (a) 125% or more of
the exercise price, then the option shall be exercisable as to 25% of the
option shares; (b) 150% or more of the exercise price, 50% of such shares; (c)
175% or more of the exercise price, 75% of such shares; and (d) 200% or more
of the exercise price, 100% of such shares. Notwithstanding the foregoing,
each such option will vest on the eighth anniversary of the grant date as to
the entire number of shares without regard to the price of the Common Stock.
Pursuant to the 1996 Plan, on or before December 31 of each year, each non-
employee Director may irrevocably elect to defer and receive in Director Stock
Units (as defined below) all or a portion (in increments of 25%, 50%, or 75%)
of the compensation payable to such Director for services on the Board of
Directors, including retainers, fees for services as Chairman of the Board or
a committee chairman (collectively, the "Annual Payments") and meeting fees,
during the next succeeding calendar year. Each Director Stock Unit is a non-
voting unit of measurement which is deemed for bookkeeping purposes to be
equivalent to one share of Common Stock. If a Director elects to defer all or
part of his or her compensation, the Company:
(i) As of the beginning of the year in which the compensation will be earned,
will credit the Director with a number of Director Stock Units determined
by dividing the sum of the Annual Payments deferred by 90% of the Fair
Market Value (as defined in the 1996 Plan) of a share of Common Stock on
the date of the credit, and
(ii) As of the end of the period in which the compensation is earned, will
credit the Director with a number of Director Stock Units determined
by dividing the amount of meeting fees deferred by 90% of the Fair
Market Value (as defined in the 1996 Plan) of a share of Common Stock
on the date of the credit.
4
<PAGE>
The Director Stock Units credited for a calendar year vest proportionately
on a per diem basis and vest fully at the end of that calendar year. If the
Director ceases to be a member of the Board by reason of death or disability
during any calendar year, any unvested Director Stock Units for that year vest
immediately. Upon termination of service or upon the occurrence of an earlier
specified date which is at least three years after the election of deferral,
each Director is entitled to receive a distribution of the vested amount
deferred either in a lump sum or in a specified number of annual installments,
as previously selected by such Director. All distributions will be in an
equivalent whole number of shares of Common Stock.
Ms. Slater was appointed to serve as Chairman of the Board of Directors on
May 29, 1997. In addition to the annual retainer fee and meeting fees
described above, Ms. Slater became eligible to receive compensation for her
services as Chairman at the rate of $50,000 per year, commencing May 29, 1997.
Ms. Slater elected to defer 100% of the cash compensation payable to her as
Chairman and to receive Director Stock Units (as described above).
BOARD OF DIRECTORS MEETINGS
The Board of Directors held nine meetings during the Company's last full
fiscal year. In 1997, each Director attended at least 75% of the aggregate
number of meetings of the Board and of each committee of which such Director
was a member.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee, a Compensation
and Benefits Committee (the "Compensation Committee"), a Compensation Review
Committee (the "Review Committee"), a Finance Committee, and a Board Affairs
Committee. No member of these Committees, other than the Finance Committee,
may be an employee of the Company.
The Audit Committee is presently composed of Mmes. Garvey and Thomas and
Messrs. Alibrandi and Carter. The functions of the Audit Committee are to
recommend to the Board the independent public accountants to be engaged by the
Company, and to review the Company's general policies and procedures with
respect to audits, accounting and financial controls, the scope and results of
the auditing engagement, and the extent to which the Company has implemented
changes suggested by the independent public accountants. The Audit Committee
met five times in 1997. The Audit Committee is chaired by Ms. Garvey.
The Compensation Committee is presently composed of Messrs. Alibrandi,
Carter, Farman, Kahane, and Michelson. The functions of the Compensation
Committee are to make recommendations to the Review Committee with respect to
compensation of the Chief Executive Officer, to recommend to the Review
Committee the compensation of certain members of senior management reporting
directly to the Chief Executive Officer, to exercise general review authority
over compensation levels of all other corporate officers and key management
personnel, to review annually compensation practices and salary administration
procedures, and generally to review and approve changes in existing employee
benefit programs and adopt new programs. The Compensation Committee met nine
times in 1997. Mr. Michelson is the chairman of the Compensation Committee.
The Review Committee is presently composed of Messrs. Alibrandi, Carter,
Farman, Kahane, McNamara, Michelson, and Steinberg, and Mmes. Slater and
Thomas. The function of the Review Committee is to review and act upon
recommendations of the Compensation Committee with respect to the compensation
of the Chief Executive Officer and certain members of senior management
reporting directly to the Chief Executive Officer. The Review Committee was
established on October 29, 1997, but did not meet in 1997. Ms. Slater is the
chairman of the Review Committee.
The Finance Committee is presently composed of Messrs. Kahane, McNamara,
Michelson, Rising, and Steinberg. The function of the Finance Committee is to
review and approve financing arrangements and other transactions or, in cases
involving certain sizes of transactions, to make recommendations to the Board
5
<PAGE>
concerning financing arrangements and other transactions. The Finance
Committee met seven times in 1997. Mr. Kahane is the chairman of the Finance
Committee.
The Board Affairs Committee is presently composed of Mmes. Garvey and Thomas
and Messrs. Farman and Steinberg. The function of the Board Affairs Committee
is to consider matters related to the governance of the Board, including the
nomination of persons for election or re-election to the Board. The Board
Affairs Committee met seven times in 1997. Ms. Thomas is the chairman of the
Board Affairs Committee.
The Board Affairs Committee will consider stockholder suggestions of persons
to be considered as nominees to fill future vacancies on the Board. Such
suggestions should be sent in writing to the Secretary at the Company's
address and must be accompanied by detailed biographical and occupational data
on the prospective nominee, along with the written consent of the prospective
nominee for consideration of his or her name by the Board Affairs Committee.
6
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 31, 1998, information with
respect to the number of outstanding shares of Common Stock of the Company
beneficially owned by each Director of the Company, each nominee for Director,
each of the named executive officers, and all Directors and executive officers
of the Company as a group. Unless otherwise indicated, and except as such
powers may be shared with their spouses under applicable law, the persons
indicated below have sole voting power and investment power with respect to
the shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
(C)
NUMBER OF
(A) SHARES OF
NUMBER OF COMMON STOCK
SHARES OF UNDERLYING
COMMON STOCK (B) UNEXERCISABLE
BENEFICIALLY PERCENT OF OPTIONS AND
BENEFICIAL OWNER OWNED (1) CLASS (2) RIGHTS (3)
- ---------------- ------------ ---------- -------------
<S> <C> <C> <C>
Directors and Nominees
Joseph F. Alibrandi (4)(5)............... 14,723 * 5,002
Daryl J. Carter (4)(6)................... 10,640 * 7,752
Richard D. Farman (4)(7)................. 2,030 * 6,002
Christine Garvey (4)(8).................. 12,339 * 8,002
William M. Kahane (4)(9)................. 1,331 * 5,000
Donald J. McNamara (4)(7)................ 2,030 * 6,002
Leslie D. Michelson (4)(10).............. 1,364 * 6,002
Nelson C. Rising (11).................... 1,105,640 1.0% 900,000
Jacqueline R. Slater (4)(12)............. 17,883 * 7,671
Thomas M. Steinberg (4)(13).............. 40,287 * 7,500
Beverly Benedict Thomas (4)(14).......... 9,874 * 7,500
Named Current Executive Officers
Stephen P. Wallace (15).................. 433,034 * 570,000
Timothy J. Beaudin (16).................. 242,625 * 262,500
Ira Yellin (17).......................... 175,000 * 225,000
Kathleen Smalley (18).................... 19,201 * 131,250
All current Directors and Executive
Officers as a group
(16 persons) (19)....................... 2,106,409 2.0% 2,172,683
</TABLE>
- --------
* Less than one percent.
(1) Reflects shares of Common Stock with respect to which the named
individuals or members of the specified group are deemed to be the
beneficial owners as of the date indicated under rules promulgated by the
Securities and Exchange Commission ("SEC").
(2) Beneficial and percentage ownership are determined in accordance with
applicable SEC rules and do not take into account shares of Common Stock
reported in column (c) above.
(3) Reflects shares of Common Stock with respect to which the rights of the
named individuals or members of the specified group to acquire beneficial
ownership (i.e., through the exercise of an option or other right, the
conversion of a security, the revocation or termination of a trust, or
otherwise) first arise more than sixty days after March 31, 1998. Except
as otherwise noted, column (c) reflects shares of Common Stock that may be
acquired upon the exercise of stock options granted pursuant to the
Executive Stock Option Plan or the 1996 Plan or the vesting of Director
Stock Units credited under the 1996 Plan.
(4) Reported holdings include vested Director Stock Units credited under the
1996 Plan. Directors do not have voting power or investment power pursuant
to the Director Stock Units but bear an economic risk and benefit
equivalent to stock ownership because the Director Stock Units convert on
a one-for-one basis to
7
<PAGE>
Common Stock following termination of service as a Director or upon the
occurrence of an earlier specified date which is at least three years after
the election of deferral. See "Directors' Compensation."
(5) Includes (i) 384 shares of Common Stock beneficially owned by Mr.
Alibrandi, (ii) 4,339 Director Stock Units credited under the 1996 Plan,
(iii) 5,000 shares of Common Stock which may be acquired upon the exercise
of options granted to non-employee Directors in February 1992 pursuant to
the Executive Stock Option Plan, and (iv) 5,000 shares of Common Stock
which may be acquired upon the exercise of options granted to non-employee
Directors in May 1996 pursuant to the 1996 Plan.
(6) Includes (i) 2,640 Director Stock Units credited under the 1996 Plan, (ii)
3,000 shares of Common Stock which may be acquired upon exercise of options
granted to non-employee Directors in March 1995 pursuant to the Executive
Stock Option Plan, and (iii) 5,000 shares of Common Stock which may be
acquired upon exercise of options granted to non-employee Directors in May
1996 pursuant to the 1996 Plan.
(7) Includes 2,030 Director Stock Units credited under the 1996 Plan.
(8) Includes (i) 4,339 Director Stock Units credited under the 1996 Plan, (ii)
3,000 shares of Common Stock which may be acquired upon exercise of options
granted to non-employee Directors in March 1995 pursuant to the Executive
Stock Option Plan, and (iii) 5,000 shares of Common Stock which may be
acquired upon exercise of options granted to non-employee Directors in May
1996 pursuant to the 1996 Plan.
(9) Includes 1,331 Director Stock Units credited under the 1996 Plan.
(10) Includes 1,364 Director Stock Units credited under the 1996 Plan.
(11) Includes (i) 700,000 shares of Common Stock and 150,000 shares of Common
Stock that may be acquired upon exercise of options granted in 1994 and
1995, respectively, pursuant to the Executive Stock Option Plan, (ii)
250,000 shares of Common Stock that may be acquired upon exercise of
options granted in 1996 pursuant to the 1996 Plan, and (iii) 5,640 shares
of Common Stock held for the benefit of Mr. Rising by the Trustee of the
Profit Sharing & Savings Plan and Trust.
(12) Includes (i) 5,650 shares of Common Stock beneficially owned by Ms.
Slater, (ii) 7,483 Director Stock Units credited under the 1996 Plan,
(iii) 1,000 shares of Common Stock that may be acquired upon exercise of
options granted to non-employee Directors in February 1993 pursuant to
the Executive Stock Option Plan, and (iv) 3,750 shares of Common Stock
that may be acquired upon exercise of options granted to non-employee
Directors in May 1996 pursuant to the 1996 Plan.
(13) Includes (i) 4,998 shares of Common Stock beneficially owned by Mr.
Steinberg, (ii) 17,454 shares of Common Stock held by and for a
charitable remainder unitrust of which Mr. Steinberg is the trustee,
(iii) 7,961 shares of Common Stock held in a joint account by Mr.
Steinberg, (iv) 1,874 Director Stock Units credited under the 1996 Plan,
(v) 3,000 shares of Common Stock which may be acquired upon exercise of
options granted to non-employee Directors in June 1994 pursuant to the
Executive Stock Option Plan, and (vi) 5,000 shares of Common Stock which
may be acquired upon exercise of options granted to non-employee
Directors in May 1996 pursuant to the 1996 Plan. Mr. Steinberg disclaims
beneficial ownership of the 17,454 shares of Common Stock held by the
trust and the 7,961 shares of Common Stock held in the joint account.
(14) Includes (i) 1,874 Director Stock Units credited under the 1996 Plan,
(ii) 3,000 shares of Common Stock which may be acquired upon exercise of
options granted to non-employee Directors in March 1995 pursuant to the
Executive Stock Option Plan, and (iii) 5,000 shares of Common Stock which
may be acquired upon exercise of options granted to non-employee
Directors in May 1996 pursuant to the 1996 Plan.
(15) Includes (i) 220,000 shares of Common Stock and 85,000 shares of Common
Stock which may be acquired upon exercise of options granted in 1995 and
1996, respectively, pursuant to the Executive Stock Option Plan, (ii)
125,000 shares of Common Stock which may be acquired upon exercise of
options granted in December 1996 pursuant to the 1996 Plan, and (iii)
3,034 shares of Common Stock held for the benefit of Mr. Wallace by the
Trustee of the Profit Sharing & Savings Plan and Trust.
8
<PAGE>
(16) Includes (i) 100,000 shares of Common Stock and 75,000 shares of Common
Stock which may be acquired upon exercise of options granted in 1995 and
1996, respectively, pursuant to the Executive Stock Option Plan, (ii)
62,500 shares of Common Stock which may be acquired upon exercise of
options granted in December 1996 pursuant to the 1996 Plan, and (iii)
5,125 shares of Common Stock held for the benefit of Mr. Beaudin by the
Trustee of the Profit Sharing & Savings Plan and Trust.
(17) Includes (i) 150,000 shares of Common Stock which may be acquired upon
exercise of options granted in February 1996 pursuant to the Executive
Stock Option Plan, and (ii) 25,000 shares of Common Stock which may be
acquired upon exercise of options granted in December 1996 pursuant to
the 1996 Plan.
(18) Includes (i) 18,750 shares of Common Stock which may be acquired upon
exercise of options granted in January 1997 pursuant to the Executive
Stock Option Plan, and (ii) 451 shares of Common Stock held for the
benefit of Ms. Smalley by the Trustee of the Profit Sharing & Savings
Plan and Trust.
(19) Includes (i) 2,025,500 shares of Common Stock which may be acquired upon
exercise of options granted in 1992, 1993, 1994, 1995, 1996 and 1997
pursuant to the Executive Stock Option Plan and the 1996 Plan, (ii)
29,304 Director Stock Units credited under the 1996 Plan, and (iii)
15,158 shares of Common Stock held by the Trustee of the Profit Sharing &
Savings Plan and Trust.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following are the only persons or entities known to the Company to be
the beneficial owner of more than 5% of the Common Stock. All information
presented is as of March 31, 1998.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS(1)
---------------- ------------------ ----------
<S> <C> <C>
California Public Employees' Retirement
System.................................... 18,782,250 17.6%
Lincoln Plaza, 400 P Street
Sacramento, California 95814
Harris Associates, L.P..................... 10,432,298 9.8%
2 North LaSalle Street, Suite 500
Chicago, Illinois 60602
Cohen & Steers Capital Management, Inc..... 6,495,700 6.1%
757 Third Avenue
New York, New York 10017
</TABLE>
- --------
(1) Beneficial and percentage ownership are determined in accordance with
applicable SEC rules.
Representatives of California Public Employees Retirement Systems
("CalPERS") and its consultants have from time to time attended and
participated in certain discussions occurring at meetings of the Board of
Directors and certain of its committees, have communicated their views on
various agenda items to the Chairman of the Board or committees, and have had
access to management of the Company and to information concerning the Company
and its plans, budgets, strategies, operations and consultants' reports, which
is available to Directors, including project-level information. In addition,
on occasion, CalPERS has offered its advice or the Company has sought the
views of CalPERS concerning certain matters, including policy matters,
executive compensation matters, the assignment of responsibilities among Board
members and the selection of the Board chairman. In 1997, CalPERS also offered
suggestions as to the process of selection of nominees, and the identification
of nominees, for positions as Directors of the Company, and a representative
of CalPERS participated in meetings of a special selection committee of the
Board and prospective candidates for positions as Directors.
REGISTRATION RIGHTS AGREEMENT
The Company, the predecessor in interest of CalPERS, and other parties who
no longer own Registrable Securities (as defined below), were parties to a
Registration Rights Agreement (as amended, the "Registration Rights
Agreement"). CalPERS and the Company executed a letter agreement dated
November 14, 1995, which confirmed that CalPERS is the owner of the
Registrable Securities and is entitled to the benefits of the Registration
Rights Agreement.
Pursuant to the Registration Rights Agreement, CalPERS may require the
Company on up to four occasions to file a registration statement under the
Securities Act so long as such registration covers not less than 20% of the
Registrable Securities held by CalPERS (or a lesser percentage if the
aggregate offering price after subtraction of underwriting discounts and
commissions would exceed $40 million). Pursuant to the Registration Rights
Agreement, the Company shall bear all expenses, other than underwriting
discounts and commissions, incurred in connection with the registrations.
CalPERS completed a registered public offering pursuant to the Registration
Rights Agreement in December 1997 and now may request three such
registrations.
CalPERS also may request that the Company file a registration statement on
Form S-3 (which may be a shelf registration if the Company so consents) if the
aggregate sale price of the registrable securities will be at least $25
million and the Company has not during the preceding twelve-month period
already effected two registrations for CalPERS. In addition, if at any time
the Company proposes to register any Common Stock or other Company securities
under the Securities Act in connection with a public offering of such
securities solely for cash, CalPERS has the right to request that any of its
Registrable Securities be included in such registration
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<PAGE>
statement, subject to certain volume limitations. Registrations pursuant to
the procedures summarized in this paragraph are not counted against CalPERS'
right to require up to three demand registrations in the future.
Under the Registration Rights Agreement, the term "Registrable Securities"
includes 18,513,028 of the 18,782,250 shares of Common Stock currently held by
CalPERS, and any Common Stock issued as a dividend or other distribution in
connection with such shares of Common Stock which are Registrable Securities
and shares of any class of capital stock purchased by CalPERS pursuant to a
private placement if that class of stock is publicly traded at the time
registration is requested. Shares of Common Stock cease to be classified as
Registrable Securities once such shares have been registered under the
Securities Act, distributed pursuant to Rule 144 of the Securities Act, or
otherwise transferred without restriction upon subsequent transfer, or if such
shares cease to be outstanding. The registration rights may be transferred by
CalPERS to a transferee or assignee of Registrable Securities if such
securities remain restricted under the Securities Act and the assignee or
transferee agrees to be bound by the terms of the Registration Rights
Agreement.
Additionally, under the Registration Rights Agreement, CalPERS and the
Company have also agreed to indemnify each other against certain civil
liabilities, including certain liabilities under the Securities Act.
11
<PAGE>
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION/1/
Compensation policy for the Company is set by the Compensation and Benefits
Committee (the "Compensation Committee") and the Compensation Review Committee
(the "Review Committee"). The Compensation Committee reviews and approves
policies of general applicability and makes recommendations to the Review
Committee with respect to the compensation of the Chief Executive Officer and,
based on the recommendations of the Chief Executive Officer, with respect to
certain members of senior management who report directly to the Chief
Executive Officer. The Review Committee reviews and acts upon the
recommendations of the Compensation Committee.
The Compensation and Benefits Committee members are:
Leslie D. Michelson, Chairman
Joseph F. Alibrandi
Daryl J. Carter
Richard D. Farman
William M. Kahane
The Compensation Review Committee members are:
Jacqueline R. Slater, Chairman
Joseph F. Alibrandi
Daryl J. Carter
Richard D. Farman
William M. Kahane
Donald J. McNamara
Leslie D. Michelson
Thomas M. Steinberg
Beverly B. Thomas
The Compensation Committee has retained SCA Consulting, L.L.C., ("SCA") to
undertake a study of compensation practices of comparable real estate
companies. As part of the study, SCA developed a peer group of publicly held
companies comparable to the Company. SCA has, at the request of the
Compensation Committee, considered a composite of companies to reflect the
unusual breadth of the activities of the Company within the real estate
industry and has considered the ability of the Company to attract and retain
outstanding employees in light of their alternative opportunities.
The Compensation Committee has also integrated the Company's compensation
policy with the business plan and goals of the Company. The Compensation
Committee and the Review Committee both believe that the compensation program
of the Company has contributed materially to stockholder value, because it
makes the compensation of key executives substantially dependent on the
accomplishment of the Company's goals, as described further below.
- --------
/1/The Compensation and Benefits Committee Report shall not be deemed to be
incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filings of the Company pursuant to
the Securities Act of 1933 or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates this
Report by reference therein, and shall not be deemed soliciting material or
otherwise deemed filed under either of such Acts.
12
<PAGE>
OVERALL POLICY
The Company's compensation program consists of three components: base
salary, annual cash bonus, and a long-term incentive program of equity
ownership. All employees are eligible for cash bonuses, depending entirely on
performance. Also, to align the interests of employees with those of
stockholders, each new employee is awarded stock options with time-vesting
provisions and, in the case of executives, price-vesting provisions as well.
The Company's compensation program for senior executives also consists of
base salary, cash bonuses, and long-term incentive compensation. The program
is designed to enable the Company to attract, motivate, and retain outstanding
senior executives by providing a fully competitive total compensation package
based on both individual and corporate performance, taking into account both
annual and long-term performance goals, and recognizing individual initiative
and achievements. In the view of the Compensation Committee and the Review
Committee, the program fully satisfied those goals in 1997.
The Compensation Committee and the Review Committee believe that
performance-based annual cash compensation and stock-based long-term
incentives align management's interests with those of stockholders and enhance
value to stockholders. Accordingly, the Company's senior executive
compensation program employs each of these elements in the compensation
package.
ANNUAL COMPENSATION PROGRAM
The annual compensation for senior executives consists of base salary and
cash bonuses.
Base salaries for senior executives are determined by evaluating the
executive's responsibilities and the experience and skills of the individual,
and by reference to the competitive marketplace for executives, including a
comparison to base salaries for comparable positions at comparable businesses.
Base salaries of senior executives of the Company typically fall at or below
the 50th percentile of base salaries of executives with similar
responsibilities at comparable businesses, as identified by SCA. The intention
of the Company's compensation plan is to provide a significant portion of each
senior executive's compensation in the form of cash bonuses and stock options,
in order to place a large part of his or her compensation at risk for
individual and corporate performance. This design, in the opinion of the
Compensation and Review Committees, provides excellent incentives to senior
executives and aligns the interests of management with those of stockholders.
For 1997, the compensation plan for each senior executive permitted a bonus
payment up to a target predetermined for each executive ranging from 120% to
200% of base salary. The amount of the bonus award for each executive other
than the Chief Executive Officer is determined by the Review Committee, based
on the recommendation of the Compensation Committee, which is, in turn, based
on the recommendation of the Chief Executive Officer. The amount of the bonus
award for the Chief Executive Officer is determined by the Review Committee,
based on the recommendation of the Compensation Committee. In each case, the
actual award amount is determined by an evaluation of the performance of the
executive in comparison to predetermined goals. Some of the goals are judged
by objective standards, and some can be achieved based upon the successful
completion of goals which require subjective evaluation. To achieve his or her
maximum bonus potential, the senior executive must achieve results that meet
standards set in connection with the determination of the executive's maximum
bonus potential. For instance, an executive who is eligible for a bonus of
200% of base salary must, to achieve the full bonus, achieve results in excess
of expected performance and add tangible value to the Company beyond that
anticipated in the Company's 1997 Business Plan.
For 1997, the Company's earnings before depreciation and deferred taxes were
$0.62 per share, representing an increase of 82% over 1996, and the price per
share of the Company's common stock increased by 76% over the price per share
at the end of 1996. For the same period, Mr. Rising received $733,163, which
represents 95% of his maximum bonus potential. The bonus award to Mr. Rising
for 1997 was made in recognition of the
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<PAGE>
outstanding results of the Company's operations in 1997, representation of the
Company to the investment community, the development of a strategic plan to
build on the successful turnaround of the Company's results from 1995 through
1996, and the Company's position for the future.
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for the senior executives consists solely of
the use of stock options. All of the senior executives participate in the
long-term incentive program. This component of the Company's compensation plan
was designed in 1995 with the assistance of Towers Perrin, an independent
compensation consulting firm. It, like the cash component of the compensation
program, was designed with the goal of providing a competitive overall
compensation program. Most of the options granted under the long-term
incentive program were granted in 1995 and 1996. The primary purpose of this
component of the compensation plan is to offer an incentive for the
improvement of the long-term performance of the Company and promote growth in
stockholder value. The Compensation Committee has concluded that the grant of
stock options to senior executives with both time- and price-vesting features
aligns management's interests with those of stockholders.
Options may be granted under the stock option program to senior executives
of the Company at the discretion of the Review Committee. The exercise price
for all option shares granted to senior executives is the fair market value on
the date of the grant. (Under the option program, fair market value is deemed
to be the closing price of the Common Stock on the date of grant.)
The stock options granted to senior executives become exercisable only upon
(1) the achievement of a schedule of certain escalating stock price levels for
the Common Stock (the "Price-Vesting Schedule") and (2) the expiration of
various time periods.
The Price-Vesting Schedule for all current and future stock option grants
operates, subject also to the time-vesting requirements, in the following
manner: If the average price of the Common Stock (calculated over 30
consecutive trading days) is (a) 120% or more of the exercise price, then the
option shall be exercisable as to one-fourth of the option shares; (b) 144% or
more of the exercise price, as to an additional one-fourth; (c) 172.8% or more
of the exercise price, as to an additional one-fourth of such shares; and (d)
207.4% or more of the exercise price, as to the remainder of the option
shares. Thus the Price-Vesting Schedule requires for full vesting more than a
doubling of the market value of the stock from the time of grant.
Notwithstanding the fulfillment of the conditions of the Price-Vesting
Schedule, however, no portion of the option may vest before the lapse of
certain time periods, typically one year from the date of grant. Thereafter,
assuming conditions of the Price-Vesting Schedule are met with respect to that
fraction of the options, one-fourth of the option shares will vest on that
date; an additional one-fourth one year later; an additional one-fourth one
year later; and the last one-fourth of the option shares one year later. Even
if the vesting conditions of the Price-Vesting Schedule have not been
fulfilled, in any event, the entire number of option shares will vest after
approximately eight years if the senior executive is still an employee of the
Company at that time.
Of the senior executive officers named in the Summary Compensation Table,
Ms. Smalley received an award of an option in 1997 under this plan for 75,000
shares of stock. Also in connection with performance for 1997, Ms. Smalley
received in 1998 an additional award under this plan of an option for 75,000
shares of stock. No other senior executive received a grant of options in 1997
or in connection with 1997 performance. The other senior executives received
grants of stock options in earlier years. See "Summary Compensation Table".
TAX MATTERS
The Code limits the deductibility for federal income tax purposes of certain
compensation paid to "covered employees," which term ordinarily includes at
least the Chief Executive Officer and the four other most highly compensated
officers of the Company, as of the end of a performance year. The Company
intends to take the necessary steps to conform its compensation to comply with
the limitations or, if this is not feasible in any given circumstance, to
mitigate the negative impact of this Code provision on stockholders.
14
<PAGE>
Compensation and Benefits Committee:
<TABLE>
<S> <C>
Leslie D. Michelson, Chairman Joseph F. Alibrandi
Daryl J. Carter Richard D. Farman
William M. Kahane
Compensation Review Committee:
Jacqueline R. Slater, Chairman Joseph F. Alibrandi
Daryl J. Carter Richard D. Farman
William M. Kahane Donald J. McNamara
Leslie D. Michelson Thomas M. Steinberg
Beverly B. Thomas
</TABLE>
EMPLOYMENT AGREEMENTS
AGREEMENT WITH MR. RISING
The Company and Mr. Rising entered into an Amended and Restated Employment
Agreement (the "Rising Agreement") dated as of November 29, 1995, pursuant to
which Mr. Rising extended his agreement to serve as President and Chief
Executive Officer of the Company through December 31, 2000. The Rising
Agreement supersedes the Employment Agreement dated July 27, 1994 between Mr.
Rising and the Company. The Rising Agreement requires the Board of Directors,
through December 31, 2000, to use its best efforts to cause Mr. Rising to be
elected as a member of the Board of Directors.
The Rising Agreement provides for a minimum base salary of $350,000 per
year, to be increased by 5% each year (compounded annually), as well as an
annual maximum bonus of 200% of his then salary. Mr. Rising is also entitled
under the Rising Agreement to receive four weeks of paid vacation each year
and payment of life insurance premiums. In addition, Mr. Rising will receive
employment benefits (including but not limited to pension, medical insurance
and disability benefits) and perquisites on terms no less favorable than those
made available by the Company from time to time to other members of the
Company's senior management. The Rising Agreement provides for the grant to
Mr. Rising of options to purchase shares of Common Stock which have been
granted and are reflected in this Proxy Statement.
The Rising Agreement expires on December 31, 2000, unless earlier terminated
as described below. The Company may unilaterally elect to terminate the Rising
Agreement before the expiration date, without financial obligations to Mr.
Rising, only on account of Mr. Rising's death, "permanent disability" (as
defined in the Rising Agreement) or otherwise for "cause" (as defined in the
Rising Agreement). Mr. Rising may elect to terminate the Rising Agreement upon
30 days advance written notice to the Company. In the event of any termination
of Mr. Rising's employment before the Expiration Date, Mr. Rising is entitled
to receive his salary through the date of termination, an amount in respect of
any unused vacation days (as determined in accordance with the then-effective
Company policy) and any other amounts or benefits payable under the Company's
employee benefit plans. In all cases, other than a termination for cause or on
account of Mr. Rising's resignation, Mr. Rising is also entitled to receive a
pro rata share of his target bonus payment for the year in which the
termination occurs. If the Company terminates Mr. Rising's employment without
cause, or if Mr. Rising is "constructively discharged" (defined in the Rising
Agreement to include (among other things) the assignment of duties
inconsistent with the position of President and Chief Executive Officer, the
failure to be elected to such offices or as a member of the Board of
Directors, a reduction in salary or bonus potential or certain geographic
relocations), then in addition to the amounts described above, Mr. Rising will
also be entitled to receive an amount equal to the product obtained by
multiplying the average of Mr. Rising's annual salary and annual bonus for the
prior two years times two and his stock options will become immediately
exercisable in full.
If Mr. Rising is constructively discharged or terminated without cause
within 12 months after the occurrence of a "change of control" of the Company,
then in lieu of the benefits described above, Mr. Rising shall be
15
<PAGE>
entitled to receive a lump sum payment in an amount which is equal to three
times the "base amount" as such term is defined in Section 280G of the Code
(subject to certain limitations contained in such section). In addition, the
stock options granted to Mr. Rising shall become immediately exercisable in
full. For purposes of the Rising Agreement, a "change of control" is defined
generally to include the following: (i) certain acquisitions of 25% or more of
the combined voting power of the then outstanding shares of Common Stock and
any other securities of the Company entitled to vote generally in the election
of Directors, or (ii) the failure of persons currently serving on the Board of
Directors, together with persons nominated by at least a majority vote of the
continuing Directors, to constitute at least a majority of the Board, or (iii)
approval by the Company's stockholders of any reorganization, merger or
consolidation of the Company in which the beneficial owners of the Common
Stock and other voting securities of the Company immediately before the
transaction fail to own beneficially at least 50% of the combined voting power
of all securities entitled to vote generally in the election of Directors
following any such transaction, or (iv) approval by the Company's stockholders
of any complete liquidation or dissolution of the Company, or of any sale or
other disposition of all or substantially all of the Company's assets.
AGREEMENT WITH MR. WALLACE
The Company and Mr. Wallace entered into an Employment Agreement dated as of
July 24, 1995, as amended by a Letter Agreement dated November 16, 1996 (as
amended, the "Wallace Agreement"), pursuant to which Mr. Wallace serves as
Senior Vice President and Chief Financial Officer of the Company. The Wallace
Agreement provides for a minimum base salary subject to annual review, as well
as an annual target bonus. For 1997, the base salary was set at $299,256, and
Mr. Wallace was eligible for a bonus of 200% of base salary. The Company
agreed to pay up to $10,000 of legal fees incurred by Mr. Wallace in
connection with the negotiation and preparation of the Wallace Agreement. The
Wallace Agreement provides that Mr. Wallace will receive employment benefits
(including but not limited to pension, medical insurance, and disability
benefits) and perquisites appropriate for executives with comparable duties.
Mr. Wallace is also entitled under the Wallace Agreement to receive three
weeks of paid vacation each year. The Wallace Agreement also provides for the
grant to Mr. Wallace of options to purchase shares of Common Stock, which have
been granted and are reflected in this Proxy Statement.
The Wallace Agreement expires on December 31, 2000, unless earlier
terminated as described below. The Company may unilaterally elect to terminate
the Wallace Agreement before that date only on account of Mr. Wallace's death,
"disability" (as defined in the Wallace Agreement) or otherwise for "cause"
(as defined in the Wallace Agreement); provided that before terminating Mr.
Wallace for "cause" the Company must provide Mr. Wallace with a notice of the
proposed termination, including a written explanation of the grounds, an
opportunity to confer with the Chief Executive Officer of the Company and 60
days after receipt of such notice to cure any alleged non-performance of his
duties. If the Company terminates Mr. Wallace's employment without cause or if
Mr. Wallace terminates his employment with the Company for "good reason" (as
defined in the Wallace Agreement), he is entitled to receive benefits equal to
(a) the number of full months remaining in the Wallace Agreement multiplied by
Mr. Wallace's monthly base salary (determined without regard to amounts
payable under any bonus program or other forms of extraordinary compensation)
as of the date of termination, (b) the number of full months remaining in the
Wallace Agreement multiplied by Mr. Wallace's average monthly target bonus for
the immediately preceding two-year period, and (c) unpaid salary with respect
to any vacation days accrued taken as of the date of termination. These
benefits are not subject to set-off or mitigation.
If Mr. Wallace is terminated by the Company without cause within 12 months
after the occurrence of a "change of control" of the Company or following the
execution of an agreement providing for a "change of control" of the Company,
he will be entitled to receive a lump sum payment in an amount which is equal
to three times the base amount as that term is defined in Section 280(g) of
the Code (subject to certain limitations contained in Section 280(g)). In
addition, Mr. Wallace's options will become immediately exercisable in full.
For purposes of the Wallace Employment Agreement, "change of control" has the
same meaning as in Mr. Rising's employment agreement. See "Agreement with Mr.
Rising" above.
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<PAGE>
AGREEMENT WITH MR. BEAUDIN
The Company and Mr. Beaudin entered into an Employment Agreement dated as of
February 10, 1995, as amended by Letter Agreement dated November 16, 1996 (as
amended, the "Beaudin Agreement"), pursuant to which Mr. Beaudin serves as
Senior Vice President, Property Operations of the Company.
The Beaudin Agreement provides for a minimum base salary subject to annual
review, as well as an annual target bonus. For 1997, the base salary was set
at $220,000, and Mr. Beaudin was eligible for a bonus of 200% of his base
salary. Mr. Beaudin is entitled under the Beaudin Agreement to receive
employment benefits (including but not limited to pension, medical insurance
and disability benefits) and perquisites appropriate for executives with
comparable duties and three weeks of paid vacation per year. The Beaudin
Agreement also provides for the grant to Mr. Beaudin of options to purchase
shares of Common Stock which have been granted and are reflected in this Proxy
Statement.
The Beaudin Agreement expires on December 31, 2000 unless earlier terminated
as described below. The Company may unilaterally elect to terminate the
Beaudin Agreement before the expiration date on the same terms and conditions
as provided for in Mr. Wallace's employment agreement except the Company is
not required to give a written notice and opportunity to cure. If the Company
terminates Mr. Beaudin's employment without cause or if Mr. Beaudin terminates
his employment with the Company for "good reason" (as defined in the Beaudin
Agreement), he is entitled to receive the same benefits as set forth in Mr.
Wallace's employment agreement. In the event of any termination of Mr.
Beaudin's employment before the Expiration Date, for the remainder of the term
of the Beaudin Agreement, Mr. Beaudin shall continue to be treated as an
employee for purposes of the Company's group health and dental programs and
shall receive benefits substantially comparable to those in effect on the day
before the date of termination. In addition, if Mr. Beaudin terminates his
employment with the Company for "good reason" or if the Company terminates Mr.
Beaudin's employment without "cause" or if Mr. Beaudin is terminated without
cause within 12 months following a "change of control", Mr. Beaudin's options
will become immediately exercisable in full. For purposes of Mr. Beaudin's
award agreements, "change of control" has the same meaning as in Mr. Rising's
employment agreement. See "Agreement with Mr. Rising" above.
AGREEMENT WITH MR. YELLIN
The Company and Mr. Yellin entered into an Employment Agreement dated as of
February 1, 1996, (the "Yellin Agreement") pursuant to which Mr. Yellin serves
as Senior Vice President, Southern California Development, of the Company.
The Yellin Agreement provides for a minimum base salary, subject to annual
review. For 1997, the base salary was set at $260,061. It also provides for a
maximum annual base bonus equal to up to 100% of base salary and a maximum
annual additional bonus of the same amount; provided, however, that for the
year ended December 31, 1996, Mr. Yellin received a minimum base bonus of
$130,000, payable in monthly installments. The Company reimbursed Mr. Yellin
for legal and accountant fees of up to $15,000 incurred by Mr. Yellin in
connection with the review and negotiation of the Yellin Agreement and also
agreed to pay for certain club membership dues. Mr. Yellin is entitled under
the Yellin Agreement to receive employment benefits (including but not limited
to pension, medical insurance, and disability benefits) and perquisites
appropriate for executives with comparable duties and three weeks of paid
vacation per year. The Yellin Agreement also allows Mr. Yellin to devote a
portion of his time to the activities of The Yellin Company in connection with
the pre-existing Cathedral Square Agreement (as defined in the Yellin
Agreement) and to receive a portion of the income from the Cathedral Square
Agreement; if the Cathedral Square Agreement is terminated, to engage in other
activities which provide compensation approximately equal to that which the
Cathedral Square Agreement would have provided; and to devote a portion of his
time to the activities of The Yellin Company in connection with other
agreements (as listed in the Yellin Agreement), so long as all such time
commitments do not conflict with Mr. Yellin's duties to the Company.
The Employment Agreement grants Mr. Yellin a lump sum payment of $100,000
for the Company's purchase of certain work in progress and Mr. Yellin's
interests in certain development projects. Under certain
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<PAGE>
circumstances specified in the Yellin Agreement, upon termination of the
Yellin Agreement, the work in progress would be reconveyed to Mr. Yellin by
the Company without consideration.
The Yellin Agreement provides for the grant to Mr. Yellin of options to
purchase shares of Common Stock which have been granted and are reflected in
this Proxy Statement.
The Yellin Agreement expires on December 31, 2000 unless earlier terminated
as described below. If the Company terminates Mr. Yellin's employment without
cause or if Mr. Yellin terminates his employment for "good reason" (as defined
in the Yellin Agreement), he is entitled to receive certain compensation and
benefits. Mr. Yellin is entitled to terminate his employment at any time by
giving the Company prior written notice no less than 30 days before the date
his resignation shall become effective.
In the event that Mr. Yellin is terminated without cause within 12 months
after the occurrence of a "change of control" of the Company, he will be
entitled to receive a lump sum payment in an amount which is equal to three
times the "base amount," as defined in Section 280G of the Code. In addition,
Mr. Yellin's stock option shall become fully vested. For purposes of the
Yellin Agreement, "change of control" has the same meaning as in Mr. Rising's
employment agreement. See "Agreement with Mr. Rising" above.
The Company and Mr. Yellin have also entered into a Letter Agreement dated
as of February 1, 1996, identifying certain benefits and reimbursable expenses
that Mr. Yellin is entitled to pursuant to the Employment Agreement.
AGREEMENT WITH MS. SMALLEY
The Company and Ms. Smalley entered into an Amended and Restated Employment
Agreement (the "Smalley Agreement") dated as of September 16, 1997, pursuant
to which Ms. Smalley serves as Senior Vice President. The Smalley Agreement
supersedes the Employment Agreement dated December 3, 1996 between Ms. Smalley
and the Company (the "Original Agreement"). The Smalley Agreement provides
that Ms. Smalley shall be based at the San Francisco and Dallas offices of the
Company.
The Smalley Agreement provides for an annual base salary of $231,000 for
fiscal year 1997, subject to annual review. It also provides for a maximum
annual base bonus equal to up to 60% of base salary and a maximum annual
additional bonus of the same amount. The Company agreed to pay up to $10,000
of legal fees incurred by Ms. Smalley in connection with the negotiation and
preparation of the Smalley Agreement and the Original Agreement. Ms. Smalley
is entitled under the Smalley Agreement 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) and
to receive three weeks of paid vacation each year. The Smalley Agreement also
provides for the grant to Ms. Smalley of options to purchase Common Stock
which have been granted and are reflected in this Proxy Statement.
The Smalley Agreement grants Ms. Smalley a lump sum payment of $108,707 for
relocation expenses. The Smalley Agreement also provides that Ms. Smalley will
receive, from time to time during fiscal year 1997 and thereafter, certain
payments relating to her residences in Dallas and San Francisco, including
payments for federal and state taxes, if any, payable by reason of the income
effect of the payments described above. The Smalley Agreement also provides
that Ms. Smalley and the Company will enter into arrangements for the purchase
of a new residence in the San Francisco area on terms and conditions specified
in the Smalley Agreement, including an interest-free loan secured by the
residence in the amount of $400,000.
The Smalley Agreement expires on December 31, 1999 unless earlier terminated
as described below. The Company may unilaterally elect to terminate the
Smalley Agreement before the expiration date only on account of Ms. Smalley's
death, "disability" (as defined in the Smalley Agreement), retirement or
otherwise for "Cause" (as defined in the Smalley Agreement); provided that
before terminating Ms. Smalley for "Cause" the Company must provide Ms.
Smalley with notice of the proposed termination, including a written
explanation of
18
<PAGE>
the grounds, an opportunity to confer with the Chief Executive Officer of the
Company and 60 days after receipt of such notice to cure any alleged non-
performance of her duties. If the Company terminates Ms. Smalley's employment
for any reason other than Cause, disability, death or retirement or if Ms.
Smalley terminates her employment with the Company for "Good Reason" (as
defined in the Smalley Agreement), she is entitled to receive benefits equal
to (a) the number of full months remaining in the Smalley Agreement multiplied
by Ms. Smalley's monthly base salary (determined without regard to amounts
payable under any bonus program or other forms of extraordinary compensation)
as of the date of termination, (b) the number of full or partial months
remaining in the Smalley Agreement multiplied by Ms. Smalley's average monthly
base and additional bonuses for the immediately preceding two-year period or,
if Ms. Smalley has not served the Company for 24 months, then the average
monthly base and additional bonuses for such shorter period, and (c) unpaid
salary with respect to any vacation days accrued but not taken as of the date
of termination. These benefits are not subject to set-off or mitigation.
If Ms. Smalley is terminated by the Company without Cause within 12 months
after the occurrence of a "change of control" of the Company or following the
execution of an agreement providing for a "change of control" of the Company,
she will be entitled to receive a lump sum payment in an amount which is equal
to three times the base amount as that term is defined in Section 280G of the
Code. In addition, Ms. Smalley's stock options shall become fully vested. For
purposes of the Smalley Agreement, "change of control" has the same meaning as
in Mr. Rising's employment agreement. See "Agreement with Mr. Rising" above.
19
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the fiscal years ended
December 31, 1997, December 31, 1996 and December 31, 1995 to the Named
Executives indicated below.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
YEAR ($) ($)(2) ($)(3) (#) ($)(4)
---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current Executive
Officers(1)
Nelson C. Rising........ 1997 385,872 733,163 70,328(5) -- 7,763
Chief Executive 1996 367,512 735,000 70,388(5) 1,000,000 7,763
Officer 1995 350,000 350,000 -- 300,000 7,632
Stephen P. Wallace...... 1997 299,256 568,575 -- -- 10,092(6)
Senior Vice President 1996 299,256 583,538 -- 670,000 7,763
and Chief Financial 1995 124,231 148,000 61,096(7) 330,000 17,960(8)
Officer
Timothy J. Beaudin...... 1997 220,000 418,000 -- -- 11,115(9)
Senior Vice President 1996 220,000 429,000 -- 400,000 7,763
Property Operations 1995 164,721 185,000 46,223(10) 100,000 5,550
Ira Yellin.............. 1997 260,016 325,000 -- -- 7,763
Senior Vice President 1996 238,348 364,000 -- 400,000 7,363
Kathleen Smalley........ 1997 231,000 277,200 96,607(11) 150,000 7,763
Senior Vice President, 1996 -- -- 108,707(12) -- --
General Counsel and
Secretary
</TABLE>
- --------
(1) Mr. Rising commenced employment with the Company in September 1994, Mr.
Beaudin commenced employment with the Company in February 1995, Mr.
Wallace commenced employment with the Company in July 1995, Mr. Yellin
commenced employment with the Company in February 1996, and Ms. Smalley
commenced employment with the Company in January 1997.
(2) Unless otherwise noted, the amount for any year represents the amount
earned for that fiscal year pursuant to the Bonus Program, whether or not
paid in a subsequent year.
(3) Except in the case of Messrs. Rising, Wallace and Beaudin and Ms. Smalley
(see notes 5, 7, 10, 11, and 12 below), Other Annual Compensation in the
form of the value of certain perquisites and other personal benefits did
not, in the aggregate, exceed the lower of $50,000 or 10% of the aggregate
salary and bonus compensation earned by any of the Named Executives during
any of the applicable reporting periods.
(4) Unless otherwise noted, the amounts listed represent the amount of the
Company's contributions for the year pursuant to the Profit Sharing &
Savings Plan and Trust.
(5) Includes payment of $51,970 for insurance for Mr. Rising. The Company also
provided Mr. Rising with an allowance for automobiles of $17,998. See
"Employment Agreements -- Agreement with Mr. Rising."
(6) Includes $2,329 of aggregate notional earnings in 1997 in excess of 120%
of the applicable federal rate on amounts deferred by Mr. Wallace pursuant
to the Deferred Compensation Program (as described below).
20
<PAGE>
Each of the Named Executives is eligible to participate in a non-qualified,
unfunded deferred compensation program (the "Deferred Compensation
Program") pursuant to which the executive may elect to defer a portion of
his or her base salary, and a portion or all of his or her bonus. Amounts
deferred will be credited to a bookkeeping account for the executive,
together with the investment returns (or losses) that would have accrued to
the account if it were invested in various investment options designated
under the Deferred Compensation Program and selected by the executive. If
an executive retires at age 59 1/2 or has more than ten years of service,
his or her account will be credited with an additional 25% of earnings as
of specified benefit determination dates. The reported amounts as well as
deferred amounts under the Deferred Compensation Program are subject to
fluctuations in value based on the performance of the simulated financial
investments selected by the executive prior to the time of distribution or
payout in accordance with the participant's elections.
(7) Includes payment to Mr. Wallace of $47,000 for relocation expenses and
$10,000 in legal fees. The Company also provided Mr. Wallace with an
automobile allowance of $4,096. See "Employment Agreements--Agreement with
Mr. Wallace."
(8) Includes payment to Mr. Wallace of $17,960 (exclusive of ordinary expenses
reimbursable to Mr. Wallace) in connection with a consulting agreement
between the Company and Mr. Wallace before Mr. Wallace's employment with
the Company.
(9) Includes $3,352 of aggregate notional earnings in 1997 in excess of 120% of
the applicable federal rate on amount deferred by Mr. Beaudin pursuant to
the Deferred Compensation Program.
(10) Includes payment to Mr. Beaudin of $25,000 for relocation expenses and
payment of $12,974 for living expenses. The Company also provided Mr.
Beaudin with an automobile allowance of $8,249. See "Employment
Agreements--Agreement with Mr. Beaudin."
(11) Includes payment to Ms. Smalley of $74,888 for temporary living expenses
and $9,947 for legal expenses. The Company also provided Ms. Smalley with
an automobile allowance of $11,772. See "Employment Agreements--Agreement
with Ms. Smalley."
(12) Includes payment to Ms. Smalley of $108,707 for relocation expenses. See
"Employment Agreements--Agreement with Ms. Smalley."
21
<PAGE>
STOCK OPTIONS
The following table presents information concerning the options granted to
each of the Named Executives during 1997. SEC rules require the Company to
include a value for each grant of options as set forth below in column (f).
These valuations are calculated in accordance with the methodology described
in footnote (3) to this table; however, the Company's use of such methodology
should not be construed as an endorsement of its accuracy for valuing options,
particularly in the light of the restrictions on the exercise and
transferability of the options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
(b)
NUMBER OF (c)
SECURITIES PERCENT OF (d)
UNDERLYING TOTAL OPTIONS EXERCISE (f)
OPTIONS GRANTED TO OR BASE (e) GRANT DATE
(a) GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/Sh) DATE(2) VALUE($)(3)
---- ---------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Current Executive
Officers
Nelson C. Rising........ -- -- -- -- --
Stephen P. Wallace...... -- -- -- -- --
Timothy J. Beaudin...... -- -- -- -- --
Ira Yellin.............. -- -- -- -- --
Kathleen Smalley........ 75,000(4) 8.79 11.05 01/01/07 314,711
75,000(5) 8.79 18.525 01/26/08 512,036
</TABLE>
- --------
(1) The options reflected in the table were granted pursuant to the terms of
the 1996 Plan. The 1996 Plan is administered by the Compensation Committee
and the Review Committee, which have full power to adopt and amend rules
to implement the terms of the 1996 Plan, including the power to reprice
options. Options granted under the 1996 Plan are exercisable for cash or
any other property (including shares of Common Stock already owned) deemed
acceptable by the Compensation Committee.
(2) Options are subject to earlier termination in certain events either upon
or following termination of employment. To the extent that stock options
awarded to an executive officer under the 1996 Plan have become
exercisable before the officer's resignation or termination of employment
with the Company (other than for cause or in the event of death or
disability), such options remain exercisable in accordance with their
terms for up to three months following the officer's termination date.
However, if the officer engages in activity in competition with the
Company, divulges confidential information or otherwise is terminated for
cause, such unexercised options are immediately forfeited. All options
which have not yet become exercisable before the officer's termination
date automatically terminate on that date. If employment is terminated by
reason of death, any unexercised portion of the option that is or becomes
vested upon death will remain exercisable for a period of one year
following the date of death. If the officer retires at or after age 65, or
ceases to be an employee because of disability or in the event of death
before the vesting date, the number of shares deemed vested shall equal
the number of option shares 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.
(3) The Company is required under SEC rules to establish a valuation for each
grant of options; the Black-Scholes option pricing model was used to
estimate the present value as of the grant date of the options set forth
in the table. The Company's use of this model should not be construed as
an endorsement of its accuracy for valuing options, particularly in the
light of the restrictions on the exercise and transferability of the
options. All stock option valuation models, including the Black-Scholes
model, require a prediction about the future movement of the stock price.
Each of the values reported in the table is calculated on the
22
<PAGE>
assumption that the option is exercised at the end of five years. The
approach used in developing the five-year term upon which the Black-Scholes
calculations were performed is consistent with the requirements of Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation." The following additional assumptions have been made for
purposes of calculating the grant date present value for the options shown
in the table: with respect to options expiring January 1, 2007, volatility
at 29.45% and a risk-free rate of return at 6.18%; and with respect to
options expiring January 26, 2008, volatility at 29.45% and a risk-free rate
of return at 5.63%.
(4) The option becomes exercisable upon the achievement of a schedule of
certain escalating stock price levels for the Common Stock (the "Pricing
Schedule") and upon the expiration of various time periods. The Pricing
Schedule operates in the following manner: if the average price of the
Common Stock (calculated over 30 consecutive trading days) is (a) $13.26
or more, then the option shall be exercisable, subject also to time-
vesting, as to 25% of the option shares; (b) $15.91 or more, subject also
to time-vesting, as to 50% of such shares; (c) $19.09 or more, subject
also to time-vesting, as to 75% of such shares; and (d) $22.99 or more,
subject also to time-vesting, as to all of the option shares.
Notwithstanding the fulfillment of the conditions of the Pricing Schedule,
however, no portion of the option may vest prior to January 1, 1998.
Thereafter, assuming conditions of the Pricing Schedule are met in each
case, one-fourth of the options shall vest on January 1, 1998; one-half on
January 1, 1999, three-fourths on January 1, 2000; and all of the option
shares on January 1, 2001. Even if the previously described Pricing
Schedule vesting conditions have not been fulfilled, the entire number of
the option shares will vest on January 1, 2005, assuming the optionee
continues to be employed by the Company.
(5) This grant, though made in 1998, was made in satisfaction of requirements
of the Smalley Agreement for a grant in 1997 and was made in recognition
of performance in 1997. The option becomes exercisable upon the
achievement of a schedule of certain escalating stock price levels for the
Common Stock (the "Pricing Schedule") and upon the expiration of various
time periods. The Pricing Schedule operates in the following manner: if
the average price of the Common Stock (calculated over 30 consecutive
trading days) is (a) $12.00 or more, then the option shall be exercisable,
subject also to time-vesting, as to 25% of the option shares; (b) $14.40
or more, subject also to time-vesting, as to 50% of such shares; (c)
$17.30 or more, subject also to time-vesting, as to 75% of such shares;
and (d) $20.75 or more, subject also to time-vesting, as to all of the
option shares. Notwithstanding the fulfillment of the conditions of the
Pricing Schedule, however, no portion of the option may vest prior to
December 10, 1998. Thereafter, assuming conditions of the Pricing Schedule
are met in each case, one-fourth of the options shall vest on December 10,
1998; one-half on December 10, 1999, three-fourths on December 10, 2000;
and all of the option shares on December 10, 2001. Even if the previously
described Pricing Schedule vesting conditions have not been fulfilled, the
entire number of the option shares will vest on December 10, 2005,
assuming the optionee continues to be employed by the Company.
23
<PAGE>
None of the Named Executives exercised options during 1997. The following
table sets forth the number of unexercised options and in-the-money options
(divided between exercisable and unexercisable options) held by the Named
Executives as of December 31, 1997.
FISCAL YEAR-END OPTION HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997($)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Current Executive
Officers
Nelson C. Rising........ 866,667 1,133,333 10,659,601 12,582,899
Stephen P. Wallace...... 387,500 612,500 4,813,313 6,918,688
Timothy J. Beaudin...... 166,667 333,333 2,068,144 3,829,356
Ira Yellin.............. 100,000 300,000 1,223,125 3,669,375
Kathleen Smalley........ 0 150,000(1) 0 781,875
</TABLE>
- --------
(1) Includes a grant of 75,000 shares, though made in 1998, made in
satisfaction of requirements of the Smalley Agreement for a grant in 1997
and in recognition of performance in 1997.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
The following is a comparison of the cumulative total stockholder return on
a $100 investment in the Common Stock with the cumulative total return,
including reinvestment of dividends, of a $100 investment in the Standard &
Poor's 500 Composite Stock Index and in a peer group index for the period from
December 31, 1992. The total return on the Common Stock is measured by
dividing the difference between the Common Stock price at the end and the
beginning of the measurement period by the Common Stock price at the beginning
of the measurement period.
The Company's peer group index includes the following companies: Atlantic
Gulf Communities, Duke Realty Investments, First Industrial Realty Trust,
First Union Real Estate Equity & Mortgage Investments SBI, Forest City
Enterprises, Inc, The Newhall Land and Farming Company, L.P., Rouse Company,
Security Capital Industrial Trust, Spieker Properties, Standard Pacific Corp.
and Washington REIT.
The peer group index is intended to provide a relevant comparison of total
annual return. The peer group includes companies involved in diversified real
estate operations such as industrial, retail and office as well as companies
involved in fee management services and residential real estate.
- --------
* This section of the Proxy Statement shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filings of the Company pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934, as amended, except to the
extent the Company specifically incorporates the section by reference
therein, and shall not be deemed soliciting material or otherwise deemed
filed under either of such Acts.
24
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
COMPARISON OF CUMULATIVE TOTAL RETURN
DECEMBER 31, 1992 TO DECEMBER 31, 1997
[PERFORMANCE CHART APPEARS HERE]
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 12/31/92)
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Catellus Development
Corp................... $100 $115 $ 87 $ 87 $169 $297
Peer Group Index........ $100 $116 $110 $127 $183 $237
S&P 500................. $100 $110 $111 $153 $192 $251
</TABLE>
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. These persons are
required by regulation of the SEC to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the fiscal year
ended December 31, 1997, the Company's officers, directors and greater than
10% beneficial owners complied with all applicable Section 16(a) filing
requirements except for the following: four Form 4s for CalPERS disclosing
three acquisitions of Common Stock upon conversion of $3.75 Series A
Cumulative Convertible Preferred Stock in 1997 and one such acquisition in
1996 inadvertently were not filed on a timely basis.
25
<PAGE>
CERTAIN TRANSACTIONS
Ms. Garvey is an executive officer of Bank of America NT & SA ("Bank of
America"). During 1997, the Company and its subsidiaries had banking
relationships with Bank of America. Such relationships, pursuant to which
funds are deposited with and borrowed from Bank of America on terms which the
Company believes are competitive, reasonable, and customary, may continue in
the future. The total amount paid by the Company and its subsidiaries to Bank
of America during 1997 pursuant to such arrangements was approximately
$12,421,778. Such amount includes interest, commitment fees, and other banking
fees paid to Bank of America as principal and/or in its capacity as agent for
other lenders participating in the syndicate, together with certain third-
party expenses incurred by Bank of America which were reimbursed by the
Company. Mr. Alibrandi is a Director of Bank of America and a Director and
member of the compensation committee of BankAmerica Corporation, the holding
company of Bank of America. Mr. Alibrandi and Ms. Garvey have abstained from
all votes of the Board of Directors with respect to matters involving Bank of
America.
AGREEMENTS WITH MR. YELLIN
Mr. Yellin, an executive officer of the Company, through The Yellin Company,
indirectly owns 9.8% of Bradbury Associates, L.P., a limited partnership,
which owns the Bradbury Building. The Company leases 21,425 rentable square
feet of space in the Bradbury Building in downtown Los Angeles pursuant to an
Office Lease dated November 22, 1996 ("Lease"). The Company moved its Southern
California headquarters to that site in March 1997. The Company believes that,
notwithstanding the involvement of an insider, the Lease was entered into on
terms which are commercially reasonable, fair to the Company, and comparable
to the terms of leases of other properties which would have been available to
the Company. The Lease has been unanimously approved by the Board of
Directors. The total amount paid by the Company to Bradbury Associates, L.P.
during 1997 pursuant to the Lease was approximately $381,595.
AGREEMENTS WITH MS. SMALLEY
In October 1997, Ms. Smalley received a loan for $400,000 from the Company
in connection with the purchase of a new residence in the San Francisco area.
As of March 30, 1998, $400,000 of this loan was outstanding. The loan does not
bear interest. See "Employment Agreements--Agreement with Ms. Smalley."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, Messrs. Alibrandi, Carter, Farman,
Kahane, and Michelson served as members of the Compensation Committee. During
the last completed fiscal year, Messrs. Alibrandi, Carter, Farman, Kahane,
McNamara, Michelson, and Steinberg and Mmes. Slater and Thomas served as
members of the Review Committee. None of the members of either committee is an
employee or officer of the Company.
26
<PAGE>
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1997,
including financial statements, is being sent to stockholders of record as of
the close of business on March 30, 1998 together with this Proxy Statement.
The Company will furnish, without charge, a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1997 as filed with the Commission
to any stockholder who submits a written request to Corporate Communications,
at the Company's offices, 201 Mission Street, San Francisco, California 94105.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP ("Price Waterhouse"), the Company's independent public
accountant, has examined the Company's financial statements for the fiscal
year ended December 31, 1997. The Company expects representatives of Price
Waterhouse to be present at the Annual Meeting and to be available to respond
to appropriate questions from stockholders. The Price Waterhouse
representatives will be given an opportunity to make a statement if they
desire.
STOCKHOLDER PROPOSAL
J.F. Quilter, Trustee, 500 Westridge Drive, Portola Valley, California,
94028, owner of 230 shares, has submitted the following proposal:
"WHEREAS, the usual practice for annual stockholder meetings is to include a
statement to the effect that "if no direction is made the proxy will be voted
for the nominations made and positions held by the management.'.
This clouds the voting results as to votes for directors and auditors, does
not reflect the desires of voting stockholders and skews the voting results.
In a political election it would be tantamount to counting the votes of those
who do not vote or abstain as being in favor of the incumbent.
"THEREFORE it is resolved that shareholders recommend that the Board of
Directors take the necessary steps to cause proxy balloting on items contained
in the notice of the annual shareholders meeting to be tabulated as in favor,
opposed and returned unmarked ballots with the decision being determined by
the count of in favor and opposed' "
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
This proposal assumes that many stockholders who sign and return their proxy
cards do not intend to cast any vote, an assumption the Company does not
believe to be valid. The Company believes that every stockholder who returns a
properly signed proxy card does intend either to cast a vote or to select a
proxy to represent that stockholder's interest at a meeting he or she chooses
not to attend. The Board of Directors is obligated to give effect to the
opinions of all stockholders who wish to participate, whether those
stockholders choose to do so by marking the proxy card with a specific vote or
simply by returning the proxy card without specific voting instructions and
thereby conferring authority to vote on the stockholder's behalf.
The Proxy Statement and proxy card clearly state that any unmarked proxies
will be voted in accordance with the recommendations of the Board of
Directors. Since a stockholder who is willing to take the time to sign his or
her proxy card will probably observe that statement, it seems unlikely that
many stockholders would be confused or surprised by the existing procedure.
The current procedure provides stockholders with a convenient way to
participate in stockholders' meetings. As of January 1998, approximately 70%
of the Company's shares were held by institutional stockholders. Many
institutional stockholders, who sign a great many proxy cards for numerous
companies in which they have
27
<PAGE>
investments, appreciate the convenience of voting as management recommends
without the necessity of marking each proposal box. While this process may be
only a minor inconvenience for a shareholder completing one proxy card, it
becomes a burden for an institutional shareholder dealing with many proxy
cards. It is important for the Company to make voting by these stockholders as
convenient as possible in order to have sufficient shares represented at its
stockholder meetings to have a quorum.
Mr. Quilter's proposal, if adopted, would mean that all proxy cards that are
submitted to the Company without specific voting instructions would be sent
back to the stockholders who submitted them and, therefore, would not be
counted as being present at the stockholders' meeting. Since many stockholders
do not mark their proxy cards when they submit them, it is likely that many of
the proxies would be returned, and there might not be enough shares
represented to constitute the quorum necessary for the transaction of business
at a stockholders' meeting.
Finally, the current procedure has been in place for a number of years and
has not caused a problem. A change in the current procedure could cause
significant confusion among the stockholders who have been following the
existing procedure for many years.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than December 14, 1998 for inclusion in the
Company's Proxy Statement and form of proxy relating to the meeting.
OTHER MATTERS
The Board of Directors knows of no matters to be presented for action by the
stockholders at the Annual Meeting other than those described in this Proxy
Statement. Unless otherwise indicated, if any other matter is properly brought
before the meeting and may be properly acted upon, the persons named in the
accompanying form of proxy will be authorized by such proxy to vote the
proxies thereon in accordance with their best judgment.
28
<PAGE>
[LOGO OF RECYCLED PAPER]
Printed on Recycled Paper
<PAGE>
CATELLUS DEVELOPMENT CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Nelson C. Rising, Stephen P. Wallace
and Kathleen Smalley, or any of them, with full power of substitution, as
proxies to vote at the Annual Meeting of Stockholders of Catellus Development
Corporation (the "Company") to be held on May 28, 1998 at 10:00 a.m., local
time, and at any adjournment or adjournments thereof, hereby revoking any
proxies heretofore given , to vote all shares of common stock of the Company
held or owned by the undersigned as directed on the reverse side hereof, and
in their discretion upon such other matters as may come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
++++++++++++++++++
+ SEE REVERSE +
+ SIDE +
++++++++++++++++++
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CATELLUS DEVELOPMENT CORPORATION
MAY 28, 1998
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes as in this example.
The shares represented hereby will be voted in accordance with the directions
given by the stockholder. If not otherwise directed, the shares represented by
this proxy will be voted FOR Item 1 and AGAINST Item 2.
1. Election of Directors
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
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Nominees: Joseph F. Alibrandi
Daryl J.Carter
Richard D. Farman
Christine Garvey
William M. Kahane
Donald J. McNamara
Leslie D. Michelson
Nelson C. Rising
Jacqueline R. Slater
Thomas M. Steinberg
Beverly Benedict Thomas
2. Stockholder Proposal To adopt the stockholder proposal:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the accompanying Notice
of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE.
SIGNATURE(S): DATE:
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NOTE: Please sign exactly as names(s) appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustees or
guardian, please give full title as such.
