<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SHURGARD STORAGE CENTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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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<PAGE> 2
[SCCI LETTERHEAD]
June 14, 1995
Dear Stockholder:
You are cordially invited to attend the 1995 Annual Meeting of
Stockholders of Shurgard Storage Centers, Inc., at 10:00 a.m. on Wednesday,
July 26, 1995, at the Fifth Avenue Room in the Westin Hotel, 1900 Fifth Avenue,
Seattle, Washington.
The Notice of Annual Meeting of Stockholders and the Proxy Statement
that follow provide details of the business to be conducted at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, we hope that you
will have your stock represented by completing, signing, dating and returning
your proxy card in the enclosed envelope as soon as possible. Your stock will
be voted in accordance with the instructions you have given in your proxy.
Sincerely,
Charles K. Barbo
Chairman, President and
Chief Executive Officer
IMPORTANT
A proxy card is enclosed. All stockholders are urged to complete and
mail the proxy card promptly. The enclosed envelope for return of the
proxy card requires no postage. Any stockholder attending the Annual
Meeting may personally vote on all matters that are considered,
in which event the signed proxy will be revoked.
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 26, 1995
To the Stockholders:
The 1995 Annual Meeting of Stockholders of Shurgard Storage Centers,
Inc. will be held at the Fifth Avenue Room in the Westin Hotel, 1900 Fifth
Avenue, Seattle, Washington on Wednesday, July 26, 1995, at 10:00 a.m. for the
following purposes:
l. To elect members of the Board of Directors;
2. To approve amendments to the Company's Certificate of
Incorporation to provide for a classified Board of Directors
and to adopt certain New York Stock Exchange requirements;
3. To approve amendments to the Company's By-Laws;
4. To approve the Company's 1995 Long-Term Incentive Compensation
Plan;
5. To approve amendments to the Company's Stock Option Plan for
Nonemployee Directors; and
6. To transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
The nominees for election as directors are named in the enclosed Proxy
Statement.
The record date for the Annual Meeting is June 2, 1995. Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON,
BUT, EVEN IF YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE
IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION.
STOCKHOLDERS ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE
PREVIOUSLY RETURNED A PROXY.
By Order of the Board of Directors
Kristin H. Stred
Secretary
Seattle, Washington
June 14, 1995
<PAGE> 4
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD JULY 26, 1995
GENERAL
The enclosed proxy is solicited by the Board of Directors of Shurgard
Storage Centers, Inc. (the "Company") for use at the 1995 Annual Meeting of
Stockholders to be held at 10:00 a.m. on Wednesday, July 26, 1995 at the Fifth
Avenue Room in the Westin Hotel, 1900 Fifth Avenue, Seattle, Washington and at
any postponement or adjournment thereof (the "1995 Annual Meeting"). Only
holders of record of the Company's Class A Common Stock and Class B Common
Stock (the "Common Stock") at the close of business on June 2, 1995 will be
entitled to vote at the 1995 Annual Meeting. On that date, the Company had
18,095,988 shares of Class A Common Stock and 154,604 shares of Class B Common
Stock outstanding. Each share of Class A Common Stock and each share of Class
B Common Stock outstanding on the record date is entitled to one vote.
The Company was formed on March 1, 1994 through the consolidation (the
"Consolidation") of 17 publicly held limited partnerships that had been
sponsored by Shurgard Incorporated (the "Management Company"). Following the
Consolidation, the Management Company managed the Company's business affairs
and properties. On March 24, 1995, the Management Company was merged with the
Company (the "Merger"), as a result of which the Company became self-managed
and self-administered. Certain information in this Proxy Statement refers to
the Consolidation, the Merger and the Management Company.
The address of the Company's principal executive offices is 1201 Third
Avenue, Suite 2200, Seattle, Washington 98101. This Proxy Statement and the
accompanying proxy card are being mailed to the Company's stockholders on or
about June 14, 1995.
VOTING
Shares of Common Stock for which proxies are properly executed and
returned will be voted at the 1995 Annual Meeting in accordance with the
directions noted thereon or, in the absence of directions, will be voted "FOR"
the election of the nominees for the Board of Directors named herein, provided
that if any of such nominees should become unavailable for election for any
reason, such shares will be voted for the election of such substitute nominee
as the Board of Directors may propose, and "FOR" the approval of the amendments
to the Certificate of Incorporation, the amendments to the By-Laws, the 1995
Long-Term Incentive Compensation Plan (the "1995 Incentive Plan") and the
amendments to the Stock Option Plan for Nonemployee Directors (the "Director
Plan"). The nominees for the Board of Directors who receive the greatest
number of votes cast for the election of directors by the shares present in
person or represented by proxy, and entitled to vote, shall be elected
director. Any action other than a vote for a nominee will have the practical
effect of voting against a nominee. The amendments to the Company's
Certificate of Incorporation and By-Laws will be approved if a majority of the
shares issued and outstanding vote in favor of approval. Abstentions from
voting and broker nonvotes will have the practical effect of voting against the
proposals. The 1995 Incentive Plan and the amendments to the Director Plan
will be approved if a majority of shares present in person or represented by
<PAGE> 5
proxy, and entitled to vote, vote in favor of approval. Abstentions from
voting will have the practical effect of voting against the proposals and
broker nonvotes will have no effect on the outcome other than to reduce the
number of "FOR" votes necessary to approve the proposals.
REVOCATION
Any stockholder giving a proxy may revoke it at any time before it is
voted by delivering to the Company's Secretary a written notice of revocation
or a duly executed proxy bearing a later date, or by attending the 1995 Annual
Meeting and voting in person.
ELECTION OF DIRECTORS AND DIRECTOR INFORMATION
Assuming adoption and effectiveness of the proposed amendments to the
Company's Certificate of Incorporation, the Board of Directors will be divided
into three classes, each class to be as nearly equal in number as possible.
Except as set forth below, directors' terms will expire at the third annual
meeting of stockholders after their election by the stockholders. Five
directors will be elected at the 1995 Annual Meeting, to be divided into the
classes and to hold office for the terms specified below. If, for any reason,
the proposed amendments to the Company's Certificate of Incorporation are not
adopted or do not become effective, each director elected at the 1995 Annual
Meeting will hold office until the next annual meeting of stockholders, and
until a successor shall have been elected and qualified.
It is intended that votes will be cast pursuant to the accompanying
proxy for the election of the nominees named below, all of whom are presently
directors of the Company. If a nominee should become unavailable for any
reason, it is intended that votes will be cast for a substitute nominee
designated by the Board of Directors. The Board of Directors has no reason to
believe that any nominee named will be unable to serve if elected.
NOMINEES FOR ELECTION - TERMS EXPIRE IN 1998 (CLASS 3). The following
individuals are the nominees of the Board of Directors to serve, following the
effectiveness of the proposal to amend the Company's Certificate of
Incorporation, until the 1998 annual meeting of stockholders:
Charles K. Barbo (age 54) has been involved as a principal in the real
estate investment industry since 1969. Mr. Barbo is one of the co-founders of
the Management Company, which was organized in 1972 to provide property
management services for self- storage facilities and other real estate and
commercial ventures. Prior to the Merger, he served as Chairman of the Board
and President of the Management Company. Upon the closing of the Merger, he
was named Chairman of the Board, President and Chief Executive Officer of the
Company. Mr. Barbo is a graduate of the Owner/President Management Program of
Harvard Business School, has a Bachelor of Arts degree in history from the
University of Washington, and is a licensed real estate broker and a licensed
securities principal and salesman. He is an alumnus of the Young Presidents
Organization.
Donald W. Lusk (age 67) has served as a director of the Company since
March 1994. He is the President of Lusk Consulting Group, which is engaged in
general management consulting as well as the formation and delivery of
management development programs in the United States and Canada. From 1974 to
1991, Mr. Lusk was Regional Managing Partner of Management Action Programs in
the Pacific Northwest. Mr. Lusk has a Bachelor of Arts degree from Pomona
College. He currently serves as a director of G.T. Development Corporation.
He has previously
-2-
<PAGE> 6
served as a director of Robert E. Bayley Construction Company, Management
Action Programs, Inc., The Bekins Company, California Pacific National Bank,
I.C.X. Corporation, Laguna Manufacturing Company, Ormand Industries and Pacific
United Services Corporation, and was Chairman of the Board of the School of
Business and Economics Advisory Board of Seattle Pacific University.
NOMINEES FOR ELECTION - TERMS EXPIRE IN 1997 (CLASS 2). The following
individuals are the nominees of the Board of Directors to serve, following the
effectiveness of the proposal to amend the Company's Certificate of
Incorporation, until the 1997 annual meeting of stockholders:
Wendell J. Smith (age 62) has served as a director of the Company
since March 1994. Mr. Smith is also currently a director of Franchise Finance
Corporation of America. He has previously served on the Western and National
Advisory Boards for FNMA and the Advisory Board of the Center for Real Estate
Research at the University of California. He retired in 1991 from the State of
California Public Employees Retirement System ("Calpers") after 27 years of
employment, the last 21 in charge of all real estate equities and mortgage
acquisitions for Calpers. During those 21 years, Calpers invested over $8
billion in real estate and mortgages. In 1991, Mr. Smith established W.J.S. &
Associates, which provides advisory and consulting services for pension funds
and pension fund advisors.
Harrell L. Beck (age 38) has served as a director of the Company and
as its Chief Financial Officer and Treasurer since July 1993. Prior to the
closing of the Merger, Mr. Beck also served as the Company's President. He was
named Senior Vice President of the Company upon the closing of the Merger. Mr.
Beck also served as the Chief Financial Officer and Treasurer of the Management
Company. He joined the Management Company in April 1986 as the Eastern
Regional Vice President and, in 1990, became its Chief Financial Officer and,
in 1992, its Treasurer. Prior to joining the Management Company, Mr. Beck was
a manager with Touche Ross & Co., where he was employed for approximately six
years, during which time he provided services primarily to clients in the real
estate and aerospace industries. Mr. Beck has a Bachelor of Arts degree in
Business Administration from Washington State University and is a member of the
American Institute of Certified Public Accountants and the Washington Society
of Certified Public Accountants.
NOMINEE FOR ELECTION - TERM EXPIRES IN 1996 (CLASS 1). The following
individual is the nominee of the Board of Directors to serve, following the
effectiveness of the proposal to amend the Company's Certificate of
Incorporation, until the 1996 annual meeting of stockholders:
Dan Kourkoumelis (age 44) has served as a director of the Company
since March 1994. He is the President, Chief Operating Officer and a director
of Quality Food Centers, Inc. ("QFC"), a publicly held corporation that
operates the largest independent supermarket chain in the Seattle, Washington
area. Mr. Kourkoumelis joined QFC in 1967 and has since held a variety of
positions. He served as Executive Vice President from 1983 to 1987, when he
also became Chief Operating Officer, and became President in 1989 and a
director in 1991. Mr. Kourkoumelis also serves on the Board of Directors of
Expeditors International, Inc. He has a Bachelor of Arts degree in Marketing
from the University of Washington.
Nine Board of Directors meetings were held in 1994. All incumbent
directors were in attendance at all such meetings.
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<PAGE> 7
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established standing committees of its Board of
Directors, including an Audit Committee and a Compensation Committee. Each of
these committees is responsible to the full Board of Directors, and its
activities are therefore subject to approval of the Board of Directors. The
functions performed by these committees are summarized as follows:
Audit Committee. The Audit Committee recommends to the Board of
Directors the independent public accountants to be selected to audit the
Company's annual financial statements and approves any special assignments
given to such accountants. The Audit Committee also reviews the planned scope
of the annual audit and the independent accountants' letter of comments and
management's responses thereto, any major accounting changes made or
contemplated and the effectiveness and efficiency of the Company's internal
accounting staff. The members of the Audit Committee are Messrs. Lusk
(Chairman) and Smith. The Audit Committee met three times in 1994, with all
incumbent members in attendance.
Compensation Committee. The Compensation Committee establishes the
remuneration levels for officers of the Company, reviews management
organization and development, reviews significant employee benefits programs
and recommends and administers executive compensation programs, including bonus
plans, stock option and other equity-based programs, deferred compensation
plans and any other cash or stock incentive programs. The members of the
Compensation Committee are Messrs. Lusk (Chairman), Kourkoumelis and Smith.
The Compensation Committee met four times in 1994, with all incumbent members
in attendance.
DIRECTOR COMPENSATION
Fees. Directors who are employees of the Company do not receive any
fees for their services as directors. Directors who are not employees of the
Company are paid an annual retainer of $12,000 for serving on the Board of
Directors and an additional fee of $1,000 for attending each meeting of the
Board of Directors and $500 for attending each meeting of a committee of the
Board of Directors. The Company also reimburses each nonemployee director for
travel expenses incurred in connection with his or her activities on behalf of
the Company. Messrs. Lusk, Smith and Kourkoumelis each received $6,000 in fees
in connection with serving on the Board of Directors' Special Committee that
was established to review the Merger.
Options. Under the Director Plan each nonemployee director
automatically receives an option to purchase 400 shares of Class A Common Stock
on the first business day following his or her initial election as a director
of the Company and thereafter receives annually, on the first business day
following the date of each annual meeting of stockholders of the Company, an
option to purchase 400 shares of Class A Common Stock, at an exercise price
equal to the fair market value of the Class A Common Stock on the date of
grant. Amendments to the Director Plan to increase the annual grant to 3,000
shares are proposed below.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended (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 Securities and
Exchange Commission (the "Commission"). Officers, directors and greater
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<PAGE> 8
than 10% beneficial owner are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
David K. Grant, Executive Vice President of the Company, filed a late
report on Form 4 with respect to a purchase of shares on behalf of his
grandfather. 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 1994
fiscal year all other filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with by such persons.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1995, certain
information with respect to the beneficial ownership of shares of Common Stock
by each director and executive officer of the Company and all directors and
executive officers of the Company as a group. Except as otherwise noted, the
Company believes that the beneficial owners of the shares of Common Stock
listed below, based on information furnished by such owners, have sole voting
and investment power with respect to such shares. As of March 31, 1995, to the
Company's knowledge no stockholder beneficially owned more than 5% of the
shares of Class A Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP CLASS
- ------------------------------ -------------------- -------------------- ----------
<S> <C> <C> <C>
Charles K. Barbo Class A Common Stock 612,811(1) 3.4%
1201 Third Avenue, Suite 2200 Class B Common Stock 76,529(2) 49.5%
Seattle, WA 98101
Arthur W. Buerk Class A Common Stock 354,868 1.9%
3831 49th N.E. Class B Common Stock 76,529(2) 49.5%
Seattle, WA 98105
Michael Rowe Class A Common Stock 68,888(3) *
David K. Grant Class A Common Stock 53,010(4) *
Harrell L. Beck Class A Common Stock 18,698(5) *
Kristin H. Stred Class A Common Stock 6,533(6) *
Dan Kourkoumelis Class A Common Stock -- --
Donald W. Lusk Class A Common Stock 200 *
Wendell J. Smith Class A Common Stock 300 *
All directors and executive officers
as a group (8 persons) Class A Common Stock 760,439 4.2%
Class B Common Stock 76,529(2) 49.5%
</TABLE>
_______________
* Less than 1%.
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<PAGE> 9
(1) Includes 2,669 shares held for Mr. Barbo's individual account under the
Company's Employee Retirement Savings Plan and 3,900 shares held by trusts
under which Mr. Barbo is the trustee and a beneficiary.
(2) Class B Common Stock entitled each of Messrs. Barbo and Buerk to a loan in
an amount necessary to satisfy his general partner capital obligations
resulting from the Consolidation. Class B Common Stock is convertible into
Class A Common Stock at a one- to-one ratio upon repayment of the loan.
(3) Includes 400 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 2,499 shares held for Mr.
Rowe's individual account under the Company's Employee Retirement Savings
Plan.
(4) Includes 400 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 1,963 shares held for Mr.
Grant's individual account under the Company's Employee Retirement Savings
Plan.
(5) Includes 400 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 1,805 shares held for Mr.
Beck's individual account under the Company's Employee Retirement Savings
Plan.
(6) Includes 400 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days.
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report has been provided by the Compensation Committee
(the "Committee") of the Board of Directors. The Committee is composed of
three nonemployee directors.
The Company commenced operations on March 1, 1994 upon the closing of
the Consolidation, and on March 28, 1994 its Class A Common Stock began public
trading on the Nasdaq National Market. On March 24, 1995, the Management
Company merged with the Company, and the Company became self-administered and
self-managed.
Although the executive officers named in the Summary Compensation
Table are executive officers of the Company, their cash compensation (base
salary and bonus) for 1994 was paid entirely by the Management Company.
Accordingly, the Committee made no recommendations with respect to cash
compensation paid to the Company's executive officers by the Management Company
for 1994. In addition, the base salaries of the executive officers for 1995
were set by the Management Company and were not adjusted by the Committee in
connection with the Merger. In conformity with the past practice of the
Management Company, the Committee expects to award discretionary year-end cash
bonuses to executive officers (other than the Chief Executive Officer) for 1995
performance based on recommendations from the Company's Chief Executive Officer
and to consider separately a discretionary year-end bonus for the Chief
Executive Officer.
The Company provides long-term incentive compensation to its executive
officers through the grant of stock options. The Compensation Committee is
responsible for administering the Company's stock option program. The
Committee generally reviews with the Chief Executive Officer the recommended
individual awards, based on the recipient's position, performance,
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<PAGE> 10
responsibilities and contributions. The Committee in 1994 also considered the
number of Management Company options granted in prior years. As discussed
under "Proposal to Approve the 1995 Incentive Plan," the Board of Directors has
adopted the 1995 Incentive Plan, subject to stockholder approval at the 1995
Annual Meeting. If the 1995 Incentive Plan is approved by the stockholders,
the Committee will be authorized to award additional forms of long-term
incentive compensation, including stock appreciation rights, stock awards
(including restricted stock), performance awards, other stock-based awards and
dividend equivalent rights.
Under a 1993 amendment to the Internal Revenue Code and proposed new
federal tax regulations, publicly traded companies are prohibited from
receiving a tax deduction for compensation in excess of $1 million paid to the
chief executive officer or any of its four other most highly compensated
executive officers for any fiscal year. The prohibition does not apply to
certain performance-based compensation. The Company's stock option plans have
been structured in such a way that the Committee expects option grants under
the plan to be treated as performance-based compensation that may be excluded
from the deductibility limit. At this time, the Company's executive officer
compensation which is subject to the deductibility limit does not exceed $1
million and, in the Committee's view, is not likely to be affected by the new
nondeductibility rules in the near future.
COMPENSATION COMMITTEE
Donald W. Lusk, Chairman
Dan Kourkoumelis
Wendell J. Smith
STOCK PRICE PERFORMANCE
Set forth below are line graphs comparing the cumulative total return
on the Class A Common Stock during the period beginning on March 28, 1994 and
ending on December 31, 1994, the last day of the Company's 1994 fiscal year,
with the cumulative total return on the Standard & Poor's 500 Index and the
Equity REIT Index prepared by the National Association of Real Estate
Investment Trusts. The comparison assumes $100 was invested on March 28, 1994
and assumes reinvestment of dividends. The stock price performance shown on the
graphs are not necessarily indicative of future price performance.
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<PAGE> 11
The first line graph assumes that the shares of Class A Common Stock
were bought at the Net Asset Value per share of $18.90 contemplated in the
Consolidation. The "Net Asset Value" was the value of the assets, determined
by independent appraisal, less the liabilities (including transaction costs and
liabilities) of the 17 limited partnerships participating in the Consolidation.
Because this was the economic basis for the Consolidation, the Company believes
that this represents the most appropriate starting point for a line graph
comparison.
The second line graph assumes that the shares of Class A Common Stock
were bought at the initial trading price on March 28, 1994, the first day that
the Class A Common Stock was publicly traded. On that day, the stock initially
traded at $23.25 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHURGARD STORAGE CENTERS, INC.,
STANDARD & POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON NET ASSET VALUE)
<TABLE>
<CAPTION>
28-Mar-94 31-Dec-94
--------- ---------
<S> <C> <C>
Shurgard $100 $115.20
S&P 500 $100 $105.30
NAREIT Equity $100 $ 99.80
</TABLE>
COMPARISON OF CUMULATIVE TOTAL
RETURN AMONG SHURGARD STORAGE CENTERS, INC.,
STANDARD & POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON INITIAL TRADING PRICE)
<TABLE>
<CAPTION>
28-Mar-94 31-Dec-94
--------- ---------
<S> <C> <C>
Shurgard $100 $ 93.60
S&P 500 $100 $105.30
NAREIT Equity $100 $ 99.80
</TABLE>
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<PAGE> 12
COMPENSATION OF EXECUTIVES
The following table sets forth the compensation for services rendered
during the fiscal years ended December 31, 1994 and 1993, for Charles K. Barbo,
who was appointed Chairman of the Board, President and Chief Executive Officer
of the Company in connection with the Merger, and for the four other most
highly compensated executive officers of the Company following the Merger.
Although certain of the individuals named below served as directors or officers
of the Company prior to the Merger, they did not receive any cash compensation
for such services from the Company but instead were compensated by the
Management Company. Accordingly, all dollar amounts shown were paid by the
Management Company and, except as indicated otherwise, all options shown were
options to purchase shares of common stock of the Management Company (the
"Management Company Common Stock").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ------------
SHARES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
- --------------------------------- ---- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Charles K. Barbo 1994 $155,000 $30,000 -- $ 200
Chairman, President and Chief 1993 $150,000 $25,000 -- $2,316
Executive Officer
Michael Rowe 1994 $103,000 $24,000 2,000(3) $7,043
Executive Vice President and 1993 $100,000 $30,340 10,000(4) $8,999
Director of Storage Operations
David K. Grant 1994 $103,000 $24,000 2,000(3) $5,888
Executive Vice President and 1993 $100,000 $15,000 10,000(4) $7,844
Director of Real Estate Investment
Harrell L. Beck 1994 $ 80,000 $24,000 2,000(3) $1,217
Director, Senior Vice President, 1993 $ 75,000 $15,000 10,000(4) $1,217
Chief Financial Officer and
Treasurer
Kristin H. Stred 1994 $ 80,000 $24,000 2,000(3) $1,087
Senior Vice President, General 1993 $ 75,000 $15,000 7,500(4) $1,057
Counsel and Secretary
- ---------------
</TABLE>
(1) Includes bonus awards earned pursuant to the terms of discretionary bonus,
incentive compensation and profit-sharing arrangements.
(2) For the year ended December 31, 1994, with respect to each person, includes
employer-matching contributions made by the Management Company under its
Employee Retirement Savings Plan of $200 per person, with respect to each
of Messrs. Rowe and Grant, includes $5,688 relating to interests in
Management Company cash distributions from investments in certain
partnerships, and, with respect to Messrs. Rowe and Beck and Ms. Stred,
includes payments of $1,155, $1,017 and $887, respectively, paid annually
towards insurance premiums on an executive disability plan.
(3) Represents options to purchase shares of Class A Common Stock granted by
the Company.
(4) Represents Management Company options, all of which were exercised prior to
the Merger.
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<PAGE> 13
OPTION GRANTS
The following table sets forth certain information regarding options
to purchase shares of Class A Common Stock granted to the Company's executive
officers during the fiscal year ended December 31, 1994. Such individuals were
not granted any options to purchase shares of Management Company Common Stock
during the fiscal year ended December 31, 1994.
OPTION GRANTS IN FISCAL 1994
<TABLE>
<CAPTION> INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------ VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- ------------------ ------------- -------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo -- -- -- -- -- --
Michael Rowe 2,000 25% $18.90 3/17/04 $23,772 $60,243
David K. Grant 2,000 25% $18.90 3/17/04 $23,772 $60,243
Harrell L. Beck 2,000 25% $18.90 3/17/04 $23,772 $60,243
Kristin H. Stred 2,000 25% $18.90 3/17/04 $23,772 $60,243
All Stockholders N/A N/A N/A N/A $94,154,817 $208,057,522
----------- ------------
</TABLE>
_________________
(1) Options were granted at the fair market value on the date of grant, which
was the value per share of the partnership assets, less liabilities,
included in the Consolidation. Each option vests in annual installments of
20%, commencing on the first anniversary of the date of grant. In the
event of certain business combinations, the vesting of outstanding options
will be accelerated. See "Executive Compensation-Employment Agreements;
Change-in-Control Arrangements."
(2) The Company did not have any employees during the fiscal year ended
December 31, 1994. As shown in this table, option grants were made to
officers of the Company.
(3) The actual value, if any, the named executive officer or any other
individual may realize will depend on the excess of the stock price over
the exercise price on the date the option is exercised. The gain for "All
Stockholders" is calculated by using $20.25, the average of the high and
low sale prices per share of Class A Common Stock as reported by the Nasdaq
National Market on December 30, 1994, and 16,829,283 shares, the number of
shares of Class A Common Stock outstanding as of the Company's fiscal
year-end. There can be no assurance that the actual value per share
realized by the named executive officer or by all stockholders will
approximate the potential realizable values set forth in the table.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information as of December 31,
1994 regarding options to purchase shares of Management Company Common Stock
held by the Company's executive officers. No such options were exercised
during the fiscal year ended December 31, 1994.
-10-
<PAGE> 14
AGGREGATED FISCAL 1994 YEAR-END VALUES
FOR MANAGEMENT COMPANY OPTIONS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#)(1) AT FISCAL YEAR-END($)(2)
--------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles K. Barbo -- -- -- --
Michael Rowe 5,333 18,667 $27,450 $80,268
David K. Grant 2,666 17,334 $13,455 $73,205
Harrell L. Beck 5,333 17,667 $27,450 $76,079
Kristin H. Stred -- 7,500 -- $31,050
- ---------------
</TABLE>
(1) All Management Company options (whether exercisable or unexercisable as of
December 31, 1994) were exercised prior to the Merger. Shares acquired on
exercise were converted into the Merger consideration.
(2) The value was calculated by multiplying the number of shares of Management
Company Common Stock issuable upon exercise of the options by the number of
shares of Class A Common Stock each share of Management Company Common
Stock was converted into in the Merger, then multiplying the result by the
closing price of the Class A Common Stock on December 31, 1994, and
deducting the aggregate exercise price of the options from the result.
-11-
<PAGE> 15
The following table sets forth certain information as of December 31,
1994 regarding options to purchase shares of Class A Common Stock held by the
Company's executive officers. No such options were exercised during the fiscal
year ended December 31, 1994.
AGGREGATED FISCAL 1994 YEAR-END VALUES
FOR COMPANY OPTIONS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
--------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles K. Barbo -- -- -- --
Michael Rowe (2) -- 2,000 -- $3,700
David K. Grant (2) -- 2,000 -- $3,700
Harrell L. Beck (2) -- 2,000 -- $3,700
Kristin H. Stred (2) -- 2,000 -- $3,700
- ---------------
</TABLE>
(1) This amount is the aggregate number of outstanding options multiplied by
the difference between the fair market value of Class A Common Stock as of
December 31, 1994 and the exercise price of such options.
(2) On March 17, 1995, 400 of the 2,000 shares granted became exercisable.
EMPLOYMENT AGREEMENTS; CHANGE-IN-CONTROL ARRANGEMENTS
1993 Stock Option Plan. The 1993 Stock Option Plan (the "1993 Plan")
provides that, upon the occurrence of certain transactions, including certain
mergers and other business combinations involving the Company, outstanding
options will become fully exercisable. Such options, if not exercised, will
then terminate upon consummation of such transaction. In the alternative, at
the discretion of the Company and the corporation(s) participating in such
transactions, such options may be assumed by the acquiring or surviving
corporation.
1995 Incentive Plan. In the event of certain mergers or
consolidations involving the Company, a sale, lease, exchange or other transfer
of all or substantially all of the Company's assets or a liquidation or
dissolution of the Company, outstanding options, stock appreciation rights and
restricted stock under the 1995 Incentive Plan will become fully exercisable,
subject to certain exceptions. In addition, the Committee may take such
further action as it deems necessary or advisable, and fair to participants,
with respect to outstanding awards under the 1995 Incentive Plan. See
"Proposal to Approve the 1995 Incentive Plan."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 1, 1994, as a part of the Consolidation approved by limited
partners, the Company made a $1,981,000 interest-free loan to Mr. Barbo to
enable him to make certain capital contributions that were required in
connection with the Consolidation. Mr. Barbo's shares of Class B Common
Stock" have been pledged as collateral for the loan. Upon repayment of the
loan,
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<PAGE> 16
a percentage of the Class B Common Stock equal to the percentage of the loan
principal being repaid will be released from the pledge and Mr. Barbo will then
have the option to convert his Class B Common Stock, on a share-for-share
basis, into Class A Common Stock.
On March 24, 1995, the Management Company was merged into the Company
following a favorable vote of the stockholders of the Company on March 21,
1995. In the Merger, the Company issued 1,266,837 new shares of Class A Common
Stock to the Management Company shareholders and an additional 282,572 shares
that replaced shares previously owned by the Management Company. The average
of the closing prices of the Class A Common Stock on the Nasdaq National Market
for the 30 trading days before the date of the Merger was $22.80, resulting in
an aggregate Merger consideration of $28,884,000 (1,266,837 new shares times
$22.80 per share). The Company's independent directors negotiated the
transaction on behalf of the Company and, based in part on a fairness opinion
rendered by Alex. Brown & Sons Incorporated, unanimously approved the Merger
and recommended that the Company's stockholders vote for it.
Messrs. Beck, Grant and Rowe and Ms. Stred, the Company's executive
officers at the time of the Merger, were also executive officers of the
Management Company and held 1.2%, 3.2%, 4.3% and .4%, respectively, of its
outstanding stock before the Merger. In addition, Charles K. Barbo, who was an
executive officer of the Management Company and held 37.1% of its outstanding
stock before the Merger, was appointed as Chairman of the Board and an
executive officer of the Company on the closing of the Merger.
In the Merger, Messrs. Barbo, Beck, Grant and Rowe and Ms. Stred
received 574,867 shares, 18,139 shares, 48,963 shares, 67,166 shares and 5,833
shares, respectively, in exchange for shares of Management Company Common
Stock. Of such shares, (i) 24,833 shares were attributable to shares acquired
immediately before the Merger at an average cost of $9.99 per share on exercise
of Management Company stock options granted to such executive officers (except
Mr. Barbo), of which 20,389 shares were attributable to options the vesting of
which was accelerated in connection with the Merger, and (ii) 20,666 shares
were attributable to stock bonuses awarded to such executive officers (except
Mr. Barbo) by the Management Company immediately before the Merger. Such
bonuses were part of the general grants and awards to Management Company
employees. In addition, pursuant to the Merger Agreement, Management Company
shareholders (including the Company's executive officers) will be entitled to
receive additional shares of Class A Common Stock, pro rata in proportion to
their ownership interests in the Management Company, based on (i) the extent to
which, during the five years following the Merger, the Company realizes value
as a result of certain transactions relating to interests in or assets of six
limited partnerships acquired by the Company in the Merger and (ii) the value,
at the end of five years or in the event of a change of control, of any
remaining interests in such partnerships as determined by independent
appraisal. The Company also agreed that it will provide for limitation of
director liability and indemnification of the Management Company's directors,
officers, employees and agents at least to the extent that such persons are
entitled thereto under the Management Company's Articles of Incorporation and
Bylaws.
Before the Merger, InterMation, Inc. ("InterMation"), a wholly owned
subsidiary of the Management Company operating a records storage business, was
distributed to the Management Company shareholders (including the Company's
executive officers) in proportion to their ownership interests in the
Management Company, because its revenue constitutes nonqualifying income for a
real estate investment trust ("REIT") for federal income tax purposes. Messrs.
Barbo
-13-
<PAGE> 17
and Rowe are directors of InterMation. The Company owned one facility engaged
in the records storage business, which was managed by InterMation. In March
1995, the Company reached an agreement with InterMation to sell this records
storage business to InterMation for approximately $575,000 and lease the
facility to InterMation at a monthly rental of approximately $23,000. The
lease term is for three years, with two five-year options, although either
party may terminate the lease on 18 months' notice. The purchase price is
evidenced by a note bearing interest at 10% per annum, providing for monthly
principal and interest of $70,000 and full payment upon expiration of the
lease.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors has approved, and recommends that the
stockholders adopt, an amendment to the Company's Certificate of Incorporation
that would divide the Board of Directors into three classes with staggered
terms. The proposal would amend Article 6 of the Certificate of Incorporation
in its entirety to read as follows:
The Board of Directors shall be composed of not fewer
than three nor more than nine Directors, the specific number
to be set by resolution of the Board of Directors; provided
that the Board of Directors may be less than three until
vacancies are filled. No decrease in the number of Directors
shall have the effect of shortening the term of any incumbent
Director. The Board of Directors shall be divided into three
classes, with the classes to be as equal in number as may be
possible, with any Director or Directors in excess of the
number divisible by three being assigned to Class 3 and Class
2, as the case may be. At the 1995 annual meeting of
stockholders, the following classes shall be elected for the
terms set forth below:
<TABLE>
<CAPTION>
Class Term
----- ----
<S> <C>
Class 1 1 year
Class 2 2 years
Class 3 3 years
</TABLE>
At each annual meeting of stockholders following the
1995 annual meeting, the number of Directors equal to the
number of Directors in the class whose term expires at the
time of such meeting shall be elected to serve until the third
ensuing annual meeting of stockholders. Unless a Director
dies, resigns or is removed, he or she shall hold office for
the term elected or until his or her successor is elected and
qualified, whichever is later. Directors may be removed only
for cause. Directors need not be stockholders of this
corporation or residents of the State of Delaware. Written
ballots are not required in the election of Directors.
-14-
<PAGE> 18
Notwithstanding anything to the contrary in Article
11, any amendment or modification of this Article 6 shall
require the affirmative vote of the holders of two-thirds of
the outstanding shares entitled to vote at an election of
Directors; provided, however, that the number of Directors may
be increased above nine by the affirmative vote of two-thirds
of the Continuing Directors then in office. "Continuing
Directors" means the Directors who are members of the Board of
Directors immediately following the 1995 annual meeting of
stockholders and each new Director nominated or elected by a
majority of the Continuing Directors.
The Board of Directors recommends that the Certificate of
Incorporation be amended to divide the Board of Directors into three classes,
as nearly equal in size as possible. Except during the initial phase-in
period, the term of office of the directors of each class will expire at the
third annual meeting after their election. Under Delaware law, a director
appointed by the Board of Directors to fill a vancancy shall hold office until
the next election of directors of the class for which such director was
appointed. This proposal is intended to provide continuity and stability to
the Company's management by increasing the effort necessary for a substantial
stockholder to gain control of the Board of Directors. Although the Company
has not yet experienced problems with respect to continuity, the Company has
been a public company only since March 1994 and its Common Stock is very widely
held. Adoption of this proposal will make it more difficult to change the
composition of the Board of Directors. In its present form the Certificate of
Incorporation requires that the entire Board of Directors stand for election
each year, so that it would take only one year for the Board of Directors to be
replaced. Following adoption of the proposal, at least two annual meetings, or
a special meeting called for the purpose of removing the directors, will be
required to effect a change in the majority of the Board of Directors.
Under Delaware law, the directors of a nonclassified board may be
removed by the stockholders with or without cause. If the proposal for a
classified board is adopted, the directors may be removed by the stockholders
only for cause. The provision for a classified board may be amended or
repealed only by the affirmative vote of the holders of two-thirds of the
outstanding shares entitled to vote in the election of directors, although the
affirmative vote of the holders of a majority of outstanding Common Stock is
sufficient to adopt the proposal.
While the Board of Directors believes that the proposed amendment to
the Certificate of Incorporation should be adopted for the reasons set forth
above, the Board of Directors is aware that the proposed amendment may have
potential antitakeover effects. Dividing the Board of Directors into three
classes with staggered terms will make it more difficult for stockholders to
change a majority of current directors. This provision is effective without
regard to whether a change in control has occurred or is occurring, and
therefore may also have the effect of preventing stockholders from replacing
directors for reasons unrelated to the control of the Company. The Company is
not aware, however, of any effort to accumulate its securities or to gain
control of it at this time.
The Company's Certificate of Incorporation also contains other
provisions that may limit or prevent a change in control of the Company.
Article 4 of the Certificate of Incorporation provides that the authorized
capital of the Company consists of 120,000,000 shares of Class A Common Stock,
500,000 shares of Class B Common Stock, 160,000,000 shares of Excess Stock and
40,000,000 shares of preferred stock. The Board of Directors may issue, from
time to time,
-15-
<PAGE> 19
one or more classes or series of preferred stock with such designations and
preferences, relative voting and other rights as it deems appropriate without
the approval of the Company's stockholders. The Board of Directors, by issuing
such common or preferred stock in one or more classes or series, could
adversely affect the voting power of the outstanding shares of Common Stock and
discourage any attempt to gain control of the Company.
The Certificate of Incorporation provides that the Company may prevent
the transfer and/or call for redemption of shares of the Company (whether
Common Stock or preferred stock) if more than 50% of the outstanding shares
would be owned, directly or indirectly, by five or fewer individuals or if one
person would own, directly or indirectly, more than 9.8% of the total
outstanding shares (or such higher percentage as may be determined by the Board
of Directors (the "Ownership Limit")). In addition, the Company may prevent
such transfers and/or calls for redemption of such shares if the Board of
Directors determines in good faith that the shares have or may become
concentrated to an extent that may prevent the Company from qualifying as a
REIT. The provisions authorizing the Company to prevent the transfer of shares
is affected by a proposed amendment to the Certificate of Incorporation
required by the New York Stock Exchange. See "Proposal to Amend the Company's
Certificate of Incorporation-New York Stock Exchange Requirements." If,
despite the restrictions noted above, any person acquires shares in excess of
the Ownership Limit (applying certain constructive ownership provisions), the
shares most recently acquired by such person in excess of the Ownership Limit
will be automatically exchanged for an equal number of shares of Excess Stock.
Holders of Excess Stock are not entitled to vote or to receive dividends or
distributions and Excess Stock is not counted for quorum purposes. For a
period of 120 days following the Company's first knowledge that the Excess
Stock has been created, the Company has the right to acquire, acquire and sell,
or cause the owner to sell, the Excess Stock. The price for the Excess Stock
will be the lesser of the market price of the Class A Common Stock as of the
date the Company or its designee acquired the Excess Stock or the price paid by
the owner or, if no purchase price was paid, the market value of Class A Common
Stock on the date of acquisition. Upon such transfer or sale, the Excess Stock
will automatically convert to Class A Common Stock.
In March 1994, the Company adopted a stockholder rights plan (the
"Rights Plan"), declaring a dividend of one preferred share purchase right (the
"Rights") for each outstanding share of Common Stock. Upon the earlier of the
close of business of the tenth business day after the date the Company learns
that a person or group (an "Acquiring Person") has acquired or obtained the
right to acquire beneficial ownership of 10% or more of the outstanding Common
Stock or the date designated by the Board of Directors following commencement
of, or first public disclosure of an intent to commence, a tender or exchange
offer for outstanding shares of Common Stock that could result in the offeror
becoming the beneficial owner of 10% or more of the outstanding shares of
Common Stock, each Right will become exercisable (other than by an Acquiring
Person) for one one-hundredth of a share of preferred stock of the Company or
may, at the election of the Board of Directors, be exchanged for shares of
preferred stock or Common Stock. In the event the Company is acquired, each
Right will represent the right to acquire shares of the acquiring or surviving
corporation or other entity.
Unless the certificate of incorporation provides otherwise, Delaware
law permits stockholders to take action in lieu of a meeting if written
consents are obtained from holders of shares sufficient to take such action at
a meeting. The Company's Certificate of Incorporation provides that action by
the stockholders in lieu of a meeting must be by unanimous written consent.
-16-
<PAGE> 20
The provisions in the Company's Certificate of Incorporation, the
Rights Plan and the proposed amendment may tend to deter any unfriendly tender
offers or other efforts to gain control of the Company and thereby deprive
stockholders of opportunities to sell shares at higher-than-market prices.
These provisions will also, however, tend to assure continuity of management
and policies and encourage those seeking control of the Company to negotiate
with management to reach terms acceptable to the Board of Directors. The
Company is not currently aware of any effort to accumulate its securities or to
gain control of the Company, nor is the proposed amendment to the Certificate
of Incorporation recommended to block any such effort.
As discussed above, the Company intends to implement the classified
Board of Directors provision immediately following the effective filing of such
amendment to the Company's Certificate of Incorporation.
NEW YORK STOCK EXCHANGE REQUIREMENTS
On May 5, 1995, the Class A Common Stock was listed on the New York
Stock Exchange. As a part of the listing process, the Company agreed to
recommend for approval by the stockholders an amendment to its Certificate of
Incorporation addressing settlement of transactions. The proposed amendment,
new Article 17, reads as follows:
Nothing in this Certificate of Incorporation shall preclude
the settlement of any transaction entered into through the facilities
of the New York Stock Exchange.
The purpose of the requirement is to protect the integrity of
transactions effected through the New York Stock Exchange and confirm that none
of the special provisions of the Certificate of Incorporation impairs or delays
such transactions. This provision will prevent the Company from blocking or
stopping transactions on the New York Stock Exchange, even where the
Certificate of Incorporation would otherwise authorize it to do so because the
purchase of shares in such transaction would endanger the Company's REIT
qualification. To protect such qualification, the Company will be required to
rely on alternative provisions of the Certificate of Incorporation that
authorize the Company to redeem certain shares or require that certain shares
be converted into Excess Stock. See "Proposal to Amend the Company's
Certificate of Incorporation - Classified Board of Directors." The Company
believes that the proposed amendment will not adversely affect the Company or
the objectives contemplated by the Certificate of Incorporation. The Board of
Directors, therefore, has proposed the amendment and recommends its adoption.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND
THE COMPANY'S CERTIFICATE OF INCORPORATION.
PROPOSAL TO AMEND THE COMPANY'S BY-LAWS
The Company's By-Laws were originally adopted in anticipation of the
Consolidation and at a time when the Company's business and properties were
managed by the Management Company. The By-Laws also reflect the history of the
Management Company (and its affiliates) as general partner of the limited
partnerships that combined to create the Company in the Consolidation and the
general restrictions placed on the activities of general partners in such
-17-
<PAGE> 21
circumstances. Many of these restrictions in turn reflect concerns over the
absence of independent review of general partner activity and the lack of
opportunities for limited partners to dispose of their investments if they
become dissatisfied with the general partner's performance. In addition,
number of existing By-Law provisions were designed to accomodate the California
regulations in order that the Company, as an externally-advised, non-stock
exchange listed company, could complete the Consolidation.
As a consequence of these factors, the By-Laws contain a number of
provisions designed to govern potential conflicts of interest between the
Company and the Management Company and to place detailed structural limits on
the activities and business affairs of the Company. By virtue of the Merger,
the Management Company was merged with the Company and the Company has become
self-managed and self-administered. Consequently, the Board of Directors
believes that the underlying reasons for a number of the special provisions in
the By-Laws are no longer persuasive. In addition, the Board of Directors
believes that well-established principles of Delaware corporate law regarding
the Board of Directors' responsibility to manage and supervise the business of
the Company and regarding procedural and substantive fairness with respect to
transactions involving conflicts of interest reduce the need for such By-Law
restrictions and limitations. The Board of Directors has also noted that the
Class A Common Stock has been trading on the Nasdaq National Market for more
than one year and is now listed on the New York Stock Exchange. These trading
markets have afforded former limited partners a measure of liquidity that they
did not enjoy before the Consolidation. Moreover, many of the provisions
designed to satisfy the California regulations are no longer required now that
the Company's stock is listed on the New York Stock Exchange. The objective of
such amendments is to place the Company in substantially the same position as
other publicly held companies regarding corporate governance.
Although the Merger has been completed, it is likely that there will
continue to be transactions in which certain executive officers have financial
interests. For example, Management Company shareholders are entitled to
receive additional shares of Class A Common Stock based on (i) the extent to
which, during the five-year period ending March 24, 2000, the Company realizes
value as a result of certain transactions relating to interests in or assets of
six limited partnerships acquired by the Company in the Merger and (ii) the
value, at March 24, 2000 or in the event of a change in control, of any
remaining interests in such partnerships as determined by independent
appraisal. The Company's executive officers are all former shareholders of the
Management Company and Mr. Barbo, in some cases, is directly or indirectly the
general partner of such partnerships. Proposals to acquire assets from one or
more of such partnerships would raise issues relating to conflicts of interest.
See "Executive Compensation--Certain Relationships and Related Transactions."
If the amendments to the By-Laws are approved, such potential conflicts of
interest and transactions will be governed by the various continuing provisions
of the By-Laws and by the principles of corporate governance under Delaware
corporate law referred to above.
A copy of the Amended and Restated By-Laws, as proposed to be amended,
is attached to this Proxy Statement as Appendix A. The proposed changes are
summarized below.
Elimination of Stockholder Approval for Amendments. The By-Laws
currently provide that a number of provisions may be amended only with the
approval of a majority of the outstanding shares of each class of stock
entitled to vote (currently Class A Common Stock and Class B Common Stock).
The sections covered by this provision include Sections 3.2 and 3.4 (as they
relate to the Independent Directors calling meetings of stockholders), Section
3.7.3 (relating to
-18-
<PAGE> 22
a written statement required to be furnished to stockholders in connection with
distributions), Sections 4.2 and 4.15 (as they relate to the independent
directors being a majority of the Board of Directors), Section 7.5 (relating to
transfers of shares jeopardizing the status of the Company as a REIT), Section
8.2 (relating to the timing and content of the annual report to stockholders),
Section 12.1.2 (relating to the Company's treatment as a REIT), Sections 12.5,
12.6, 12.7 and 12.8 (relating to investment policy and restrictions) and the
definitions in Section 1, to the extent that such definitions are to be used in
any of the sections referred to above.
Adoption of the amendments to the By-Laws would permit the Board of
Directors to amend any of the foregoing sections in the future without action
by the stockholders, although the stockholders would retain the right to amend
or alter the By-Laws at any time. Except as set forth below, the Board of
Directors does not have any present plans or intentions to amend the provisions
of the By-Laws discussed above. Specifically, the Board of Directors does not
have any present intention to change matters relating to Independent Directors,
continuation of the Company as a REIT or providing the stockholders with an
explanatory statement in connection with distributions.
While management and the Board of Directors believe that the policies
set forth in Article 12 of the By-Laws in large part remain the policies of the
Company and reflect the current views of the Board of Directors, they
nevertheless believe that it is desirable to give the Board additional
amendment flexibility in order to eliminate the possibility that such
provisions might restrict the ability of the Board to authorize activities that
it determines to be in the interests of the Company. The Company currently has
the visibility, and its stockholders have the market liquidity, afforded by a
New York Stock Exchange-listed company. The Company regularly sets forth in
its reports to investors its investment policies and goals, and information
concerning its capital raising (including borrowing) and other significant
activities, and is subject to the rules of the SEC relating to release of
public information concerning significant events, including any changes in its
investment policies. Accordingly, significant changes in investment policies
or restrictions contained in Article 12 would be promptly disclosed in a news
release or other filing available to investors, and any stockholders concerned
about such a change would have the ability promptly to sell his shares through
the facilities of the Stock Exchange.
Purchases of Property From an Interested Party. Section 12.6(b) of
the By-Laws presently includes provisions that, with respect to purchases of
property from an Interested Party (as defined in the By-Laws) (i) require that
the purchase price of such property be no greater than the cost of the selling
party unless the Directors have determined that there is substantial
justification for such excess and such excess is not unreasonable in amount and
(ii) prohibit the Company from acquiring such property if the purchase price to
be paid is in excess of its fair market value as determined by an independent
appraiser. The proposed amendments delete both provisions because the Board of
Directors believes that they are unnecessary in light of other requirements of
Section 12.6(b) that require the Independent Directors to find that the terms
of the transaction are fair and reasonable in any event. The Board of
Directors also believes that the specific limitations are unduly restrictive in
view of cyclical fluctuations in real estate values and the need for the
Company to respond effectively to property acquisition opportunities. The
appropriate purchase price for real property may depend on a variety of
factors, including strategic considerations (such as location in relation to
other Company properties), timing of the purchase in relation to cycles in real
estate values and the presence of competitive buyers bidding for the property.
In some circumstances, where comparable transactions for self-storage
properties are few, real estate appraisals may not be cost effective.
Moreover, it is unclear that the provision is
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<PAGE> 23
limited to real estate properties and "appraisals" may not be available or
appropriate for other types of properties. Under many circumstances,
therefore, appraised value may not be the appropriate measure of value to the
Company, but the requirement would nevertheless preclude the Company
realistically from acquiring the property. The Board of Directors believes
that it should be able to use other generally accepted methods of valuation in
such transactions, such as evaluating market data directly or relying on such
other forms of independent evaluations as fairness opinions.
Section 12.6(b) presently contains general restrictions designed to
protect the interests of the Company and its stockholders in cases where
property is acquired from Interested Parties. Specifically, no such
transaction may occur unless, after disclosure to the Board of Directors of the
Interested Party's interest in the proposed transaction, a majority of
directors not otherwise interested in such transaction (including a majority of
the Independent Directors) has determined that the property is being offered to
the Company on fair and reasonable terms. In addition, under Section 12.6(e),
in approving any transaction with an Interested Party, the Board of Directors
must make a determination that the transaction is fair, competitive and
commercially reasonable and on terms and conditions not less favorable to the
Company than those available from unaffiliated third parties. Such
transactions will also be subject to the requirements of Delaware corporate law
described above.
Appraisal Requirement for Mortgage Loans. Section 12.5(c)(i)
presently requires that the Company obtain an appraisal of the underlying
property securing any mortgage loan made by the Company, provided that such
appraisal is not necessary in the purchase of mortgage loans from a third party
if the Company's management has made certain findings. This section has been
amended to provide that obtaining appraisals in connection with mortgage loans
will be governed by the same standards that govern the direct acquisition of
properties as set forth in Section 12.2, which permits the Board of Directors
to decide whether to rely on market data otherwise available to it or to
require an appraisal.
Requirements Relating to Stock Option Plans. Section 12.5(i)
presently contains a number of detailed restrictions affecting stock option
plans, including a restriction to the effect that options may not be granted to
nonemployees or granted at prices below fair market value. The Board of
Directors believes that the specific terms of stock option plans should be
established independent of detailed requirements contained in the By-Laws
because employee compensation and incentive needs change over time and the
Company should be able to respond quickly to such needs. Many of the By-Law
requirements relate to tax requirements for incentive stock options. This
creates the potential problem that if the Internal Revenue Service (the "IRS")
changes its regulations, the Company would have to amend the By-Laws to match
the new IRS regulations. Because these regulations must be complied with even
in the absence of a By-Law provision, including these specific requirements in
the By-Laws is not necessary. In addition, in most instances the Internal
Revenue Code of 1986, as amended, (the "Code"), and the federal securities laws
provide strong incentives for the Company to submit stock option plans for
approval by the stockholders. For example, both the 1995 Incentive Plan and
the amendments to the Director Plan are submitted to a vote of the stockholders
at the 1995 Annual Meeting. The amended By-Laws, therefore, delete all
specific requirements for stock option plans except the requirement that
outstanding options may not exceed more than 10% of the Company's outstanding
stock.
Annual Report to Stockholders. Section 8.2 of the By-Laws currently
requires that the Company send an annual report to its stockholders within 120
days of its fiscal year-end. It also
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<PAGE> 24
requires that the annual report include a variety of specific information,
including the ratio of the costs of raising capital during the period to the
capital raised, a disclosure of transactions involving the Company and its
directors and their affiliates and comments from the Independent Directors on
the fairness of such transactions. The Board of Directors believes that these
specific requirements largely duplicate the requirements of the proxy rules and
other requirements under the federal securities laws and therefore can be
deleted without affecting information available to stockholders.
As indicated above, the Board of Directors does not currently
contemplate any other changes to the By-Laws that presently require approval of
the stockholders. If the proposed amendments to the By-Laws are adopted by the
stockholders, however, such changes could be made in the future if, in the
judgment of the Board of Directors, conditions warrant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APROVAL OF THE PROPOSAL TO AMEND
THE COMPANY'S BY-LAWS.
PROPOSAL TO APPROVE THE 1995 INCENTIVE PLAN
In July 1993, the Company adopted the 1993 Plan, which was amended and
restated in March 1995, pursuant to which it has reserved up to 5,000,000
shares of Class A Common Stock for issuance upon exercise of options granted
thereunder. On June 2, 1995, there were outstanding options to purchase
186,500 shares, of which options to purchase 98,000 shares were held by five
executive officers and options to purchase 88,500 shares were held by 33
employees. On June 2, 1995, there were approximately 600 full-time employees
of the Company The closing price of a share of Class A Common Stock on that
date, as reported in The Wall Street Journal for the NYSE--Composite
Transactions, was $___________.
The 1995 Incentive Plan was adopted by the Company's Board of
Directors on May 9, 1995, subject to approval by the Company's stockholders at
the 1995 Annual Meeting. The 1995 Incentive Plan is the successor to the
existing 1993 Plan. Upon approval by the stockholders, the 1995 Incentive Plan
will supersede the 1993 Plan and no further grants will be made under the 1993
Plan. A copy of the 1995 Incentive Plan is attached to this Proxy Statement as
Appendix B. The following description of the 1995 Incentive Plan is a summary
and does not purport to be fully descriptive. Reference is made to Appendix B
for more detailed information.
INTRODUCTION
The purpose of the 1995 Incentive Plan is to enhance the long-term
profitability and stockholder value of the Company by offering incentives and
rewards to those employees, consultants and agents of the Company and its
subsidiaries who are key to the Company's growth and success, and to encourage
them to remain in the service of the Company and its subsidiaries and to
acquire and maintain stock ownership in the Company.
The following are certain of the most significant differences between
the 1995 Incentive Plan and the 1993 Plan:
(a) In addition to options as authorized under the 1993 Plan, the
1995 Incentive Plan provides for stock appreciation rights, stock awards
(including restricted stock), performance awards, other stock-based awards and
dividend equivalent rights.
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<PAGE> 25
(b) The 1995 Incentive Plan requires mandatory acceleration in the
event of certain mergers and consolidations or a sale of substantially all the
assets or a liquidation of the Company, except where such awards are assumed or
replaced in the transaction.
(c) The 1995 Incentive Plan permits the plan administrator to
authorize loans, loan guarantees or installment payments to assist award
recipients in acquiring shares pursuant to awards and contains certain
limitations imposed by recent tax legislation.
(d) The 1995 Incentive Plan allows for grants to consultants and
agents, as well as officers and key employees of the Company.
AWARDS
The 1995 Incentive Plan provides for grants of stock options, stock
appreciation rights, stock awards (including restricted stock), performance
awards, other stock-based awards and dividend equivalent rights. Awards may be
made singly, in combination or in tandem so that the settlement or payment of
one automatically reduces or cancels the other. Awards may also be made in
combination or in tandem with, as alternatives to, or as the payment form for,
grants or rights under any other employee or compensation plan of the Company
or in substitution for, or by the assumption of, awards issued under plans of
an acquired entity.
Stock Subject to the 1995 Incentive Plan. For each calendar year from
and including 1995 through July 26, 2000, the number of shares of Class A
Common Stock that shall become authorized for issuance under the 1995 Incentive
Plan (the "authorized shares") shall be 2% of the Company's outstanding Class A
Common Stock (determined as the number of shares used by the Company to
calculate fully diluted earnings per share as reported in the annual report for
the preceding year). In addition, shares authorized for issuance in any
previous year but not actually issued will be added to the number of shares
that become authorized for issuance in any current year. No further awards
will be made under the 1993 Plan. No more than 610,000 shares may be issued as
stock awards (including restricted stock) or other stock-based awards under the
1995 Incentive Plan. Shares issued pursuant to the 1995 Incentive Plan will be
drawn from authorized and unissued shares or shares now held or subsequently
acquired by the Company as treasury shares.
Subject to adjustment from time to time as provided in the 1995
Incentive Plan, not more than 200,000 shares of Class A Common Stock may be
subject to awards under the 1995 Incentive Plan to any participant in the
aggregate over the term of the 1995 Incentive Plan, to the extent required for
compliance with certain provisions of Section 162(m) of the Code, which
precludes the Company from taking a tax deduction for compensation payments to
executives in excess of $1 million, unless such payments qualify for the
"performance-based" exemption from the $1 million limitation.
Any shares of Class A Common Stock that have been made subject to an
award that cease to be subject to the award (other than by reason of exercise
or payment of the award to the extent it is exercised for or settled in
shares), including, without limitation, in connection with the expiration,
surrender, cancellation or termination of an award, will be available for
issuance in connection with future grants of awards under the 1995 Incentive
Plan.
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<PAGE> 26
Eligibility to Receive Awards. Awards may be granted under the 1995
Incentive Plan to those officers and key employees (including directors who are
also employees) of the Company and its subsidiaries as the plan administrator
from time to time selects. Awards may also be made to consultants and agents
who provide services to the Company and its subsidiaries.
Terms and Conditions of Stock Option Grants. Options granted under
the 1995 Incentive Plan may be "incentive stock options" (as defined in Section
422 of the Code) or "nonqualified stock options." The option price for each
option granted under the 1995 Incentive Plan will be determined by the plan
administrator, but will be not less than 100% of the Class A Common Stock's
fair market value on the date of grant with respect to incentive stock options
and not less than 85% of fair market value with respect to nonqualified stock
options. For purposes of the 1995 Incentive Plan, "fair market value" means
the average of the high and low per share trading prices for the Class A Common
Stock as reported in The Wall Street Journal for the NYSE--Composite
Transactions for a single trading day.
The exercise price for shares purchased under options must be paid in
cash, except that the plan administrator may authorize payment in cash and/or
already-owned Class A Common Stock, a promissory note, delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker,
or such other consideration as the plan administrator may specify. The
optionee must pay to the Company applicable withholding taxes upon exercise of
the option as a condition to receiving the stock certificates. The withholding
tax may be paid in cash or by the withholding or delivery of Common Stock.
The option term will be fixed by the plan administrator. Each option
will be exercisable pursuant to a vesting schedule determined by the plan
administrator. If not so established, options generally will vest 20% per year
beginning one year after the date of grant. The plan administrator will also
determine the circumstances under which an option will be exercisable in the
event the optionee ceases to provide services to the Company or one of its
subsidiaries. If not so established, options generally will be exercisable for
three years after termination of services as a result of retirement, early
retirement at the Company's request, disability or death and for three months
after all other terminations. An option will not be exercisable if the
optionee's services are terminated for cause, as defined in the 1995 Incentive
Plan.
Stock Appreciation Rights. A stock appreciation right gives its
holder the right to receive an appreciation distribution from the Company equal
to the difference between the value of the Class A Common Stock subject to the
right at the time of exercise and the exercise price of the right. For stock
appreciation rights granted in tandem with options, the exercise price will be
the same as the option exercise price. For other stock appreciation rights,
the exercise price will be as determined by the plan administrator, but will
not be less than 85% of the fair market value of the Class A Common Stock on
the date the right was granted. The appreciation distribution will be paid in
shares of Class A Common Stock or cash or any combination of shares and cash,
as the plan administrator may determine. Unless otherwise provided by the plan
administrator, the provisions of the 1995 Incentive Plan regarding
exercisability of options after the termination of a holder's services shall
apply equally, to the extent applicable, to stock appreciation rights.
Stock Awards. The plan administrator is authorized to make awards of
Class A Common Stock to participants on such terms and conditions and subject
to such restrictions, if any (whether based on performance standards, periods
of service or otherwise), as the plan administrator may determine.
Restrictions may include repurchase or forfeiture rights in favor of the
Company.
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<PAGE> 27
Performance Awards. Performance awards may be denominated in cash,
shares of Common Stock or any combination thereof. The plan administrator is
authorized to determine the nature, length and starting date of the performance
period for each performance award and the performance objectives to be used in
valuing performance awards and determining the extent to which such performance
awards have been earned. Performance objectives and other terms may vary from
participant to participant and between groups of participants. Performance
objectives may include, but shall not be limited to, profits, profit growth,
profit-related return ratios, cash flow, total stockholder return, funds from
operations, customer service, employee satisfaction or performance against
budget, whether applicable to the Company or any relevant subsidiary or
business unit, comparisons with competitor companies or groups and with stock
market indices, or any combination thereof, as the plan administrator may deem
appropriate. The plan administrator will determine for each performance award
the range of dollar values or number of shares of Class A Common Stock, or a
combination thereof, to be received by the holder at the end of the performance
period if and to the extent that the relevant measures of performance for the
performance awards are met. The earned portion of a performance award may be
paid currently or on a deferred basis with such interest or earnings equivalent
as may be determined by the plan administrator.
The plan administrator may adjust the performance goals and
measurements applicable to performance awards to take into account changes in
law and accounting and tax rules and to make such adjustments as the plan
administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances. The plan administrator also may adjust the performance goals
and measurements applicable to performance awards and thereby reduce the amount
to be received by any holder pursuant to such awards if and to the extent that
the plan administrator deems it appropriate.
The plan administrator will determine the circumstances under which a
performance award will be payable if a holder ceases to provide services to the
Company. If not so established, a pro rata payment will be made at the end of
the performance period if the termination of services is a result of
retirement, early retirement at the Company's request, disability or death. A
termination of services for any other reasons will result in forfeiture of the
performance award unless otherwise determined by the plan administrator.
Other Stock-Based Awards. The plan administrator may grant other
stock-based awards under the 1995 Incentive Plan pursuant to which shares of
Class A Common Stock are or may in the future be acquired, or awards
denominated in stock units, including awards valued using measures other than
market value. Such other stock-based awards may be granted alone or in
addition to or in tandem with any award of any type granted under the 1995
Incentive Plan and must be consistent with the 1995 Incentive Plan's purpose.
Dividend Equivalent Rights. The plan administrator may grant dividend
equivalent rights that entitle the holder to be credited with an amount equal
to the cash or stock dividends or other distributions that would have been paid
on a specified number of shares of Class A Common Stock covered by such award
had such covered shares been issued and outstanding on a dividend record date.
The plan administrator may establish such rules and procedures governing the
crediting of dividend equivalent rights, including the timing, form of payment
and payment contingencies, as it deems are appropriate or necessary.
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<PAGE> 28
Loans, Loan Guarantees and Installment Payments. To assist a holder
(including a holder who is an officer or director of the Company) in acquiring
shares of Class A Common Stock pursuant to an award granted under the 1995
Incentive Plan, the plan administrator may authorize (a) the extension of a
loan to the holder by the Company, (b) the payment by the holder of the
purchase price, if any, of the Class A Common Stock in installments, or (c) the
guarantee by the Company of a loan obtained by the grantee from a third party.
The terms of any loans, installment payments or guarantees, including the
interest rate and terms of repayment, will be subject to the plan
administrator's discretion, and may be granted with or without security.
Transferability. No option, stock appreciation right, performance
award, other stock-based award or dividend equivalent right will be assignable
or otherwise transferable by the holder other than by will or the laws of
descent and distribution and, during the holder's lifetime, may be exercised
only by the holder, except, in the plan administrator's sole discretion, to the
extent permitted by Rule 16b-3 under the Exchange Act or Section 422 of the
Code.
Adjustment of Shares. In the event of any changes in the outstanding
stock of the Company by reason of stock dividends, stock splits, spinoffs,
combinations or exchanges of shares, recapitalizations, mergers,
consolidations, distributions to stockholders other than a normal cash
dividend, or other changes in the Company's corporate or capital structure, the
plan administrator, in its sole discretion, shall make any equitable
adjustments as it deems appropriate in (a) the maximum number of and class of
securities subject to the 1995 Incentive Plan, (b) the maximum number and class
of securities that may be made subject to awards to any participant, and (c)
the number and class of securities that are subject to any outstanding award
and the per share price of such securities, without any change in the aggregate
price to be paid therefor.
Corporate Transaction. In the event of certain mergers or
consolidations or a sale of substantially all the assets or a liquidation of
the Company, each option, stock appreciation right or stock award that is at
the time outstanding will automatically accelerate so that each such award
shall, immediately prior to such corporate transaction, become 100% vested,
except that such award will not so accelerate if and to the extent: (a) such
award is, in connection with the corporate transaction, either to be assumed by
the successor corporation or parent thereof or to be replaced with a comparable
award for the purchase of shares of the capital stock of the successor
corporation or its parent corporation or (b) such award is to be replaced with
a cash incentive program of the successor corporation that preserves the spread
existing at the time of the corporate transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such award.
Any such awards that are assumed or replaced in the corporate transaction and
do not otherwise accelerate at that time shall be accelerated in the event the
holder's employment or services should subsequently terminate within two years
following such corporate transaction, unless such employment or services are
terminated by the Company for cause or by the holder voluntarily without good
reason.
Further Adjustment of Awards. The plan administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the plan administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to holders, with respect to
awards. Such authorized action may include, but is not limited to,
establishing, amending or waiving the type, terms, conditions or duration of,
or restrictions on, awards so as to provide for earlier, later, extended or
additional time for exercise, payment or settlement or lifting restrictions,
differing methods for calculating payments or settlements, alternate forms and
amounts of payments and
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<PAGE> 29
settlements and other modifications, and the plan administrator may take such
actions with respect to all holders, to certain categories of holders or only
to individual holders. The plan administrator may take such actions before or
after granting awards to which the action relates and before or after any
public announcement with respect to such sale, merger, consolidation,
reorganization, liquidation or change in control that is the reason for such
action.
Administration. The 1995 Incentive Plan will be administered by the
Committee, except to the extent the Board of Directors appoints another
committee or committees consisting of one or more members of the Board of
Directors. The Board of Directors may delegate the responsibility for
administering the 1995 Incentive Plan with respect to designated classes of
eligible participants to different committees, subject to such limitations as
the Board of Directors deems appropriate. Committee members will serve for
such term as the Board of Directors may determine, subject to removal by the
Board of Directors at any time. The composition of any committee responsible
for administering the 1995 Incentive Plan with respect to officers and
directors of the Company who are subject to Section 16 of the Exchange Act with
respect to securities of the Company will comply with the requirements of Rule
16b-3 promulgated under Section 16(b) of the Exchange Act, or any successor
provision.
Amendment and Termination. The 1995 Incentive Plan may be terminated,
modified or amended by the stockholders of the Company. The Board of Directors
may also terminate the 1995 Incentive Plan, or modify or amend it, subject to
stockholder approval in certain instances, as set forth in the 1995 Incentive
Plan. No awards may be granted under the 1995 Plan after June 26, 2000.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to the Company and to any person
granted an award under the 1995 Incentive Plan under the existing applicable
provisions of the Code and the regulations thereunder are substantially as
follows. Under present law and regulations, no income will be recognized by a
participant upon the grant of stock options, stock appreciation rights, other
stock- based awards or performance awards.
Upon the exercise of a nonqualified stock option, the optionee will
recognize taxable ordinary income in an amount equal to the excess of the fair
market value of the shares acquired over the option price. Upon a later sale
of those shares, the optionee will have short-term or long-term capital gain or
loss, as the case may be, in an amount equal to the difference between the
amount realized on such sale and the tax basis of the shares sold. If payment
of the option price is made entirely in cash, the tax basis of the shares will
be equal to their fair market value on the exercise date (but not less than the
option price), and the shares' holding period will begin on the day after the
exercise date.
If the optionee uses already-owned shares to exercise an option in
whole or in part, the transaction will not be considered to be a taxable
disposition of the already-owned shares. The optionee's tax basis and holding
period of the already-owned shares will be carried over to the equivalent
number of shares received upon exercise. The tax basis of the additional
shares received upon exercise will be the fair market value of the shares on
the exercise date (but not less than the amount of cash, if any, used in
payment), and the holding period for such additional shares will begin on the
day after the exercise date.
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<PAGE> 30
The same rules apply to an incentive stock option that is exercised
more than three months after the optionee's termination of employment (or more
than 12 months thereafter in the case of permanent and total disability, as
defined in the Code).
Upon the exercise of an incentive stock option during employment or
within three months after the optionee's termination of employment (12 months
in the case of permanent and total disability, as defined in the Code), for
regular tax purposes the optionee will recognize no income at the time of
exercise (although the optionee will have income for alternative minimum income
tax purposes at that time as if the option were a nonqualified stock option)
and no deduction will be allowed to the Company for federal income tax purposes
in connection with the grant or exercise of the option. If the acquired shares
are sold or exchanged after the later of (a) one year from the date of exercise
of the option and (b) two years from the date of grant of the option, the
difference between the amount realized by the optionee on that sale or exchange
and the option price will be taxed to the optionee as a long- term capital gain
or loss. If the shares are disposed of before such holding period requirements
are satisfied, then the optionee will recognize taxable ordinary income in the
year of disposition in an amount equal to the excess, on the date of exercise
of the option, of the fair market value of the shares received over the option
price paid (or generally, if less, the excess of the amount realized on the
sale of the shares over the option price), and the optionee will have capital
gain or loss, long-term or short-term, as the case may be, in an amount equal
to the difference between (i) the amount realized by the optionee upon that
disposition of the shares and (ii) the option price paid by the optionee
increased by the amount of ordinary income, if any, so recognized by the
optionee.
Upon payment to a participant in settlement of a stock option or
pursuant to the exercise of stock appreciation rights or pursuant to another
stock-based award or a performance award, the participant will recognize
taxable ordinary income in an amount equal to the cash and the fair market
value of the Class A Common Stock received.
Special rules apply to a director or officer subject to liability
under Section 16(b) of the Exchange Act.
In all the foregoing cases the Company will be entitled to a deduction
at the same time and in the same amount as the participant recognizes ordinary
income, subject to the following limitations. Under Section 162(m) of the
Code, certain compensation payments in excess of $1 million are subject to a
limitation on deductibility for the Company. The limitation on deductibility
applies with respect to that portion of a compensation payment for a taxable
year in excess of $1 million to either the Company's Chief Executive Officer or
any one of the other four most highly compensated executive officers. Certain
performance- based compensation is not subject to the limitation on
deductibility. Options and stock appreciation rights can qualify for this
performance-based exception, but only if they are granted at fair market value,
the total number of shares that can be granted to an executive for any period
is stated, and stockholder and Board of Directors' approval is obtained.
Restricted stock grants and performance awards under the 1995 Incentive Plan
will not satisfy the performance-based criteria. The option and stock
appreciation right portions of the 1995 Incentive Plan have been drafted to
allow compliance with those performance-based criteria.
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<PAGE> 31
NEW PLAN BENEFITS
Since awards under the 1995 Incentive Plan will be discretionary,
awards thereunder for the current fiscal year are not presently determinable.
For purposes of comparison, the following table contains information about
awards made and benefits received from January 1, 1995 through June 2, 1995
under the 1993 Plan to the named executive officers and the groups indicated.
No stock options have been exercised to date. Approximately 39 persons have
received awards in 1995 under the 1993 Plan; it is not anticipated that the
total number of persons receiving awards in 1995 under the 1995 Incentive Plan
would be substantially greater. No nonemployee nominee for election as a
director received awards under the 1993 Plan in 1995.
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<PAGE> 32
BENEFITS UNDER 1993 PLAN IN 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
CLASS A COMMON STOCK AVERAGE EXERCISE PRICE
NAME UNDERLYING OPTIONS OF OPTIONS GRANTED
---------- -------------------- ----------------------
<S> <C> <C>
Charles K. Barbo . . . . . . . . . . . . . . 30,000 $23.00
Harrell L. Beck . . . . . . . . . . . . . . . 15,000 $20.75
Michael Rowe . . . . . . . . . . . . . . . . 15,000 $20.75
David K. Grant . . . . . . . . . . . . . . . 15,000 $20.75
Kristin H. Stred . . . . . . . . . . . . . . 15,000 $20.75
All executive officers as a group . . . . . . 90,000 $21.50
All other employees (including
all officers who are not
executive officers) as a group . . . . . 88,500 $23.00
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995 INCENTIVE
PLAN.
PROPOSAL TO AMEND THE STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
In July 1993, the Company adopted the Director Plan and reserved
20,000 shares of Class A Common Stock for issuance on exercise of options
thereunder. The Director Plan provides for the automatic grant of options to
purchase 400 shares at the time a person becomes a director and annually on the
day following the Company's annual meeting of stockholders.
The purposes of the Director Plan are to attract and retain the
services of experienced and knowledgeable nonemployee directors of the Company
and to provide an incentive for such directors to increase their proprietary
interest in the Company's long-term success and progress. The Company believes
that the existing automatic grant structure is inadequate to achieve these
objectives and is proposing that automatic grants be increased to 3,000 shares
and that the number of shares reserved for the Director Plan be increased to
200,000 shares, subject to adjustment in the event of stock dividends, stock
splits, recapitalizations, combinations or exchanges of shares, split-ups,
split-offs, spinoffs or other similar changes in capitalization. In addition,
the term of options granted under the Director Plan has been increased from
five years to 10 years.
A copy of the Director Plan as proposed to be amended is attached to
this Proxy Statement as Appendix C. Elected or appointed members of the Board
of Directors who are not otherwise employees of the Company or any parent or
subsidiary corporation (each, an "Eligible Director") may participate in the
Director Plan.
Administration. The administrator of the Director Plan (the "Director
Plan Administrator") is the Company's Board of Directors. Subject to the terms
of the Director Plan, the Director Plan Administrator has the power to construe
the provisions of the Director Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Director Plan as it may deem desirable.
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<PAGE> 33
Term and Vesting. Options vest at the next annual meeting of
stockholders following grant. Options expire on the earlier of 10 years from
the date of grant or one year after an Eligible Director's termination of
service as a director.
Option Exercise Price. The option exercise price for an option
granted under the Director Plan is the fair market value of the shares at the
time the option is granted. For purposes of the Director Plan, "fair market
value" is the closing price on the New York Stock Exchange on the day prior to
the date of grant or, in the case of the initial grants under the Director
Plan, the average price on the Nasdaq National Market for the 30 business days
immediately after the start of trading of the Class A Common Stock.
Amendment and Termination. The Board of Directors may amend,
terminate or suspend the Director Plan at any time, provided that no such
amendment shall be made without the approval of the Company's stockholders, if
such approval is required to comply with Rule 16b-3 under the Exchange Act.
Term. The Director Plan shall continue in effect until it is
terminated by action of the Board of Directors or the Company's stockholders,
but such termination shall not affect the then-outstanding terms of any
options.
Tax Consequences. The federal income tax consequences to the Company
and the Eligible Directors of the grant and exercise of options granted under
the Director Plan are the same as those applicable to employees receiving
nonqualified stock options under the 1995 Incentive Plan. See "Proposal to
Approve the 1995 Incentive Plan--Federal Income Tax Consequences."
Plan Benefits. Each of the three Eligible Directors who may continue
in office after the 1995 Annual Meeting (Messrs. Lusk, Smith and Kourkoumelis)
has received an initial grant of nonqualified stock options to purchase 400
shares and 3,000 shares of Class A Common Stock on March 9, 1994 and May 9,
1995, respectively. The exercise prices are $23.07 per share and $23.88 per
share, respectively, the fair market values per share on those dates.
Each Eligible Director who is elected at the 1995 Annual Meeting or at
an annual meeting of stockholders thereafter shall automatically receive an
option grant to purchase 3,000 shares of Class A Common Stock on the day after
such annual meeting. Each Eligible Director who is appointed or elected other
than at an annual meeting of stockholders shall, on the day of such appointment
or election, automatically receive an option grant to purchase 3,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSAL TO AMEND THE DIRECTOR PLAN.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, which audited the Company's accounts for the
last fiscal year, has been selected to continue as the Company's independent
auditor for the current fiscal year. Representatives of Deloitte & Touche LLP
are expected to attend the 1995 Annual Meeting and have an opportunity to make
a statement and/or respond to appropriate questions from stockholders.
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<PAGE> 34
SOLICITATION OF PROXIES
The proxy card accompanying this Proxy Statement is solicited by the
Board of Directors. Proxies may be solicited by officers, directors and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. D.F. King & Co., Inc.
may solicit proxies at an approximate cost of $____, plus reasonable expenses.
Such solicitations may be made personally, or by mail, facsimile, telephone,
telegraph or messenger. The Company will reimburse persons holding shares of
Common Stock in their names or in the names of nominees, but not owning such
shares beneficially, such as brokerage houses, banks and other fiduciaries, for
the expense of forwarding solicitation materials to their principals. All the
costs of soliciting proxies will be paid by the Company.
OTHER MATTERS
The Company knows of no other matters that are likely to be brought
before the 1995 Annual Meeting. If, however, other matters not now known or
determined come before the 1995 Annual Meeting, the persons named in the
enclosed proxy or their substitutes will vote such proxy in accordance with
their judgment in such matters.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders to be considered for inclusion in the Proxy
Statement and proxy card for the Company's 1996 Annual Meeting of Stockholders
must be received by the Secretary of the Company by February 1, 1995.
ANNUAL REPORT
A copy of the Company's 1994 Annual Report is being mailed with this
Proxy Statement to each stockholder of record. Additional copies of such
annual report may be obtained without charge by writing or calling Investor
Relations at (800) 955-2235.
By Order of the Board of Directors
Kristin H. Stred
Secretary
Seattle, Washington
June 14, 1995
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APPENDIX A
AMENDED AND RESTATED
BY-LAWS
OF
SHURGARD STORAGE CENTERS, INC.
Effective on July 26, 1995
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AMENDED AND RESTATED
BY-LAWS
OF
SHURGARD STORAGE CENTERS, INC.
SECTION 1. DEFINITIONS
Whenever used in these By-Laws, unless the context otherwise requires,
the terms defined in this Section 1 shall have the following respective
meanings:
"ADJUSTED NET WORTH" means the amount obtained by subtracting the
Corporation's total liabilities from its total assets as adjusted. The
Corporation shall reduce its total assets by such reasonable reserves as the
Board shall determine but shall not take into account depreciation or
amortization. Except as otherwise stated herein, the Corporation's total
assets and total liabilities shall be as shown on the Corporation's books,
which shall be prepared in accordance with generally accepted accounting
principles.
"AFFILIATE" of a Person means (a) any other Person directly or
indirectly controlling, controlled by or under common control with such Person,
(b) any other Person owning or controlling ten percent (10%) or more of the
outstanding voting securities of such Person, (c) any officer, Director or
partner of such Person, and (d) if such Person is an officer, Director or
partner, any company for which such Person acts as an officer, Director or
partner.
"ANCILLARY SERVICES" means any business activity rendered in
connection with, or incidental to, the Corporation's primary activity of
leasing its properties, generating revenues for the Corporation that would be
treated by the IRS as Nonqualifying Income, including, but not limited to, the
sale of goods and services to its tenants or others.
"ASSET COVERAGE" means the ratio (expressed as a percentage) which the
value of the Corporation's total assets, less all liabilities and indebtedness,
except indebtedness for unsecured borrowings, bears to the aggregate amount of
all unsecured borrowings of the Corporation.
"BOARD" means the Board of Directors of the Corporation, as
constituted from time to time.
"BY-LAWS" means the By-Laws of the Corporation, as in effect from time
to time.
"CHAIRMAN OF THE BOARD" shall have the meaning assigned to such term
in Sections 5.1 and 5.6 hereof.
"CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"COMMON STOCK" means the Class A Common Stock of the Corporation, par
value $.001 per share, the Class B Common Stock of the Corporation, par value
$.001 per share, and the Excess Stock of the Corporation, par value $.001 per
share.
"CONSOLIDATION" means the acquisition by the Corporation of
substantially all of the assets of each of the Partnerships, which was
effective on March 1, 1994.
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"CORPORATION" means Shurgard Storage Centers, Inc., a Delaware
corporation.
"DIRECTORS" means the directors of the Board.
"INDEBTEDNESS" of the Corporation means, as of the date the amount
thereof is to be determined, any and all amounts due on financial obligations
of the Corporation evidencing its obligations to repay funds borrowed to
finance the business and affairs of the Corporation, including, but not limited
to, the outstanding principal balance, accrued but unpaid interest, late fees
and penalties, or other obligations, due under any of the Corporation's debt
securities, commercial paper, notes, debentures, bonds, promissory notes,
revolving lines of credit, and credit and loan agreements. Indebtedness is
limited to amounts borrowed by the Corporation and does not include other
liabilities, such as accounts payable, lease obligations, liabilities and
claims incurred in the conduct of the Corporation's business, or the
liabilities of other companies or entities in which the Corporation may have
invested. In addition, "Indebtedness" includes any amounts borrowed by any
wholly owned subsidiaries of the Corporation.
"INDEBTEDNESS RESTRICTION" means the restriction placed upon the
Corporation's authority to borrow funds set forth in Section 12.7 hereof.
"INDEPENDENT DIRECTORS" means Directors who do not perform services
for the Corporation, except as Directors.
"INTERESTED PARTY" of the Corporation means a Director, an officer,
any Person owning or controlling ten percent (10%) or more of any class of
outstanding voting securities of the Corporation, or any Affiliate of any of
the aforementioned Persons, and, to the extent that any such Person proposes to
enter into a transaction with the Corporation, such transaction is subject to
the restrictions set forth in Section 12.6 hereof.
"IRS" means the Internal Revenue Service.
"MORTGAGE LOANS" means notes, debentures, bonds and other evidences of
indebtedness or obligations that are secured or collateralized by interests in
real property.
"NONQUALIFYING INCOME" means income not described in Section 856(c)(2)
of the Code, or any successor provision.
"OTHER SHURGARD PROGRAMS" means the real estate programs (other than
the Partnerships), whether organized as joint ventures, general partnerships,
limited partnerships or otherwise, which were organized by Shurgard or any of
the general partners of the Partnerships, and whose assets were managed by
Shurgard as of the date the Corporation was organized.
"OWN," "OWNER" or "OWNERSHIP" means a Person considered to "own"
Shares if such Person is treated as an owner of such Shares for purposes of the
REIT Provisions of the Code, including ownership provisions of Code Sections
542 and 544 (all as in effect from time to time).
"PARTNERSHIPS" means Shurgard Mini-Storage Limited Partnership I, a
Washington limited partnership; Shurgard Income Properties II, a Washington
limited partnership; Shurgard Income Properties III, A Real Estate Limited
Partnership, a Washington limited partnership; Shurgard Income
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Properties IV, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties V, A Real Estate Limited Partnership, a
Washington limited partnership; Shurgard Income Properties VI, A Real Estate
Limited Partnership, a Washington limited partnership; Shurgard Income
Properties VII, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties VIII, A Real Estate Limited
Partnership, a Washington limited partnership; Shurgard Income Properties IX, A
Real Estate Limited Partnership, a Washington limited partnership; Shurgard
Income Properties X, A Real Estate Limited Partnership, a Washington limited
partnership; Shurgard Income Properties XI, A Real Estate Limited Partnership,
a Washington limited partnership; Shurgard Income Properties XII, A Real Estate
Limited Partnership, a Washington limited partnership; Shurgard Income
Properties - Fund 14 Limited Partnership, a Delaware limited partnership;
Shurgard Growth Capital - Fund 15 Limited Partnership, a Delaware limited
partnership; Shurgard Income Properties - Fund 16 Limited Partnership, a
Delaware limited partnership; Shurgard Growth Capital - Fund 17 Limited
Partnership, a Delaware limited partnership; and Shurgard Income Properties -
Fund 18 Limited Partnership, a Delaware limited partnership. References to a
"Partnership" shall be understood to refer to any of the Partnerships.
"PERSON" means an individual, a corporation, limited partnership,
general partnership, joint stock company or an association, a joint venture,
trust, bank, trust company, land trust, business trust or an estate, or any
other entity and governmental agency and any political subdivision thereof.
"PREFERRED STOCK" means the shares of any series or any class of any
series of Preferred Stock authorized and created by the Board in accordance
with the terms and provisions of the Certificate of Incorporation of the
Corporation and the Delaware General Corporation Law.
"PRESIDENT" shall have the meaning assigned to such term in Sections
5.1 and 5.7 hereof.
"REIT" means a real estate investment trust as defined in Sections 856
to 860 of the Code.
"REIT PROVISIONS OF THE CODE" means Part II, Subchapter M of Chapter 1
of the Code, as now enacted or hereafter amended, or successor statutes,
relating to REITs.
"SECRETARY" shall have the meaning assigned to such term in Sections
5.1 and 5.9 hereof.
"SECURITIES" means any instruments commonly known as "securities,"
including stock, shares, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or any certificates of interest, shares or
participations, or warrants, options or rights to subscribe to, purchase or
acquire any of the foregoing.
"SHARES" means the Corporation's shares of stock, whether Common Stock
or Preferred Stock.
"SHURGARD" means Shurgard Incorporated, a Washington corporation.
"STOCKHOLDER" means a holder of the Shares of the Corporation's stock,
whether Common Stock or Preferred Stock.
"SUBSIDIARY" of a Person means an Affiliate controlled by such Person
directly or indirectly, through one or more intermediaries.
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"TOTAL ASSETS" of the Corporation means, as of the date the amount
thereof is to be determined, the greater of (a) the Corporation's total assets
computed in accordance with generally accepted accounting principles,
consistently applied (and which would be reflected on the Corporation's balance
sheet if such balance sheet were prepared as of such date), plus all
accumulated depreciation as of such date, and (b) the fair market value of the
Corporation's assets determined in accordance with guidelines established by
the Board, consistently applied. Notwithstanding the foregoing, the Board may
change the guidelines established for computing the fair market value of its
assets, pursuant to clause (b) of the preceding sentence, if such change is
made in good faith and not for the purpose of circumventing the restrictions
contained in the Indebtedness Restriction, and if applied retroactively would
not have prohibited the Corporation from borrowing any funds at the time such
funds were actually borrowed by the Corporation.
"TREASURER" shall have the meaning assigned to such term in Sections
5.1 and 5.10 hereof.
"UNIMPROVED REAL PROPERTY" means the property of a REIT which has the
following three (3) characteristics: (a) an equity interest in property which
was not acquired for the purpose of producing rental or other operating income,
(b) no development or construction is in progress on such land, and (c) no
development or construction on such land is planned in good faith to commence
within one (1) year of the property's acquisition by the Corporation or within
one (1) year of the Corporation's receipt of all necessary permits, licenses
and approvals to proceed with development or construction, provided that the
Corporation in good faith, following the acquisition of the land, proceeds to
apply for and pursue the issuance of all permits, licenses and approvals as may
be necessary, prudent or advisable for the development and or construction
planned for the land.
"VICE PRESIDENT" shall have the meaning assigned to such term in
Sections 5.1 and 5.8 hereof.
SECTION 2. OFFICES
The principal office of the Corporation shall be located at its
principal place of business or such other place as the Board may designate.
The Corporation may have such other offices, either within or without the State
of Delaware, as the Board may designate or as the business of the Corporation
may require from time to time.
SECTION 3. STOCKHOLDERS
3.1 ANNUAL MEETING
The annual meeting of the Stockholders shall be held the second
Tuesday in May in each year commencing in 1995 at the principal office of the
Corporation or such other place designated by the Board for the purpose of
electing Directors and transacting such other business as may properly come
before the meeting. If the day fixed for the annual meeting is a legal holiday
at the place of the meeting, the meeting shall be held on the next succeeding
business day. At any time prior to the commencement of the annual meeting, the
Board may postpone the annual meeting for a period of up to one hundred twenty
(120) days from the date fixed for such meeting in accordance with this Section
3.1. If the annual meeting is not held on the date designated therefor, the
Board shall cause the meeting to be held as soon thereafter as may be
convenient.
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3.2 SPECIAL MEETINGS
The Chairman of the Board, the President, the Board, a majority of the
Independent Directors or the holders of not less than ten percent (10%) of all
the outstanding Shares entitled to vote at the meeting may call special
meetings of the Stockholders for any purpose.
3.3 PLACE OF MEETING
All meetings shall be held at the principal office of the Corporation
or at such other place within or without the State of Delaware designated by
the Board, by any Persons entitled to call a meeting hereunder or in a waiver
of notice signed by all the Stockholders entitled to notice of the meeting.
3.4 NOTICE OF MEETING
The Chairman of the Board, the President, the Secretary, the Board,
the Independent Directors or Stockholders calling an annual or special meeting
of Stockholders as provided for herein shall cause to be delivered to each
Stockholder entitled to notice of or to vote at the meeting, either personally
or by mail, not less than ten (10) nor more than sixty (60) days before the
meeting, written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. At any time within ten (10) days after receipt of a written request of
the holders of not less than the number of outstanding Shares specified in
Section 3.2 hereof and entitled to vote at the meeting, it shall be the duty of
the Secretary to give notice of a special meeting of Stockholders to be held on
such date and at such place and hour as the Secretary may fix, not less than
ten (10) nor more than sixty (60) days after receipt of said request, and if
the Secretary shall neglect or refuse to issue such notice, the Person making
the request may do so and may fix the date for such meeting. If such notice is
mailed, it shall be deemed delivered when deposited in the official government
mail properly addressed to the Stockholder at the Stockholder's address as it
appears on the stock transfer books of the Corporation with postage prepaid.
If the notice is telegraphed, it shall be deemed delivered when the content of
the telegram is delivered to the telegraph company.
3.5 BUSINESS FOR STOCKHOLDERS' MEETINGS
3.5.1 BUSINESS AT ANNUAL MEETINGS
In addition to the election of Directors, other proper business may be
transacted at an annual meeting of Stockholders, provided that such business is
properly brought before such meeting. To be properly brought before an annual
meeting, business must be (a) brought by or at the direction of the Board or
(b) brought before the meeting by a Stockholder pursuant to written notice
thereof, in accordance with Section 3.5.3 hereof, and received by the Secretary
not fewer than sixty (60) nor more than ninety (90) days prior to the date
specified in Section 3.1 hereof for such annual meeting (or if less than sixty
(60) days' notice or prior public disclosure of the date of the annual meeting
is given or made to the Stockholders, not later than the tenth day following
the day on which the notice of the date of the annual meeting was mailed or
such public disclosure was made). Any Stockholder notice shall set forth (i)
the name and address of the Stockholder proposing such business; (ii) a
representation that the Stockholder is entitled to vote at such meeting and a
statement of the number of Shares of the Corporation which are beneficially
owned by the Stockholder; (iii) a representation that the Stockholder intends
to appear in person or by proxy at the meeting to propose such business; and
(iv) as to each
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matter the Stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, the language of the
proposal (if appropriate) and any material interest of the Stockholder in such
business. No business shall be conducted at any annual meeting of Stockholders
except in accordance with this Section 3.5.1. If the facts warrant, the Board,
or the chairman of an annual meeting of Stockholders, may determine and declare
that (a) a proposal does not constitute proper business to be transacted at the
meeting or (b) business was not properly brought before the meeting in
accordance with the provisions of this Section 3.5.1, and, if, in either case,
it is so determined, any such business not properly brought before the meeting
shall not be transacted. The procedures set forth in this Section 3.5.1 for
business to be properly brought before an annual meeting by a Stockholder are
in addition to, and not in lieu of, the requirements set forth in Rule 14a-8
under Section 14 of the Securities Exchange Act of 1934, as amended, or any
successor provision.
3.5.2 BUSINESS AT SPECIAL MEETINGS
At any special meeting of the Stockholders, only such business as is
specified in the notice of such special meeting given by or at the direction of
the Person or Persons calling such meeting, in accordance with Section 3.4
hereof, shall come before such meeting.
3.5.3 NOTICE TO CORPORATION
Any written notice required to be delivered by a Stockholder to the
Corporation pursuant to Section 3.4, Section 3.5.1 or Section 3.5.2 hereof must
be given, either by personal delivery or by registered or certified mail,
postage prepaid, to the Secretary at the Corporation's executive offices.
3.6 WAIVER OF NOTICE
3.6.1 IN WRITING
Whenever any notice is required to be given to any Stockholder under
the provisions of these By-Laws, the Certificate of Incorporation or the
Delaware General Corporation Law, a waiver thereof in writing, signed by the
Person or Persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
3.6.2 BY ATTENDANCE
The attendance of a Stockholder at a meeting shall constitute a
waiver of notice of such meeting, except when a Stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
3.7 FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
3.7.1 MEETINGS
For the purpose of determining Stockholders entitled to notice of and
to vote at any meeting of Stockholders or any adjournment thereof, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which record
date shall not be more than sixty (60) (or the maximum number permitted by
applicable law)
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nor less than ten (10) days before the date of such meeting. If no record date
is fixed by the Board, the record date for determining Stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
Stockholders of record entitled to notice of and to vote at the meeting of
Stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
3.7.2 CONSENT TO CORPORATE ACTION WITHOUT A MEETING
For the purpose of determining Stockholders entitled to consent to
corporate action in writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which date shall not be more than
ten (10) (or the maximum number permitted by applicable law) days after the
date upon which the resolution fixing the record date is adopted by the Board.
If no record date has been fixed by the Board, the record date for determining
Stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by Chapter 1 of the
Delaware General Corporation Law, as now or hereafter amended, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of Stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
and prior action by the Board is required by Chapter 1 of the Delaware General
Corporation Law, as now or hereafter amended, the record date for determining
Stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board adopts
the resolution taking such prior action.
3.7.3 DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS
The Board may, out of funds legally available therefor, at any regular
or special meeting, declare dividends upon the Shares as and when it deems
expedient. Before declaring any dividends there may be set apart out of any
funds of the Corporation available for dividends, such sums as the Board, from
time to time in its discretion, deems proper for working capital or as a
reserve fund to make contingencies or for equalizing dividends or for such
other purposes as the Board shall deem conducive to the interests of the
Corporation. For the purpose of determining Stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
Stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty (60) (or the maximum number permitted by
applicable law) days prior to such action. If no record date is fixed, the
record date for determining Stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto. Any distribution of income or capital assets of the Corporation to
Stockholders will be accompanied by a written statement disclosing the source
of the funds distributed. If, at the time of distribution, this information is
not available, a written explanation of the relevant circumstances will
accompany the distribution and a written statement disclosing the source of
funds distributed will be sent to the Stockholders not later than sixty (60)
days after the close of the fiscal year in which the distribution was made.
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3.8 VOTING LIST
At least ten (10) days before each meeting of Stockholders, a complete
list of the Stockholders entitled to vote at such meeting, or any adjournment
thereof, shall be made, arranged in alphabetical order, with the address of and
number of Shares held by each Stockholder. This list shall be open to
examination by any Stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. This list shall also be produced
and kept at such meeting for inspection by any Stockholder who is present.
3.9 QUORUM
A majority of the outstanding Shares entitled to vote, present in
Person or represented by proxy at the meeting, shall constitute a quorum at a
meeting of the Stockholders; provided, that where a separate vote by a class or
classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy at the meeting, shall
constitute a quorum entitled to take action with respect to that vote on that
matter. If less than a majority of the outstanding Shares entitled to vote are
represented at a meeting, a majority of the Shares so represented may adjourn
the meeting from time to time without further notice. If a quorum is present
or represented at a reconvened meeting following such an adjournment, any
business may be transacted that might have been transacted at the meeting as
originally called. The Stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Stockholders to leave less than a quorum.
3.10 MANNER OF ACTING
In all matters other than the election of Directors, if a quorum is
present, the affirmative vote of the majority of the outstanding Shares present
in Person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the Stockholders, unless the vote of a
greater number is required by these By-Laws, the Certificate of Incorporation
or the Delaware General Corporation Law. Where a separate vote by a class or
classes is required, if a quorum of such class or classes is present, the
affirmative vote of the majority of outstanding shares of such class or classes
present in Person or represented by proxy at the meeting shall be the act of
such class or classes. Directors shall be elected by a plurality of the votes
of the Shares present in Person or represented by proxy at the meeting and
entitled to vote on the election of Directors.
3.11 PROXIES
3.11.1 APPOINTMENT
Each Stockholder entitled to vote at a meeting of Stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another Person or Persons to act for such Stockholder by proxy. Such
authorization may be accomplished by (a) the Stockholder or such Stockholder's
authorized officer, Director, employee or agent executing a writing or causing
his or her signature to be affixed to such writing by any reasonable means,
including facsimile signature, or (b) transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the intended holder of the proxy or to a proxy solicitation firm, proxy
support service
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or similar agent duly authorized by the intended proxy holder to receive such
transmission; provided, that any such telegram, cablegram or other electronic
transmission must either set forth or be accompanied by information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the Stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
by which a Stockholder has authorized another Person to act as proxy for such
Stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
3.11.2 DELIVERY TO CORPORATION; DURATION
A proxy shall be filed with the Secretary before or at the time of the
meeting or the delivery to the Corporation of the consent to corporate action
in writing. A proxy shall become invalid three (3) years after the date of its
execution unless otherwise provided in the proxy. A proxy with respect to a
specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.
3.12 VOTING OF SHARES
Each outstanding Share entitled to vote with respect to the subject
matter of an issue submitted to a meeting of Stockholders shall be entitled to
one (1) vote upon each such issue unless otherwise set forth in the Certificate
of Incorporation or other document defining the rights and preferences of any
such Shares.
3.13 VOTING FOR DIRECTORS
Each Stockholder entitled to vote at an election of Directors may
vote, in Person or by proxy, the number of Shares owned by such Stockholder for
as many Persons as there are Directors to be elected and for whose election
such Stockholder has a right to vote.
3.14 ACTION BY STOCKHOLDERS WITHOUT A MEETING
Any action which could be taken at any annual or special meeting of
Stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be (a) signed by all of the Stockholders entitled to vote with respect to
the subject matter thereof (as determined in accordance with Section 3.7.2
hereof) and (b) delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the records of proceedings of
Stockholders meetings. Delivery made to the Corporation's registered office
shall be by hand or by certified mail or registered mail, return receipt
requested. Every written consent shall bear the date of signature of each
Stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless written consents signed by
all of the Stockholders entitled to vote with respect to the subject matter
thereof are delivered to the Corporation, in the manner required by this
Section 3.14, within sixty (60) (or the maximum number permitted by applicable
law) days of the earliest dated consent delivered to the Corporation in the
manner required by this Section 3.14. The validity of any consent executed by
a proxy for a Stockholder pursuant to a telegram, cablegram or other means of
electronic transmission transmitted to such proxy holder by or
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upon the authorization of the Stockholder shall be determined by or at the
direction of the Secretary. A written record of the information upon which the
Person making such determination relied shall be made and kept in the records
of the proceedings of the Stockholders. Any such consent shall be inserted in
the minute book as if it were the minutes of a meeting of the Stockholders.
3.15 INSPECTORS OF ELECTION
3.15.1 APPOINTMENT
In advance of any meeting of Stockholders, the Board shall appoint one
or more Persons to act as inspectors of election at such meeting and to make a
written report thereof. The Board may designate one (1) or more Persons to
serve as alternate inspectors to serve in place of any inspector who is unable
or fails to act. If no inspector or alternate is able to act at a meeting of
Stockholders, the chairman of such meeting shall appoint one or more Persons to
act as inspector of elections at such meeting.
3.15.2 DUTIES
The inspectors shall:
(a) ascertain the number of Shares of the Corporation
outstanding and the voting power of each such Share;
(b) determine the Shares represented at the meeting and
the validity of proxies and ballots;
(c) count all votes and ballots;
(d) determine and retain for a reasonable period of time
a record of the disposition of any challenges made to any determination by
them; and
(e) certify their determination of the number of Shares
represented at the meeting and their count of the votes and ballots.
The validity of any proxy or ballot shall be determined by the
inspectors of election in accordance with the applicable provisions of the
Delaware General Corporation Law as then in effect. In determining the
validity of any proxy transmitted by telegram, cablegram or other electronic
transmission, the inspectors shall record in writing the information upon which
they relied in making such determination. Each inspector of elections shall,
before entering upon the discharge of his or her duties, take and sign an oath
to faithfully execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors of election may
appoint or retain other Persons to assist them in the performance of their
duties.
SECTION 4. BOARD OF DIRECTORS
4.1 GENERAL POWERS
The business and affairs of the Corporation shall be managed by the
Board.
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4.2 NUMBER AND TENURE
The Board shall be composed of not less than three (3) nor more than
nine (9) Directors, the specific number to be set by resolution of the Board or
the Stockholders. The number of Directors may be changed from time to time by
amendment to these By-Laws, subject to the Certificate of Incorporation, but
no decrease in the number of Directors shall have the effect of shortening the
term of any incumbent Director. At any time the Board consists of more than
one (1) Director, at least a majority of Directors shall at all times be
Independent Directors; provided, however, that in the event of the death,
resignation or removal of an Independent Director, such requirement shall not
be applicable for a period of sixty (60) days. The Board of Directors shall be
divided into three classes, with the classes to be as equal in number as may be
possible, with any Director or Directors in excess of the number divisible by
three being assigned to Class 3 and Class 2, as the case may be. At the 1995
annual meeting of stockholders, the following classes shall be elected for the
terms set forth below:
<TABLE>
<CAPTION>
Class Term
----- ----
<S> <C>
Class 1 1 year
Class 2 2 years
Class 3 3 years
</TABLE>
At each annual meeting of stockholders following the 1995 annual meeting, the
number of Directors equal to the number of Directors in the class whose term
expires at the time of such meeting shall be elected to serve until the third
ensuing annual meeting of stockholders. Unless a Director dies, resigns or is
removed, he or she shall hold office for the term elected or until his or her
successor is elected and qualified, whichever is later. Directors need not be
Stockholders of the Corporation or residents of the State of Delaware.
4.3 NOMINATION AND ELECTION
4.3.1 NOMINATION
Only Persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations for the
election of Directors may be made (a) by or at the direction of the Board or
(b) by any Stockholder of record entitled to vote for the election of Directors
at such meeting; provided, however, that a Stockholder may nominate Persons for
election as Directors only if written notice (in accordance with Section 3.5.3
hereof) of such Stockholder's intention to make such nominations is received by
the Secretary (i) with respect to an election to be held at an annual meeting
of the Stockholders, not fewer than sixty (60) nor more than ninety (90) days
prior to the date specified in Section 3.1 hereof for such annual meeting (or
if less than sixty (60) days' notice or prior public disclosure of the date of
the annual meeting is given or made to the Stockholders, not later than the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made) and (ii) with respect to
an election to be held at a special meeting of the Stockholders for the
election of Directors, not later than the close of business on the seventh
business day following the date on which notice of such meeting is first given
to Stockholders. Any such Stockholder's notice shall set forth (a) the name
and address of the Stockholder who intends to make a nomination; (b) a
representation that the Stockholder is entitled to vote at such meeting and a
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statement of the number of Shares of the Corporation which are beneficially
owned by the Stockholder; (c) a representation that the Stockholder intends to
appear in person or by proxy at the meeting to nominate the Person or Persons
specified in the notice; (d) as to each Person the Stockholder proposes to
nominate for election or re-election as a Director, the name and address of
such Person and such other information regarding such nominee as would be
required in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had such nominee been nominated by the
Board, and a description of any arrangements or understandings, between the
Stockholder and such nominee and any other Persons (including their names),
pursuant to which the nomination is to be made; and (e) the consent of each
such nominee to serve as a Director if elected. If the facts warrant, the
Board, or the chairman of a Stockholders' meeting at which Directors are to be
elected, shall determine and declare that a nomination was not made in
accordance with the foregoing procedure, and, if it is so determined, the
defective nomination shall be disregarded. The right of Stockholders to make
nominations pursuant to the foregoing procedure is subject to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation. The procedures set forth in this
Section 4.3 for nomination for the election of Directors by Stockholders are in
addition to, and not in limitation of, any procedures now in effect or
hereafter adopted by or at the direction of the Board or any committee thereof.
4.3.2 ELECTION
At each election of Directors, the Persons receiving the greatest
number of votes shall be the Directors.
4.4 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after
and at the same place as the annual meeting of Stockholders. By resolution,
the Board or any committee designated by the Board may specify the time and
place either within or without the State of Delaware for holding regular
meetings thereof without other notice than such resolution.
4.5 SPECIAL MEETINGS
Special meetings of the Board or any committee appointed by the Board
may be called by or at the request of the Chairman of the Board, the President,
the Secretary or, in the case of special Board meetings, any two (2) Directors
and, in the case of any special meeting of any committee appointed by the
Board, by the chairman thereof. The Person or Persons authorized to call
special meetings may fix any place either within or without the State of
Delaware as the place for holding any special Board or committee meeting called
by them.
4.6 MEETINGS BY TELEPHONE
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means so that all Persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in Person at a meeting.
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4.7 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day
and hour of the meeting shall be given to a Director in writing or orally by
telephone or in Person. Neither the business to be transacted at nor the
purpose of any special meeting need be specified in the notice of such meeting.
4.7.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be effective
if delivered to a Director at least two (2) days before the meeting.
4.7.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective
if deposited in the official government mail properly addressed to a Director
at his or her address shown on the records of the Corporation with postage
prepaid at least five (5) days before the meeting.
4.7.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be deemed
effective when dispatched to a Director at his or her address shown on the
records of the Corporation at least three (3) days before the meeting.
4.7.4 FACSIMILE NOTICE
If notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched
at least two (2) days before the meeting to a Director at his or her telephone
number or other number appearing on the records of the Corporation.
4.7.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company at least
two (2) days before the meeting for delivery to a Director at his or her
address shown on the records of the Corporation.
4.7.6 ORAL NOTICE
If notice is delivered orally, by telephone or in Person, the notice
shall be deemed effective if personally given to the Director at least two (2)
days before the meeting.
4.8 WAIVER OF NOTICE
4.8.1 IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these By-Laws, the Certificate of Incorporation or the Delaware
General Corporation Law, a waiver thereof in writing, signed by the Person or
Persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted
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at nor the purpose of any regular or special meeting of the Board or any
committee appointed by the Board need be specified in the waiver of notice of
such meeting.
4.8.2 BY ATTENDANCE
The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, except when a Director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
4.9 QUORUM
A majority of the total number of Directors fixed by or in the manner
provided in these By-Laws or, if vacancies exist on the Board, a majority of
the total number of Directors then serving on the Board, provided, however,
that such number may be not less than one-third (1/3) of the total number of
Directors fixed by or in the manner provided in these By-Laws, shall constitute
a quorum for the transaction of business at any Board meeting. If less than a
majority are present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
4.10 MANNER OF ACTING
The act of the majority of the Directors present at a Board or
committee meeting at which there is a quorum shall be the act of the Board or
committee, unless the vote of a greater number is required by these By-Laws,
the Certificate of Incorporation or the Delaware General Corporation Law.
4.11 PRESUMPTION OF ASSENT
A Director present at a Board or committee meeting at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting, or
unless such Director files a written dissent to such action with the Person
acting as the secretary of the meeting before the adjournment thereof, or
forwards such dissent by registered mail to the Secretary immediately after the
adjournment of the meeting. A Director who voted in favor of such action may
not dissent.
4.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action which could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each of the Directors or
by each committee member. Any such written consent shall be inserted in the
minute book as if it were the minutes of a Board or a committee meeting.
4.13 RESIGNATION
Any Director may resign at any time by delivering written notice to
the Chairman of the Board, the President, the Secretary or the Board, or to the
registered office of the Corporation. Any such resignation shall take effect
at the time specified therein, or if the time is not specified, upon delivery
thereof, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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4.14 REMOVAL
At a meeting of Stockholders called expressly for that purpose, one or
more members of the Board (including the entire Board) may be removed, but only
with cause, by a vote of the holders of a majority of the Shares then entitled
to vote on the election of Directors.
4.15 VACANCIES
Any vacancy occurring on the Board may be filled by the affirmative
vote of a majority of the remaining Directors though less than a quorum of the
Board; provided, however, that a vacancy created by the death, resignation or
removal of an Independent Director, in the absence of a vote of the
Stockholders, may be filled only by the vote of a majority of the remaining
Independent Directors. A Director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office. Any Directorship
to be filled by reason of an increase in the number of Directors may be filled
by the Board for a term of office continuing only until the next election of
the class for which such Director shall have been chosen, and until his or her
successor shall be elected and qualify.
4.16 EXECUTIVE AND OTHER COMMITTEES
4.16.1 CREATION AND AUTHORITY OF COMMITTEES
The Board may, by resolution passed by a majority of the number of
Directors fixed by or in the manner provided in these By-Laws, appoint standing
or temporary committees, including an "Executive Committee," each committee to
consist of one or more Directors, and invest such committees with such powers
as it may see fit, subject to such conditions as may be prescribed by the Board
and by applicable law; but no such committee shall have the power or authority
of the Board in reference to (a) amending the Certificate of Incorporation, (b)
adopting a plan of merger or consolidation, (c) recommending to the
Stockholders the sale, lease or exchange or other disposition of all or
substantially all the property and assets of the Corporation other than in the
usual and regular course of business, (d) recommending to the Stockholders a
voluntary dissolution or a revocation thereof, (e) amending these By-Laws, (f)
declaring a dividend, or (g) authorizing the issuance of stock. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a committee member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.
4.16.2 AUDIT COMMITTEE
In addition to any committees appointed pursuant to this Section 4.16,
there shall be an "Audit Committee," appointed annually by the Board,
consisting of at least two (2) Directors who are not members of management. It
shall be the responsibility of the Audit Committee to review the scope and
results of the annual independent audit of books and records of the
Corporation, to review compliance with all corporate policies that have been
approved by the Board and to discharge such other responsibilities as may from
time to time be assigned to it by the Board. The Audit Committee shall meet at
such times and places as the members deem advisable, and shall make such
recommendations to the Board as they consider appropriate.
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4.16.3 COMPENSATION COMMITTEE
The Board may, in its discretion, designate a "Compensation Committee"
consisting of not less than two (2) Directors or such higher number as the
Board may from time to time determine. The duties of the Compensation Committee
shall consist of the following: (a) to establish and review periodically, but
not less than annually, the compensation of the officers of the Corporation and
to make recommendations concerning such compensation to the Board; (b) to
consider incentive compensation plans for the employees of the Corporation; (c)
to carry out the duties assigned to the Compensation Committee under any stock
option plan or other plan approved by the Corporation; (d) to consult with the
President concerning any compensation matters deemed appropriate by the
President or the Compensation Committee; and (e) to perform such other duties
as shall be assigned to the Compensation Committee by the Board.
4.16.4 NOMINATING AND ORGANIZATION COMMITTEE
The Board may, in its discretion, designate a "Nominating and
Organization Committee" consisting of not less than two (2) Directors or such
higher number as the Board may from time to time determine. The duties of the
Nominating and Organization Committee shall consist of the following: (a) to
report and make recommendations to the Board on the size and composition of the
Board and nominees for Directors; (b) to evaluate the performance of the
officers of the Corporation and, together with management, select and recommend
to the Board appropriate individuals for election, appointment and promotion as
officers of the Corporation and ensure the continuity of capable management;
(c) to report and make recommendations to the Board on the organization of the
Corporation; and (d) to perform such other duties as shall be assigned to the
Nominating and Organization Committee by the Board.
4.16.5 MINUTES OF MEETINGS
All committees so appointed shall keep regular minutes of their
meetings and shall cause them to be recorded in books kept for that purpose.
4.16.6 QUORUM AND MANNER OF ACTING
A majority of the number of Directors composing any committee of the
Board, as established and fixed by resolution of the Board, shall constitute a
quorum for the transaction of business at any meeting of such committee, but,
if less than a majority are present at a meeting, a majority of such Directors
present may adjourn the meeting from time to time without further notice. The
act of a majority of the members of a committee present at a meeting at which a
quorum is present shall be the act of such committee.
4.16.7 RESIGNATION
Any member of any committee may resign at any time by delivering
written notice thereof to the Chairman of the Board, the President, the
Secretary, the Board or the chairman of such committee. Any such resignation
shall take effect at the time specified therein or, if the time is not
specified, upon delivery thereof, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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4.16.8 REMOVAL
The Board may remove from office any member of any committee elected
or appointed by it or by an Executive Committee, but only by the affirmative
vote of not less than a majority of the number of Directors fixed by or in the
manner provided in these By-Laws.
4.17 COMPENSATION
By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, or a fixed
sum for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 5. OFFICERS
5.1 NUMBER
The officers of the Corporation shall be a President, a Secretary and
a Treasurer, each of whom shall be elected by the Board. One or more Vice
Presidents and such other officers and assistant officers, including a Chairman
of the Board, may be elected or appointed by the Board, such officers and
assistant officers to hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as may be provided by
resolution of the Board. Any officer may be assigned by the Board any
additional title that the Board deems appropriate. The Board may delegate to
any officer or agent the power to appoint any such subordinate officers or
agents and to prescribe their respective terms of office, authority and duties.
Any two (2) or more offices may be held by the same Person.
5.2 ELECTION AND TERM OF OFFICE
The officers of the Corporation shall be elected annually by the Board
at the Board meeting held after the annual meeting of the Stockholders. If the
election of officers is not held at such meeting, such election shall be held
as soon thereafter as a Board meeting conveniently may be held. Unless an
officer dies, resigns or is removed from office, he or she shall hold office
until the next annual meeting of the Board or until his or her successor is
elected.
5.3 RESIGNATION
Any officer may resign at any time by delivering written notice to the
Chairman of the Board, the President, a Vice President, the Secretary or the
Board. Any such resignation shall take effect at the time specified therein
or, if the time is not specified, upon delivery thereof, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
5.4 REMOVAL
Any officer or agent elected or appointed by the Board may be removed
by the Board whenever in its judgment the best interests of the Corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the Person so removed.
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5.5 VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled by
the Board for the unexpired portion of the term, or for a new term established
by the Board.
5.6 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD
If elected, the Chairman of the Board shall perform such duties as
shall be assigned to him or her by the Board from time to time and shall
preside over meetings of the Board and Stockholders unless another officer is
appointed or designated by the Board as Chairman of such meeting. If elected,
the Vice-Chairman of the Board shall perform such duties as shall be assigned
to him or her by the Board from time to time and shall preside over meetings of
the Board and Stockholders in the absence of the Chairman of the Board unless
another officer is appointed or designated by the Board as Chairman of such
meeting.
5.7 PRESIDENT
The President shall be the chief executive officer of the Corporation
unless some other officer is so designated by the Board, shall preside over
meetings of the Board and Stockholders in the absence of a Chairman of the
Board and, subject to the Board's control, shall supervise and control all the
assets, business and affairs of the Corporation. The President may sign
certificates for Shares, deeds, mortgages, bonds, contracts or other
instruments, except when the signing and execution thereof have been expressly
delegated by the Board or by these By-Laws to some other officer or agent of
the Corporation or are required by law to be otherwise signed or executed by
some other officer or in some other manner. In general, the President shall
perform all duties incident to the office of President and such other duties as
are prescribed by the Board from time to time.
5.8 VICE PRESIDENT
In the event of the death of the President or his or her inability to
act, the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President or,
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Any Vice President may sign with the
Secretary or any Assistant Secretary certificates for Shares. Vice Presidents
shall have, to the extent authorized by the President or the Board, the same
powers as the President to sign deeds, mortgages, bonds, contracts or other
instruments. Vice Presidents shall perform such other duties as from time to
time may be assigned to them by the President or by the Board. A Vice-
President may be designated as an Executive Vice-President, a Senior
Vice-President or a Vice-President of a specific function or responsibility or
may be otherwise designated at the discretion of the Board to differentiate
various Vice-Presidential positions.
5.9 SECRETARY
The Secretary shall be responsible for the preparation of minutes of
meetings of the Board and Stockholders, maintenance of the Corporation's
records and stock registers, and authentication of the Corporation's records
and shall in general perform all duties incident to the office of Secretary and
such
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other duties as from time to time may be assigned to him or her by the
President or by the Board. In the absence of the Secretary, an Assistant
Secretary may perform the duties of the Secretary.
5.10 TREASURER
If required by the Board, the Treasurer shall give a bond for the
faithful discharge of his or her duties in such amount and with such surety or
sureties as the Board shall determine. The Treasurer shall have charge and
custody of and be responsible for all funds and Securities of the Corporation;
receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, and deposit all such moneys in the name of the
Corporation in banks, trust companies or other depositories selected in
accordance with the provisions of these By-Laws; sign certificates for Shares;
and in general perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him or her by the
President or by the Board. In the absence of the Treasurer, an Assistant
Treasurer may perform the duties of the Treasurer.
5.11 SALARIES
The salaries of the officers shall be fixed from time to time by the
Board or by any Person or Persons to whom the Board has delegated such
authority. No officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a Director.
SECTION 6. CONTRACTS, LOANS, CHECKS AND DEPOSITS
6.1 CONTRACTS
The Board may authorize any officer or officers, or agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and on behalf of the Corporation. Such authority may be general or confined to
specific instances.
6.2 LOANS TO THE CORPORATION
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board. Such authority may be general or confined to specific
instances.
6.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, or agent or agents, of the Corporation and
in such manner as is from time to time determined by resolution of the Board.
6.4 DEPOSITS
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board may select.
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SECTION 7. CERTIFICATES FOR SHARES AND THEIR TRANSFER
7.1 ISSUANCE OF SHARES
No Shares shall be issued unless authorized by the Board, which
authorization shall include the maximum number of Shares to be issued and the
consideration to be received for each share.
7.2 CERTIFICATES FOR SHARES
Certificates representing Shares shall be signed by the Chairman of
the Board or Vice Chairman of the Board or the President or the Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, any of whose signatures may be a facsimile. The Board may in its
discretion appoint responsible banks, trust companies or other qualified
entities from time to time to act as transfer agents and registrars of the
stock of the Corporation; and, when such appointments shall have been made, no
stock certificate shall be valid until countersigned by one of such transfer
agents and registered by one of such registrars. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such Person was such officer, transfer
agent or registrar at the date of issue. All certificates shall include on
their face written notice of any restrictions which may be imposed on the
transferability of such Shares and shall be consecutively numbered or otherwise
identified.
7.3 STOCK RECORDS
The stock transfer books shall be kept at the registered office or
principal place of business of the Corporation or at the office of the
Corporation's transfer agent or registrar. The name and address of each Person
to whom certificates for Shares are issued, together with the class and number
of Shares represented by each such certificate and the date of issue thereof,
shall be entered on the stock transfer books of the Corporation. The Person in
whose name Shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
7.4 RESTRICTION ON TRANSFER
Except to the extent that the Corporation has obtained an opinion of
counsel acceptable to the Corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
Shares shall bear a legend on the face of the certificate, or on the reverse of
the certificate if a reference to the legend is contained on the face, which
reads substantially as follows:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, or any applicable state
law, and no interest therein may be sold, distributed, assigned,
offered, pledged or otherwise transferred unless (a) there is an
effective registration statement under such Act and applicable state
securities laws covering any such transaction involving said
securities or (b) this corporation receives an opinion of legal
counsel for the holder of these securities (concurred in by legal
counsel for this corporation) stating that such transaction is exempt
from registration or (c) this corporation otherwise satisfies itself
that such transaction is exempt from registration. Neither the
offering of the securities nor any offering materials have been
reviewed by any administrator under the Securities Act of 1933, as
amended, or any applicable state law."
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7.5 TRANSFERS OF SHARES
Subject to Section 7.7 hereof, Shares shall be transferable on the
records of the Corporation upon presentment to the Corporation or a transfer
agent of a certificate or certificates representing the Shares requested to be
transferred, with proper endorsement on the certificate or on a separate
accompanying document, together with such evidence of the payment of transfer
taxes and compliance with other provisions of law as the Corporation or its
transfer agent may require. All certificates surrendered to the corporation
for transfer shall be cancelled and no new certificate shall be issued until
the former certificates for a like number of Shares shall have been surrendered
and cancelled.
Whenever it is deemed by the Board to be reasonably necessary to
protect the tax status of the Corporation, the Board may require a statement or
affidavit from each Stockholder or proposed transferee of Shares setting forth
the number of Shares already owned by such Person and any related Person
specified in the form prescribed by the Board for that purpose. If, in the
opinion of the Board, which shall be conclusive, any proposed transfer would
jeopardize the status of the Corporation as a REIT under the REIT Provisions of
the Code, as now enacted or as hereafter amended, the Directors may refuse to
permit such transfer. Any attempted transfer for which the Directors have
refused this permission shall be void and of no effect to transfer any legal or
beneficial interest in the Shares. All contracts for the sale or other
transfer of Shares shall be subject to this provision.
7.6 STOCKHOLDERS' DISCLOSURES
The Stockholders, upon demand, shall disclose to the Corporation in
writing such information with respect to direct and indirect ownership of the
Shares as the Board deems necessary to comply with the provisions of the Code
and the regulations thereunder or to comply with the requirements of any other
taxing authority, including the provisions relating to qualification of the
Corporation as a REIT.
7.7 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
Corporation as the Board may prescribe.
SECTION 8. BOOKS AND RECORDS
8.1 MAINTENANCE OF BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its Stockholders
and Board, and such other records as may be necessary or advisable.
8.2 ANNUAL REPORT TO STOCKHOLDERS
The Board shall cause an annual report to be sent to the Stockholders
not later than one hundred twenty (120) days after the close of the fiscal year
adopted by the Corporation. This report shall be sent at least thirty (30)
days before the annual meeting of Stockholders to be held during the next
fiscal year and in the manner specified in Section 3.4 hereof for giving notice
to Stockholders. The annual report shall contain financial statements prepared
in accordance with generally accepted accounting principles which are audited
and reported on by independent certified public accountants.
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SECTION 9. ACCOUNTING YEAR
The accounting year of the Corporation shall be the calendar year,
provided that if a different accounting year is at any time selected for
purposes of federal income taxes, the accounting year shall be the year so
selected.
SECTION 10. SEAL
The seal of the Corporation, if any, shall consist of the name of the
Corporation, the state of its incorporation and the year of its incorporation.
SECTION 11. INDEMNIFICATION
11.1 RIGHT TO INDEMNIFICATION
Each Person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a Director or an officer of the
Corporation or that, being or having been such a Director or an officer or an
employee of the Corporation, he or she is or was serving at the request of an
executive officer of the Corporation as a Director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as such a Director, officer, employee or agent
or in any other capacity while serving as such a Director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the full
extent permitted by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), or by other applicable
law as then in effect, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) actually and reasonably incurred or suffered by such
indemnitee in connection therewith, and such indemnification shall continue as
to an indemnitee who has ceased to be a Director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that except as provided in Section 11.2
hereof with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized or ratified by the
Board. The right to indemnification conferred in this Section 11.1 shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that
if the Delaware General Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a Director or an officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay
all amounts so advanced upon ultimate determination of nonentitlement to
indemnification for such expenses under this Section 11.1 or otherwise.
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11.2 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under Section 11.1 hereof is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty (20) days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such
suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit.
Neither the failure of the Corporation (including its Board, independent legal
counsel or its Stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances nor an actual determination by the Corporation (including its
Board, independent legal counsel or its Stockholders) that the indemnitee is
not entitled to indemnification shall be a defense to the suit or create a
presumption that the indemnitee is not so entitled.
11.3 NONEXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses
conferred in this Section 11 shall not be exclusive of any other right which
any Person may have or hereafter acquire under any statute, agreement, vote of
Stockholders or Independent Directors, provisions of the Certificate of
Incorporation or By-Laws or otherwise. Notwithstanding any amendment to or
repeal of this Section 11, or of any of the procedures established by the Board
of Directors pursuant to Section 11.7, any indemnitee shall be entitled to
indemnification in accordance with the provisions hereof and thereof with
respect to any acts or omissions of such indemnitee occurring prior to such
amendment or repeal.
11.4 INSURANCE, CONTRACTS AND FUNDING
The Corporation may maintain insurance, at its expense, to protect
itself and any Director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such Person against such expense, liability or loss
under the Delaware General Corporation Law. The Corporation, without further
Stockholder approval, may enter into contracts with any Director, officer,
employee or agent in furtherance of the provisions of this Section 11 and may
create a trust fund, grant a security interest or use other means (including,
without limitation, a letter of credit) to ensure the payment of such amounts
as may be necessary to effect indemnification as provided in this Section 11.
11.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The Corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees or agents or groups of
employees or agents of the Corporation with the same scope and effect as the
provisions of this Section 11 with respect to the indemnification and
advancement of expenses of Directors and officers of the Corporation; provided,
however, that an undertaking shall be made by an employee or agent only if
required by the Board.
11.6 PERSONS SERVING OTHER ENTITIES
Any Person who is or was a Director, an officer or employee of the
Corporation who is or was serving (a) as a director or an officer of another
corporation of which a majority of the shares entitled
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to vote in the election of its directors is held by the Corporation or (b) in
an executive or management capacity in a partnership, joint venture, trust or
other enterprise of which the Corporation or a wholly owned Subsidiary of the
Corporation is a general partner or has a majority Ownership shall be deemed to
be so serving at the request of an executive officer of the Corporation and
entitled to indemnification and advancement of expenses under Section 11.1
hereof.
11.7 PROCEDURES FOR THE SUBMISSION OF CLAIMS
The Board may establish reasonable procedures for the submission of
claims for indemnification pursuant to this Section 11, determination of the
entitlement of any Person thereto and review of any such determination. Such
procedures shall be set forth in an appendix to these By-Laws and shall be
deemed for all purposes to be a part hereof.
SECTION 12. INVESTMENT POLICY AND RESTRICTIONS
12.1 GENERAL STATEMENT OF POLICY
12.1.1 TYPES OF INVESTMENTS
The Corporation intends to invest, directly or indirectly, in: (a)
self-service storage facilities; (b) office and business parks; (c) such other
commercial real estate investments as may be approved by the Board from time to
time; and (d) Mortgage Loans secured by real estate of a type in which the
Corporation is authorized to invest. Subject to the restrictions of this
Section 12, the Corporation's investments may be acquired in such manner,
through such means and upon such terms and conditions as may be determined by
the Board, and such investments may include, but are not limited to, direct
acquisitions by the Corporation of real estate interests as well as investments
in corporations, business trusts, general partnerships, limited partnerships,
joint ventures or other legal entities that acquire real estate investments.
All investments made by the Corporation, except those pursuant to Section 12.3
hereof, must be approved by a majority of the Directors or made in accordance
with guidelines approved by the Board and in effect at the time the investments
are made by the Corporation's management.
12.1.2 TAX TREATMENT AS A REIT
As soon the Corporation commences doing business, the Corporation
shall use its best efforts to be eligible for tax treatment as a REIT under the
Code, shall make such elections and filings, and take such other actions as may
be necessary, to be treated as a REIT under the Code and shall thereafter
conduct its business to continue to qualify as a REIT under the REIT Provisions
of the Code.
12.1.3 LIABILITY PROTECTION
Although the general purpose of the Corporation is to qualify as a
REIT under the REIT Provisions of the Code, no Director, officer, employee,
agent or independent contractor of the Corporation shall be liable for any act
or omission resulting in the loss of tax benefits under the Code.
12.1.4 REVIEW OF INVESTMENT POLICIES
The Independent Directors shall review the investment policies of the
Corporation at least annually to determine that the policies being followed by
the Corporation are in the best interests of its
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Stockholders. Each such determination and the basis therefore shall be set
forth in the minutes of the Directors.
12.2 APPRAISAL REQUIREMENT
The consideration paid for real property acquired by the Corporation
shall ordinarily be based on the fair market value of the property as
determined by a majority of the Directors. In determining the fair market
value of property acquired by the Corporation, the Directors shall be entitled
to rely upon appraisals prepared by qualified independent real estate
appraisers selected by the Corporation or such other market data and
information available to the Directors which, in their judgment, afford a
reasonable basis for making an informed determination as to the fair market
value of the property being acquired.
12.3 SPECIFIC INVESTMENTS
Pending investment or reinvestment of the Corporation's assets in the
type of investments described in Section 12.1 hereof, the Corporation may
invest its assets in investments such as: (a) U. S. government securities, (b)
bankers' acceptances, (c) certificates of deposit, (d) bank repurchase
agreements covering securities of the U. S. government or governmental
agencies, (e) commercial paper rated A-1 or better by Moody's Investors
Service, Inc. or any other nationally recognized rating agency, (f)
interest-bearing time deposits in banks and thrift institutions, (g) money
market funds, (h) mortgage-backed securities issued or guaranteed by the U. S.
government or its agencies, (i) debt securities or equity securities
collateralized by debt securities rated A-1 or better by Moody's Investors
Service, Inc., or any other nationally recognized rating agency, (j) other
short- or medium-term liquid investments or hybrid debt/equity securities
approved by the Board, and (k) any combination of the foregoing investments.
12.4 RESERVES
The Corporation may retain, as a permanent reserve, such funds as the
Board deems reasonable, in cash and in the types of investments described in
Section 12.3 hereof.
12.5 INVESTMENT RESTRICTIONS
The Corporation shall not:
(a) invest more than ten percent (10%) of its Total Assets in
Unimproved Real Property or Mortgage Loans on Unimproved Real Property;
(b) invest in foreign currency, bullion, commodities or commodity
future contracts;
(c) invest in or make a Mortgage Loan, except on the following
conditions:
(i) in determining the fair market value of the
underlying property securing the Mortgage Loan, the Directors shall be
entitled to rely upon appraisals prepared by qualified independent
real estate appraisers selected by the Corporation or such other
market data and information available to the Directors which, in their
judgment, afford a reasonable basis for making an informed
determination as to the fair market value of such underlying
property;
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(ii) the Corporation has obtained a mortgagee's or owner's
title insurance policy or other commitment as to the priority of the
mortgage or the condition of the title of the underlying property;
(iii) the Mortgage Loan is secured by real estate of a type
in which the Corporation is authorized to invest;
(iv) the aggregate amount of the Mortgage Loan and all
senior indebtedness as secured by the underlying property does not
exceed ninety percent (90%) of the appraised value of the property as
determined by an independent appraiser or as determined by the Board
pursuant to this Section 12.5(c), unless the Board determines that an
increased amount is justified by additional credit or collateral, such
as personal guarantees or the pledge of additional assets, and the
aggregate value of Mortgage Loans junior to other secured indebtedness
does not exceed ten percent (10%) of the Corporation's Total Assets;
(v) the Mortgage Loan is not subordinate to any mortgage
or equity interest of a Director or any Affiliates thereof or any
other Affiliate of the Corporation; and
(vi) the investment in the Mortgage Loan would not cause
the Corporation to have invested, immediately after the making of such
investment, more than twenty-five percent (25%) of its Total Assets in
Mortgage Loans;
(d) invest in contracts for the sale of real estate;
(e) engage in underwriting or the agency distribution of
securities issued by others;
(f) issue "redeemable securities" (as defined in Section 2(a)(32)
of the Investment Company Act of 1940, as amended), "face amount certificates
of the installment type" (as defined in Section 2(a)(15) thereof) or "periodic
payment plan certificates" (as defined in Section 2(a)(27) thereof);
(g) invest in the equity securities of any nongovernmental issuer
for a period in excess of eighteen (18) months, except for investments in the
Other Shurgard Programs, equity investments in any Person organized for the
primary purpose of investing in self-service storage facilities and office
parks or for rendering Ancillary Services with respect to the ownership,
operation and holding of such real estate assets made pursuant to Section
12.6(f) or 12.8 hereof, equity interests in any general partnership, joint
venture, association, trust, limited partnership or other legal entity
permitted under Section 12.9 hereof, equity interests in entities that would be
considered qualified REIT subsidiaries of the Corporation under Section 856(i)
of the Code and investments in REITs the portfolios of which consist of assets
the Board of Directors considers appropriate for the Corporation, were it to
hold such assets directly;
(h) issue debt securities of the Corporation unless the issuance
of such debt is not restricted by Section 12.6 hereof and the historical debt
service coverage (in the most recently completed fiscal year), as adjusted for
known changes, would, in the opinion of the Board, be sufficient to service the
principal and interest payments from the higher level of corporate debt;
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(i) issue options, warrants or similar evidences of a right to
purchase the Corporation's Securities unless (i) issued to all its Stockholders
ratably, (ii) as a part of a financing arrangement, or (iii) as a part of a
stock option or similar plan to compensate the Corporation's Directors,
officers, employees, consultants, advisors and/or other similar persons that
has been approved by the Board; provided, however, that the number of Shares of
Common Stock subject to outstanding options under such plan shall not exceed
ten percent (10%) of the then outstanding Shares of Common Stock;
(j) engage in short sales, or borrow, on an unsecured basis, if
such borrowing will result in an Asset Coverage of less than three hundred
percent (300%);
(k) engage in trading activities in Securities, as compared with
investment activities;
(l) invest in any commercial real estate other than self-service
storage facilities or office and business parks, unless the Board makes each of
the following determinations as to the proposed investment:
(i) the acquisition and holding of the investment would
not jeopardize or in the future be likely to jeopardize the
qualification of the Corporation as a REIT under the Code;
(ii) the Corporation's management has the experience and
expertise necessary for effective management of the investment or has
contracted or will contract, on behalf of the Corporation, with a
third party manager having such experience and expertise; and
(iii) the investment constitutes a prudent and reasonable
investment by the Corporation and is being made for the purpose of (A)
maximizing the value of property acquired by the Corporation, a
portion of which is being used as or was acquired for the purpose of a
self-service storage facility or an office and business park, or (B)
diversifying the Corporation's portfolio to protect the value of its
assets and to hedge against the risk of having the Corporation's
assets concentrated in self-service storage facilities and office and
business parks; and
(m) acquire securities in any company holding investments or
engaging in activities prohibited by paragraphs (a) through (e), (i) and (k) of
this Section 12.5.
12.6 RESTRICTIONS UPON DEALINGS BETWEEN THE CORPORATION AND INTERESTED
PARTIES
(a) General Restriction. Except as provided in this Section 12.6,
the Corporation shall not engage in a transaction with any Interested Party.
Any transaction between the Corporation and any Interested Party made in
compliance with the requirements of this Section 12.6 shall be valid
notwithstanding such relationship and such Interested Party shall not be under
any disability from or have any liability as a result of entering into any such
transaction with the Corporation.
(b) Sales to the Corporation. The Corporation shall not purchase
property from any Interested Party, unless
, after disclosure to the Board of the interest of the Interested
Party in the proposed transaction, a majority of Directors not
otherwise interested in such transaction (including a majority of the
Independent Directors) has determined that the property is being
offered to the Corporation upon terms fair and reasonable to the
Corporation.
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(c) Sales by the Corporation. The Corporation shall not sell
property to a Director or any Affiliate thereof.
(d) Loans to or From the Corporation. The Corporation shall not
make loans to, or borrow funds from, any Interested Party unless, after
disclosure to the Board of the interest of the Interested Party in the proposed
transaction, a majority of Directors not otherwise interested in such
transaction (including a majority of the Independent Directors) approves the
transaction as being fair, competitive and commercially reasonable and no less
favorable to the Corporation than loans between unaffiliated lenders and
borrowers under the same circumstances.
(e) Other Services and Transactions. Except to the extent
otherwise expressly authorized by the terms of Section 12.6 or this Section
12.6(e), the Corporation shall not enter into any transaction with any
Interested Party, unless the terms and conditions of such transaction have
been disclosed to the Board and approved by a majority of the Directors not
otherwise interested in the matter (including a majority of Independent
Directors). The disclosure required by this Section 12.6(e) shall be in
writing and shall fully describe all the material terms and conditions of the
proposed transaction, and such Directors in approving the transaction have
determined the transaction to be fair, competitive and commercially reasonable
and on terms and conditions not less favorable to the Corporation than those
available from unaffiliated third parties. The determinations required by this
Section 12.6(e) shall be set forth in writing, together with such explanation
as the Directors deem necessary or advisable, and shall be filed with the
Corporation's books and records. In construing this Section 12.6(e), the term
"transaction" shall be understood to refer to any dealings between the
Corporation and an Interested Party, wherein the Corporation transfers, or is
obligated to transfer, to the Interested Party valuable consideration, whether
in the form of cash, securities, tangible assets, intangible assets or
otherwise, in exchange for property, services, waiver of claims or other
valuable consideration, however designated.
(f) Ancillary Services. The Corporation may permit one or more
third parties, including a property manager, a Director and/or an Affiliate
thereof, to offer Ancillary Services to its customers or others or use the
Corporation's properties as a site for offering such Ancillary Services,
provided that the conditions in Section 12.8 hereof are satisfied.
12.7 CORPORATION'S RIGHT TO BORROW FUNDS
Subject to the restrictions contained in this Section 12.7, the
Corporation may, at any time, at the discretion of the Board, borrow funds, on
a secured or unsecured basis, from institutional lenders, banks and other
lenders selected by the Board and, in connection therewith, execute, issue and
deliver promissory notes, commercial paper, notes, debentures, bonds and other
debt obligations (which may be convertible into Shares or other equity
interests or be issued together with warrants to acquire Shares or other equity
interests). Notwithstanding the foregoing, except as otherwise provided in the
following sentence, the Corporation shall not borrow any funds if, after giving
effect to such borrowing, the Corporation's Indebtedness would exceed fifty
percent (50%) of its Total Assets. The ceiling upon the Corporation's
Indebtedness imposed by the preceding sentence shall not prohibit the
Corporation from incurring Indebtedness as necessary to refinance Indebtedness
previously obtained by the Corporation, which was permissible at the time such
Indebtedness was obtained, and to make distributions to Stockholders in order
to preserve the eligibility of the Corporation as a REIT under the provisions
of the Code. The restriction upon the Corporation's ability to borrow funds is
to be applied at the time the borrowing is obtained by the Corporation. Any
borrowing by the Corporation permitted at the time such borrowing is made does
not become unauthorized, or constitute a violation of these By-
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Laws, even if, after the borrowing is in place, the Corporation's
Indebtedness exceeds the ceiling upon Indebtedness referenced above (namely,
the fifty percent (50%) ceiling), whether or not such excess is due, in part,
to any accrued but unpaid interest, late fees or penalties, finance charges or
other amounts due with respect to the Corporation's new borrowing or previous
borrowings. In addition, the Corporation shall not borrow any funds if, after
giving effect to such borrowing, the Corporation's Indebtedness would exceed
three hundred percent (300%) of its Adjusted Net Worth. The Board shall review
the status of the Corporation's Indebtedness at least quarterly.
12.8 PURSUIT OF ANCILLARY SERVICES
(a) The Corporation may provide any Ancillary Services to its
tenants or others as long as the Board believes in good faith that the
Corporation's pursuit of such Ancillary Services would not jeopardize the
Corporation's qualification as a REIT under the Code.
(b) In the event that the Corporation's pursuit of one or more of
the Ancillary Services might jeopardize the qualification of the Corporation as
a REIT under the Code, the Corporation may, in lieu of offering such Ancillary
Services directly:
(i) restructure the manner in which such Ancillary
Services are offered to the Corporation's tenants or others, alter the
pricing of the Ancillary Services or take such other action as the
Corporation deems necessary;
(ii) invest in one or more other entities which directly
provide the Ancillary Services to the Corporation's tenants or others;
or
(iii) permit others, including Interested Parties, to offer
the Ancillary Services to the Corporation's tenants or others in
compliance with the terms of Section 12.8(c) hereof;
provided, however, that, in each such instance, the Board has received an
opinion from tax counsel or a ruling from the IRS that such action, subject to
the qualifications and restrictions imposed by the Board, and such other
assumptions as the Board may reasonably establish, would not disqualify the
Corporation from taxation as a REIT under the Code.
(c) The Corporation may permit one or more third parties to offer
Ancillary Services to its customers or others, or to use the Corporation's
properties as a site for offering such Ancillary Services, if the Board has, in
good faith, made the following determinations:
(i) the Corporation does not wish, or consider it
advisable, to offer the Ancillary Services directly to its tenants and
others or has determined that rendering such Ancillary Services would
jeopardize the qualification of the Corporation as a REIT under the
Code;
(ii) permitting others to render such Ancillary Services
would likely increase the rental revenues or other income derived from
the ownership of the Corporation's properties, enhance the
competitiveness of the Corporation or otherwise provide economic
benefits, directly or indirectly, to the Corporation;
(iii) the party or parties rendering the Ancillary Services
are competent to do so, have experience in rendering such Ancillary
Services and have entered into a written contract
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with the Corporation with respect to the provision of the Ancillary
Services, having terms and conditions deemed fair and equitable to the
Board; and
(iv) if the Person to render the Ancillary Services is an
Interested Party, the transaction has been disclosed to and approved
by the Directors as provided in Section 12.6(e) hereof.
12.9 CORPORATION'S RIGHT TO PARTICIPATE IN JOINT INVESTMENTS
The Corporation may participate in, and contribute funds to or invest
in, any general partnership, joint venture, association, trust, limited
partnership or other legal entity (a "Joint Enterprise") as long as:
(a) such investment in the Joint Enterprise would not (i)
jeopardize the qualification of the Corporation as a REIT under the Code or
(ii) result in the Corporation's becoming an investment company within the
meaning of the Investment Company Act of 1940, as amended (unless the
Corporation is exempt from all the provisions of such Act);
(b) the principal purpose of the Joint Enterprise is either to
own, manage, hold, occupy or otherwise deal with self-service storage
facilities and/or office and business parks, and/or with Mortgage Loans
collateralized by such assets, or to render Ancillary Services to Persons who
own, manage or hold self-service storage facilities, office and business parks
and/or Mortgage Loans collateralized by such assets; and
(c) if one or more of the other parties to the Joint Enterprise
are Interested Parties, such transaction has been disclosed to and approved by
the Directors (including a majority of the Independent Directors) as provided
in Section 12.6(e) hereof.
12.10 INVESTMENT IN CORPORATION'S SHARES
The Corporation may, at any time, at the discretion of the Board,
invest in any class or series of the Common Stock or Preferred Stock, or in any
promissory notes, commercial paper, notes, debentures, bonds or other debt
obligations, for the purpose of supporting the value of any such securities and
for any other valid corporate purposes; provided, however, that until March 1,
1997, any action to support the value of the Common Stock must be approved by a
majority vote of the Independent Directors.
SECTION 13. INDEPENDENT ACTIVITIES
13.1 SHARES HELD BY DIRECTORS AND OFFICERS
Any Director or officer may acquire, own, hold and dispose of Shares,
for his or her individual account, and may exercise all rights of a Stockholder
to the same extent and in the same manner as if he or she were not a Director
or an officer.
13.2 BUSINESS INTERESTS AND INVESTMENTS OF DIRECTORS
Subject to the limitations contained in this Section 13.2, any
Director who is not an officer may have personal business interests and may
engage in personal business activities, which interests and
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activities may include the acquisition, syndication, holding, management,
operation or disposition, for his or her own account or for the account of
others, of interests in real property or Persons engaged in the real estate
business, even if those interests and activities directly compete with the
actual business being conducted by the Corporation, and is not required to
present to the Corporation any business opportunity which comes to him or her
even though such opportunity is within the Corporation's investment policies.
13.3 OTHER BUSINESS RELATIONSHIPS OF DIRECTORS
Subject to the provisions of Section 12 hereof, any Director or
officer may be interested as trustee, officer, director, stockholder, partner,
member, advisor or employee, or otherwise have a direct or indirect interest in
any Person who may be engaged to render advice or services to the Corporation,
and may receive compensation from such Person as well as compensation as
Director, officer or otherwise hereunder, and no such activity shall be deemed
to conflict with his or her duties and powers as Director or officer.
SECTION 14. AMENDMENTS
These By-Laws may be amended or repealed and new By-Laws may be
adopted by the Board; provided, however, that all By-Laws made by the Board may
be amended or repealed by the Stockholders.
SECTION 15. MISCELLANEOUS
15.1 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS
The provisions of these By-Laws are separable, and if the Board shall
determine, with the advice of counsel, that any one or more of such provisions
(the "Conflicting Provisions") are in conflict with the REIT Provisions of the
Code, the Delaware General Corporation Law or other applicable federal or
Delaware laws and regulations, the Conflicting Provisions shall be deemed never
to have constituted a part of these By-Laws; provided, however, that such
determination of the Directors shall not affect or impair any of the remaining
provisions of these By-Laws or render invalid or improper any action taken or
omitted (including, but not limited to, the election of Directors) prior to
such determination. Such determination shall become effective when a
certificate, signed by a majority of the Directors setting forth any such
determination and reciting that it was duly adopted by the Directors, shall be
filed with the books and records of the Corporation. The Directors shall not
be liable for failure to make any determination under this Section 17. Nothing
in this Section 17 shall in any way limit or affect the rights of the Directors
or the Stockholders to amend these By-Laws.
15.2 RELIANCE UPON LEGAL ADVICE
The Directors, including the Independent Directors, may retain one or
more legal counsel to assist them in making any determinations required by
them, or which they are permitted to make, pursuant to the terms of these
By-Laws. Such Directors shall not be liable for any loss caused by or
resulting from any action taken or omitted in reliance upon any legal opinion
rendered by such counsel, so long as the selection of the legal counsel and
reliance on the advice was in good faith.
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In making any such determinations, the Directors shall, however, not
be obligated to follow the advice of any legal counsel engaged to advise them.
15.3 CONSTRUCTION
Unless the context requires otherwise, the general provisions, rules
of construction and definitions in the Delaware General Corporation Law shall
govern the construction of these By-Laws.
The foregoing By-Laws were adopted by the Board on May 9, 1995 and by
the Stockholders on July 26, 1995.
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Secretary
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APPENDIX B
SHURGARD STORAGE CENTERS, INC.
1995 LONG-TERM INCENTIVE COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Shurgard Storage Centers, Inc. 1995 Long-Term
Incentive Compensation Plan (the "Plan") is to enhance the long-term
profitability and stockholder value of Shurgard Storage Centers, Inc., a
Delaware corporation (the "Company"), by offering incentives and rewards to
those employees, consultants and agents of the Company and its Subsidiaries (as
defined in Section 2 below) who are key to the Company's growth and success,
and to encourage them to remain in the service of the Company and its
Subsidiaries and to acquire and maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1 AWARD
"Award" means an award or grant made to a Participant pursuant to the
Plan, including, without limitation, awards or grants of Options, Stock
Appreciation Rights, Stock Awards, Performance Awards, Other Stock-Based
Awards, Dividend Equivalent Rights or any combination of the foregoing.
2.2 BOARD
"Board" means the Board of Directors of the Company.
2.3 CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor violations), in each case
as determined by the Plan Administrator, whose determination shall be
conclusive and binding.
2.4 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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2.5 COMMON STOCK
"Common Stock" means the Class A Common Stock, par value $.001 per
share, of the Company.
2.6 CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Approval by the holders of the Common Stock of any
merger or consolidation of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Common
Stock are converted into cash, securities or other property, other than a
merger of the Company in which the holders of the Common Stock immediately
prior to the merger have substantially the same proportionate ownership of
common stock of the surviving corporation immediately after the merger;
(b) Approval by the holders of the Common Stock of any
sale, lease, exchange or other transfer in one transaction or a series of
related transactions of all or substantially all of the Company's assets other
than a transfer of the Company's assets to a majority-owned subsidiary (as the
term "subsidiary" is defined in Section 8.3 of the Plan) of the Company; or
(c) Approval by the holders of the Common Stock of any
plan or proposal for the liquidation or dissolution of the Company.
2.7 DISABILITY
"Disability" means "disability" as that term is defined for purposes
of the Company's Long-Term Disability Plan or other similar successor plan
applicable to salaried employees.
2.8 DIVIDEND EQUIVALENT RIGHT
"Dividend Equivalent Right" means a right, granted to a Participant
under Section 13 of the Plan, to receive cash, shares of Common Stock, other
Awards or other property equal in value to dividends paid with respect to a
specified number of shares of Common Stock.
2.9 EARLY RETIREMENT
"Early Retirement" means retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
2.10 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.11 FAIR MARKET VALUE
"Fair Market Value" means the closing price of the Common Stock as
reported in The Wall Street Journal for the New York Stock Exchange--Composite
Transactions (or similar successor consolidated transactions reports) for a
single trading day. If no sales of Common Stock were made on
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the New York Stock Exchange on the transaction date, Fair Market Value shall
mean the closing price of a share of Common Stock as reported for the next
preceding day on which sales of Common Stock were made on the New York Stock
Exchange.
2.12 GOOD REASON
"Good Reason" means the occurrence of any of the following events or
conditions:
(a) a change in the Holder's status, title, position or
responsibilities (including reporting responsibilities) that, in the Holder's
reasonable judgment, represents a substantial reduction of the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Holder of any duties or responsibilities that, in the
Holder's reasonable judgment, are inconsistent with such status, title,
position or responsibilities; or any removal of the Holder from or failure to
reappoint or reelect the Holder to any of such positions, except in connection
with the termination of the Holder's employment for Cause, for Disability or as
a result of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary,
unless such reduction is part of a reduction in salary applicable to
substantially all or certain classes of Company employees;
(c) the Company's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Company's business that is not materially greater than
such travel requirements prior to the Corporate Transaction;
(d) the Company's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof)
in which the Holder was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Holder with
compensation and benefits at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each employee benefit plan,
program and practice as in effect immediately prior to the Corporate
Transaction (or as in effect following the Corporate Transaction, if greater),
unless such reduction in benefits as set forth in (i) and (ii) above is part of
a reduction in benefits applicable to substantially all or certain classes of
Company employees;
(e) any material breach by the Company of any provision
of the Plan; or
(f) any purported termination of the Holder's employment
or service for Cause by the Company that does not comply with the terms of the
Plan.
2.13 GRANT DATE
"Grant Date" means the date designated in a resolution of the Plan
Administrator as the date an Award is granted. If the Plan Administrator does
not designate a Grant Date in the resolution, the Grant Date shall be the date
the Plan Administrator adopted the resolution.
2.14 HOLDER
"Holder" means the Participant to whom an Award is granted, or the
personal representative of a Holder who has died.
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2.15 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an option to purchase Common Stock
granted under Section 7 of the Plan with the intention that it qualify as an
"incentive stock option" as that term is defined in Section 422 of the Code.
2.16 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an option to purchase Common Stock
granted under Section 7 of the Plan other than an Incentive Stock Option.
2.17 OPTION
"Option" means the right to purchase Common Stock granted under
Section 7 of the Plan.
2.18 OTHER STOCK-BASED AWARD
"Other Stock-Based Award" means an Award granted under Section 12 of
the Plan.
2.19 PARTICIPANT
"Participant" means an individual who is a Holder of an Award or, as
the context may require, any employee, consultant or agent of the Company or a
Subsidiary who has been designated by the Plan Administrator as eligible to
participate in the Plan.
2.20 PERFORMANCE AWARD
"Performance Award" means an Award granted under Section 11 of the
Plan the payout of which is subject to achievement through a performance period
of performance goals prescribed by the Plan Administrator.
2.21 PLAN ADMINISTRATOR
"Plan Administrator" means any committee of the Board designated to
administer the Plan under Section 3.1 of the Plan.
2.22 RESTRICTED STOCK
"Restricted Stock" means shares of Common Stock granted under Section
10 of the Plan the rights of ownership of which are subject to restrictions
prescribed by the Plan Administrator.
2.23 RETIREMENT
"Retirement" means retirement as of the individual's normal retirement
date under the Shurgard Employees Retirement Savings Plan or other similar
successor plan applicable to salaried employees.
2.24 STOCK APPRECIATION RIGHT
"Stock Appreciation Right" means an Award granted under Section 9 of
the Plan.
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2.25 STOCK AWARD
"Stock Award" means an Award granted under Section 10 of the Plan.
2.26 SUBSIDIARY
"Subsidiary," except as expressly provided otherwise, means any entity
that is directly or indirectly controlled by the Company or in which the
Company has a significant ownership interest, as determined by the Plan
Administrator, and any entity that may become a direct or indirect parent of
the Company.
2.27 WINDOW PERIOD
"Window Period" means a period of 10 days on which there is trading in
the Common Stock on the New York Stock Exchange, beginning with the third
trading day after disclosure by the Company to the public of its earnings for
the fiscal period just ended and ending with the twelfth such day.
2.28 WINDOW PERIOD FAIR MARKET VALUE
"Window Period Fair Market Value" means the highest Fair Market Value
during a Window Period.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Compensation Committee of the
Board, except to the extent the Board appoints another committee or committees
(which term includes subcommittees) consisting of one or more members of the
Board to administer the Plan. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible
Participants to different committees, subject to such limitations as the Board
deems appropriate. Committee members shall serve for such term as the Board
may determine, subject to removal by the Board at any time. The composition of
any committee responsible for administering the Plan with respect to officers
and directors of the Company who are subject to Section 16 of the Exchange Act
with respect to securities of the Company shall comply with the requirements of
Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect.
Currently, Rule 16b-3 requires that the selection of officers and directors who
are subject to Section 16 of the Exchange Act for participation and decisions
concerning the number or maximum number of shares granted or allocated or made
subject to options or stock appreciation awards, must be made by a committee
which consists of not less than three disinterested directors of the Company.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the
selection of individuals to be granted Awards, the type of Awards, the number
of shares of Common Stock subject to an Award, all terms, conditions,
restrictions and limitations, if any, of an Award and the terms of any
instrument that evidences the Award. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and
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regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
For each calendar year from and including 1995, a number of shares of
Common Stock equal to an amount of up to two percent of the adjusted average
common shares outstanding of the Company used to calculate fully diluted
earnings per share as reported in the annual report to stockholders for the
preceding year shall become available for issuance under the Plan. In
addition, any shares of Common Stock available for issuance under the Plan in
previous years but not actually issued shall be added to the aggregate number
of shares of Common Stock available for issuance in that calendar year under
the Plan. No further awards shall be made under the Company's 1993 Stock
Option Plan after the effective date of the Plan. Shares issued under the Plan
shall be drawn from authorized and unissued shares or shares now held or
subsequently acquired by the Company as treasury shares.
4.2 LIMITATIONS
(a) Subject to adjustment as provided in Section 16.1 of the Plan,
(i) not more than an aggregate of 1,840,000 shares of Common Stock shall be
issued pursuant to the exercise of Incentive Stock Options awarded under the
Plan and (ii) not more than an aggregate of 610,000 shares of Common Stock
shall be available for issuance pursuant to grants of Stock Awards or Other
Stock-Based Awards under the Plan.
(b) Subject to adjustment from time to time as provided in Section
16.1 of the Plan, not more than 200,000 shares of Common Stock may be made
subject to Options or Stock Appreciation Rights under the Plan to any
individual Participant in any one fiscal year of the Company, such limitation
to be applied in a manner consistent with the requirements of, and only to the
extent required for compliance with, the exclusion from the limitation on
deductibility of compensation under Section 162(m) of the Code.
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award
that cease to be subject to the Award (other than by reason of exercise or
payment of the Award to the extent it is exercised for or settled in shares),
including, without limitation, in connection with the expiration, surrender,
cancellation or termination of an Award, shall again be available for issuance
in connection with future grants of Awards under the Plan. Shares that are
subject to tandem Awards shall be counted only once.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers and key
employees (including directors who are also employees) of the Company and its
Subsidiaries as the Plan Administrator from time to
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time selects. Awards may also be made to consultants and agents who provide
services to the Company and its Subsidiaries.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made under the Plan.
Such Awards may include, but are not limited to, Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Stock Awards,
Performance Awards, Other Stock-Based Awards and Dividend Equivalent Rights.
Awards may be granted singly, in combination or in tandem so that the
settlement or payment of one automatically reduces or cancels the other.
Awards may also be made in combination or in tandem with, as alternatives to,
or as the payment form for, grants or rights under any other employee or
compensation plan of the Company.
6.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other entities ("Acquired Entities") (or
the parent of the Acquired Entity) and the new Award is substituted, or the old
award is assumed, by reason of a merger, consolidation, acquisition of property
or of stock, reorganization or liquidation (the "Acquisition Transaction"). In
the event that a written agreement pursuant to which the Acquisition
Transaction is completed is approved by the Board and said agreement sets forth
the terms and conditions of the substitution for or assumption of outstanding
awards of the Acquired Entity, said terms and conditions shall be deemed to be
the action of the Plan Administrator without any further action by the Plan
Administrator, except as may be required for compliance with Rule 16b-3 under
the Exchange Act, and the persons holding such Awards shall be deemed to be
Participants and Holders.
SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified
Stock Options, which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.
7.3 TERM OF OPTIONS
The term of each Option shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.
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7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each
instrument that evidences an Option the time at which or the installments in
which the Option shall become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option will become exercisable according
to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
<TABLE>
<CAPTION>
PERIOD OF HOLDER'S
CONTINUOUS EMPLOYMENT OR SERVICE
WITH THE COMPANY OR ITS
SUBSIDIARIES FROM THE OPTION PERCENT OF TOTAL OPTION
GRANT DATE THAT
----------------------------------- IS EXERCISABLE
-------------------------
<S> <C>
after one year 20%
after two years 40%
after three years 60%
after four years 80%
after five years 100%
</TABLE>
To the extent that the right to purchase shares has accrued
thereunder, an Option may be exercised from time to time by written notice to
the Company, in accordance with procedures established by the Plan
Administrator, setting forth the number of shares with respect to which the
Option is being exercised and accompanied by payment in full as described in
Section 7.5 of the Plan. In no case may an Option be exercised as to less than
100 shares at any one time (or the lesser number of remaining shares covered by
the Option).
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash, except that the Plan Administrator may, either at the
time the Option is granted or at any time before it is exercised and subject to
such limitations as the Plan Administrator may determine, authorize payment in
cash and/or one or more of the following alternative forms: (i) Common Stock
already owned by the Holder for at least six months (or any shorter period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes) having a Fair Market Value on the day prior to the exercise date
equal to the aggregate Option exercise price; (ii) a promissory note authorized
pursuant to Section 14 of the Plan; (iii) delivery of a properly executed
exercise notice, together with irrevocable instructions, to (a) a brokerage
firm designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(b) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board; or (iv) such other consideration as the Plan Administrator may
permit.
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7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each
instrument that evidences an Option whether the Option will continue to be
exercisable, and the terms and conditions of such exercise, if a Holder ceases
to be employed by, or to provide services to, the Company or its Subsidiaries,
which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the
Option will be exercisable according to the following terms and conditions,
which may be waived or modified by the Plan Administrator at any time. In case
of termination of the Holder's employment or services other than by reason of
death or Cause, the Option shall be exercisable, to the extent of the number of
shares purchasable by the Holder at the date of such termination, only: (i)
within three years if the termination of the Holder's employment or services
are coincident with Retirement, Early Retirement at the Company's request or
Disability or (ii) within three months after the date the Holder ceases to be
an employee, consultant or agent of the Company or a Subsidiary if termination
of the Holder's employment or services is for any reason other than Retirement,
Early Retirement at the Company's request or Disability, but in no event later
than the remaining term of the Option. Any Option exercisable at the time of
the Holder's death may be exercised, to the extent of the number of shares
purchasable by the Holder at the date of the Holder's death, by the personal
representative of the Holder's estate entitled thereto at any time or from time
to time within three years after the date of death, but in no event later than
the remaining term of the Option. In case of termination of the Holder's
employment or services for Cause, the Option shall automatically terminate upon
first notification to the Holder of such termination, unless the Plan
Administrator determines otherwise. If a Holder's employment or services with
the Company are suspended pending an investigation of whether the Holder shall
be terminated for Cause, all the Holder's rights under any Option likewise
shall be suspended during the period of investigation. A transfer of
employment or services between or among the Company and its Subsidiaries shall
not be considered a termination of employment or services. Unless the Plan
Administrator determines otherwise, a leave of absence approved in accordance
with Company procedures shall not be considered a termination of employment or
services, except that with respect to Incentive Stock Options such leave of
absence shall be subject to any requirements of Section 422 of the Code.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Participant holds two or more such Options that become exercisable
for the first time in the same calendar year, such limitation shall be applied
on the basis of the order in which such Options are granted.
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8.2 10% STOCKHOLDERS
If a Participant owns 10% or more of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years.
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3 of the Plan, "parent corporation"
and "subsidiary corporation" shall have the meanings attributed to those terms
for purposes of Section 422 of the Code.
8.4 TERM
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 EXERCISABILITY
An Option designated as an Incentive Stock Option must be exercised
within three months after termination of employment for reasons other than
death or Disability to qualify for Incentive Stock Option tax treatment. In
the case of termination of employment or services due to Disability, the Option
must be exercised within one year after such termination to qualify for
Incentive Stock Option tax treatment.
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 GRANT OF STOCK APPRECIATION RIGHTS
The Plan Administrator may grant a Stock Appreciation Right separately
or in tandem with a related Option.
9.2 TANDEM STOCK APPRECIATION RIGHTS
A Stock Appreciation Right granted in tandem with a related Option
will give the Holder the right to surrender to the Company all or a portion of
the related Option and to receive an appreciation distribution (in shares of
Common Stock or cash or any combination of shares and cash, as the Plan
Administrator shall determine at any time) in an amount equal to the excess of
the Fair Market Value on the date the Stock Appreciation Right is exercised
over the exercise price per share of the right, which shall be the same as the
exercise price of the related Option, except that if the right is exercised
during a Window Period, the amount will be equal to the excess of the Window
Period Fair Market Value for the Window Period during which the Stock
Appreciation Right is exercised over the exercise price per share of the right.
A tandem Stock Appreciation Right will have the same other terms and provisions
as the related Option. Upon and to the extent a tandem Stock Appreciation
Right is exercised, the related Option will terminate.
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9.3 STAND-ALONE STOCK APPRECIATION RIGHTS
A Stock Appreciation Right granted separately and not in tandem with
an Option will give the Holder the right to receive an appreciation
distribution in an amount equal to the excess of the Fair Market Value for the
date the Stock Appreciation Right is exercised over the exercise price per
share of the right, except that if the right is exercised during a Window
Period, the amount will be equal to the excess of the Window Period Fair Market
Value for the Window Period during which the right is exercised over the
exercise price per share of the right. A stand-alone Stock Appreciation Right
will have such terms as the Plan Administrator may determine, except that the
exercise price per share of the right must be at least equal to 85% of the Fair
Market Value on the Grant Date and the term of the right, if not otherwise
established by the Plan Administrator, shall be 10 years from the Grant Date.
9.4 EXERCISE OF STOCK APPRECIATION RIGHTS
Unless otherwise provided by the Plan Administrator in the instrument
that evidences the Stock Appreciation Right, the provisions of Section 7.6 of
the Plan relating to the termination of a Holder's employment or services shall
apply equally, to the extent applicable, to the Holder of a Stock Appreciation
Right. Stock Appreciation Rights held by Participants who are subject to
Section 16 of the Exchange Act may be exercised solely in accordance with the
requirements for compliance with Rule 16b-3 under the Exchange Act.
SECTION 10. STOCK AWARDS
10.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make Awards of Common Stock to
Participants on such terms and conditions and subject to such restrictions, if
any (whether based on performance standards, periods of service or otherwise),
as the Plan Administrator shall determine, which terms, conditions and
restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which
shares subject to Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture of Restricted Stock
shall occur by reason of termination of the Holder's services.
10.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Holder's release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall deliver, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, a stock certificate for
the appropriate number of shares of Common Stock.
10.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan
Administrator may, in its sole discretion, waive the forfeiture period and any
other terms, conditions or restrictions on any Restricted Stock under such
circumstances and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.
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SECTION 11. PERFORMANCE AWARDS
11.1 PLAN ADMINISTRATOR AUTHORITY
Performance Awards may be denominated in cash, shares of Common Stock
or any combination thereof. The Plan Administrator is authorized to grant
Performance Awards and shall determine the nature, length and starting date of
the performance period for each Performance Award and the performance
objectives to be used in valuing Performance Awards and determining the extent
to which such Performance Awards have been earned. Performance objectives and
other terms may vary from Participant to Participant and between groups of
Participants. Performance objectives may include, but shall not be limited to,
profits, profit growth, profit-related return ratios, cash flow, total return
to stockholders, funds from operations, customer service, employee satisfaction
or performance against budget, whether applicable to the Company or any
relevant Subsidiary or business unit, comparisons with competitor companies or
groups and with stock market indices, or any combination thereof, as the Plan
Administrator may deem appropriate. Performance periods may overlap and
Participants may participate simultaneously with respect to Performance Awards
that are subject to different performance periods and different performance
factors and criteria. The Plan Administrator shall determine for each
Performance Award the range of dollar values or number of shares of Common
Stock (which may, but need not, be shares of Restricted Stock pursuant to
Section 10 of the Plan), or a combination thereof, to be received by the
Participant at the end of the performance period if and to the extent that the
relevant measures of performance for such Performance Awards are met. The
earned portion of a Performance Award may be paid currently or on a deferred
basis with such interest or earnings equivalent as may be determined by the
Plan Administrator. Payment shall be made in the form of cash, whole shares of
Common Stock (which may, but need not, be shares of Restricted Stock pursuant
to Section 10 of the Plan), Options or any combination thereof, either in a
single payment or in annual installments, all as the Plan Administrator shall
determine.
11.2 ADJUSTMENT OF AWARDS
The Plan Administrator may adjust the performance goals and
measurements applicable to Performance Awards to take into account changes in
law and accounting and tax rules and to make such adjustments as the Plan
Administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances. The Plan Administrator also may adjust the performance goals
and measurements applicable to Performance Awards and thereby reduce the amount
to be received by any Participant pursuant to such Awards if and to the extent
that the Plan Administrator deems it appropriate.
11.3 PAYOUT UPON TERMINATION
The Plan Administrator shall establish and set forth in each
instrument that evidences a Performance Award whether the Award will be
payable, and the terms and conditions of such payment, if a Holder ceases to be
employed by, or to provide services to, the Company or its Subsidiaries, which
provisions may be waived or modified by the Plan Administrator at any time. If
not so established in the instrument evidencing the Performance Award, the
Award will be payable according to the following terms and conditions, which
may be waived or modified by the Plan Administrator at any time. If during a
performance period a Participant's employment or services with the Company
terminate by reason of the Participant's Retirement, Early Retirement at the
Company's request, Disability or death, such Participant shall be entitled to a
payment with respect to each outstanding
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Performance Award at the end of the applicable performance period (i) based, to
the extent relevant under the terms of the Award, on the Participant's
performance for the portion of such performance period ending on the date of
termination and (ii) prorated for the portion of the performance period during
which the Participant was employed by the Company, all as determined by the
Plan Administrator. The Plan Administrator may provide for an earlier payment
in settlement of such Performance Award discounted at a reasonable interest
rate and otherwise in such amount and under such terms and conditions as the
Plan Administrator deems appropriate. Except as otherwise provided in Section
16 of the Plan or in the instrument evidencing the Performance Award, if during
a performance period a Participant's employment or services with the Company
terminate other than by reason of the Participant's Retirement, Early
Retirement at the Company's request, Disability or death, then such Participant
shall not be entitled to any payment with respect to the Performance Awards
relating to such performance period, unless the Plan Administrator shall
otherwise determine. The provisions of Section 7.6 of the Plan regarding
leaves of absence and termination for Cause shall apply to Performance Awards.
SECTION 12. OTHER STOCK-BASED AWARDS
The Plan Administrator may grant other Awards under the Plan pursuant
to which shares of Common Stock (which may, but need not, be shares of
Restricted Stock pursuant to Section 10 of the Plan) are or may in the future
be acquired, or Awards denominated in stock units, including ones valued using
measures other than market value. Such Other Stock-Based Awards may be granted
alone or in addition to or in tandem with any Award of any type granted under
the Plan and must be consistent with the Plan's purpose.
SECTION 13. DIVIDEND EQUIVALENT RIGHTS
The Plan Administrator is authorized to make Awards of Dividend
Equivalent Rights. The Plan Administrator shall establish such rules and
procedures governing the crediting of Dividend Equivalent Rights, including the
timing, form of payment and payment contingencies of such Dividend Equivalent
Rights, as it deems are appropriate or necessary.
SECTION 14. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS
To assist a Holder (including a Holder who is an officer or director
of the Company) in acquiring shares of Common Stock pursuant to an Award
granted under the Plan, the Plan Administrator may authorize, either at the
Grant Date or at any time before the acquisition of Common Stock pursuant to
the Award, (i) the extension of a loan to the Holder by the Company, (ii) the
payment by the Holder of the purchase price, if any, of the Common Stock in
installments, or (iii) the guarantee by the Company of a loan obtained by the
grantee from a third party. The terms of any loans, installment payments or
guarantees, including the interest rate and terms of repayment, will be subject
to the Plan Administrator's discretion. Loans, installment payments and
guarantees may be granted with or without security. The maximum credit
available is the purchase price, if any, of the Common Stock acquired plus the
maximum federal and state income and employment tax liability that may be
incurred in connection with the acquisition.
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SECTION 15. ASSIGNABILITY
No Option, Stock Appreciation Right, Performance Award, Other
Stock-Based Award or Dividend Equivalent Right granted under the Plan may be
assigned or transferred by the Holder other than by will or by the laws of
descent and distribution, and during the Holder's lifetime, such Awards may be
exercised only by the Holder. Notwithstanding the foregoing, and to the extent
permitted by Rule 16b-3 under the Exchange Act and Section 422 of the Code, the
Plan Administrator, in its sole discretion, may permit such assignment,
transfer and exercisability and may permit a Holder of such Awards to designate
a beneficiary who may exercise the Award or receive compensation under the
Award after the Holder's death.
SECTION 16. ADJUSTMENTS
16.1 ADJUSTMENT OF SHARES
In the event that at any time or from time to time a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to stockholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (i) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (ii) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator, in its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (a) the maximum number of and
class of securities subject to the Plan as set forth in Section 4.1 of the
Plan, (b) the maximum number and class of securities that may be made subject
to Awards to any individual Participant as set forth in Section 4.2 of the
Plan, and (c) the number and class of securities that are subject to any
outstanding Award and the per share price of such securities, without any
change in the aggregate price to be paid therefor. The determination by the
Plan Administrator as to the terms of any of the foregoing adjustments shall be
conclusive and binding.
16.2 CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences the
Award, in the event of any Corporate Transaction, each Option, Stock
Appreciation Right or Stock Award that is at the time outstanding shall
automatically accelerate so that each such Award shall, immediately prior to
the specified effective date for the Corporate Transaction, become 100% vested,
except that such acceleration will not occur if in the opinion of the Company's
accountants it would render unavailable "pooling of interest" accounting for a
Corporate Transaction that would otherwise qualify for such accounting
treatment. Such Award shall not so accelerate, however, if and to the extent:
(i) such Award is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable award for the purchase of shares of the capital stock of the
successor corporation or its parent corporation, (ii) such Award is to be
replaced with a cash incentive program of the successor corporation that
preserves the spread existing at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule
applicable to such Award, or (iii) the acceleration of such Award is subject to
other limitations imposed by the instrument evidencing the Award. The
determination of Award comparability under clause (i) above shall be made by
the Plan Administrator, and its determination shall be conclusive and binding.
All such Awards shall terminate and cease to remain outstanding
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immediately following the consummation of the Corporate Transaction, except to
the extent assumed by the successor corporation or its parent corporation. Any
such Awards that are assumed or replaced in the Corporate Transaction pursuant
to clauses (i) or (ii) above and do not otherwise accelerate at that time shall
be accelerated in the event the Holder's employment or services should
subsequently terminate within two years following such Corporate Transaction,
unless such employment or services are terminated by the Company for Cause or
by the Holder voluntarily without Good Reason. Notwithstanding the foregoing,
no Incentive Stock Option shall become exercisable pursuant to this Section
16.2 without the Holder's consent, if the result would be to cause such Option
not to be treated as an Incentive Stock Option (whether by reason of the annual
limitation described in Section 8.1 of the Plan or otherwise).
16.3 FURTHER ADJUSTMENT OF AWARDS
Without limiting the preceding Section 16.2 of the Plan, and subject
to the limitations set forth in Section 11 of the Plan, the Plan Administrator
shall have the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, liquidation or change in control of the Company,
as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to
Participants, with respect to Awards. Such authorized action may include (but
shall not be limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to provide for
earlier, later, extended or additional time for exercise, payment or settlement
or lifting restrictions, differing methods for calculating payments or
settlements, alternate forms and amounts of payments and settlements and other
modifications, and the Plan Administrator may take such actions with respect to
all Participants, to certain categories of Participants or only to individual
Participants. The Plan Administrator may take such actions before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.
16.4 LIMITATIONS
The grant of Awards will in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
SECTION 17. WITHHOLDING OF TAXES
The Company may require the Holder to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, exercise, payment or settlement of any Award. In such instances,
the Plan Administrator may, in its discretion and subject to the Plan and
applicable law, permit the Holder to satisfy withholding obligations, in whole
or in part, by paying cash, by electing to have the Company withhold shares of
Common Stock or by transferring shares of Common Stock to the Company, in such
amounts as are equivalent to the Fair Market Value of the withholding
obligation.
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SECTION 18. AMENDMENT AND TERMINATION OF PLAN
18.1 AMENDMENT OF PLAN
The Plan may be amended by the stockholders of the Company. The Board
may also amend the Plan in such respects as it shall deem advisable; however,
to the extent required for compliance with Rule 16b-3 under the Exchange Act,
Section 422 of the Code or any applicable law or regulation, stockholder
approval will be required for any amendment that will (i) increase the total
number of shares as to which Options may be granted or which may be used in
payment of Stock Appreciation Rights, Performance Awards, Other Stock-Based
Awards or Dividend Equivalent Rights under the Plan or that may be issued as
Restricted Stock, (ii) materially modify the class of persons eligible to
receive Awards, (iii) materially increase the benefits accruing to Participants
under the Plan, or (iv) otherwise require stockholder approval under any
applicable law or regulation.
18.2 TERMINATION OF PLAN
The Company's stockholders or the Board may suspend or terminate the
Plan at any time. Unless the Plan shall theretofore have been terminated by
the Company's stockholders or the Board, the Plan shall terminate on, and no
Awards shall be made after July 26, 2000, except that such termination shall
have no effect on Awards made prior thereto.
18.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the
consent of the Holder of any Award under the Plan, alter or impair any rights
or obligations under any Award theretofore granted under the Plan.
SECTION 19. GENERAL
19.1 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
Neither the Plan, participation in the Plan as a Participant nor any
action of the Plan Administrator taken under the Plan shall be construed as
giving any Participant or employee of the Company any right to be retained in
the employ of the Company or limit the Company's right to terminate the
employment or services of the Participant.
19.2 REGISTRATION; CERTIFICATES FOR SHARES
The Company shall be under no obligation to any Participant to
register for offering or resale under the Securities Act of 1933, as amended,
or register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan. The Company may issue certificates for shares with such legends and
subject to such restrictions on transfer and stop-transfer instructions as
counsel for the Company deems necessary or desirable for compliance by the
Company with federal and state securities laws.
19.3 NO RIGHTS AS A STOCKHOLDER
No Option, Stock Appreciation Right, Performance Award or Other
Stock-Based Award shall entitle the Holder to any dividend (except to the
extent provided in an Award of Dividend Equivalent
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Rights), voting or other right of a stockholder unless and until the date of
issuance under the Plan of the shares that are the subject of such Awards, free
of all applicable restrictions.
19.4 COMPLIANCE WITH LAWS AND REGULATIONS
It is the Company's intention that, so long as any of the Company's
equity securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the
Exchange Act and, if any Plan provision is later found not to be in compliance
with such Rule, the provision shall be deemed null and void, and in all events
the Plan shall be construed in favor of its meeting the requirements of Rule
16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Participants who are officers or
directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Participants.
Additionally, in interpreting and applying the provisions of the Plan, any
Option granted as an Incentive Stock Option pursuant to the Plan shall, to the
extent permitted by law, be construed as an "incentive stock option" within the
meaning of Section 422 of the Code.
19.5 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing
contained herein shall require the Company to segregate any monies or other
property, or shares of Common Stock, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.
19.6 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform
to applicable laws, or, if it cannot be so construed or deemed amended without,
in the Plan Administrator's determination, materially altering the intent of
the Plan or the Award, such provision shall be stricken as to such
jurisdiction, person or Award, and the remainder of the Plan and any such Award
shall remain in full force and effect.
SECTION 20. EFFECTIVE DATE
The Plan's effective date is the date on which it is approved by the
Company's stockholders.
Adopted by the Board on __________, 1995 and approved by the Company's
stockholders on __________, 1995.
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APPENDIX C
SHURGARD STORAGE CENTERS, INC.
AMENDED AND RESTATED STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
SECTION 1. PURPOSES
The purposes of the Shurgard Storage Centers, Inc. Stock Option Plan
for Nonemployee Directors (the "Plan") are to attract and retain the services
of experienced and knowledgeable nonemployee directors of Shurgard Storage
Centers, Inc. (the "Corporation") and to provide an incentive for such
directors to increase their proprietary interests in the Corporation's
long-term success and progress.
SECTION 2. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 6 hereof, the total
number of shares of the Corporation's Class A Common Stock, $0.001 par value
per share (the "Common Stock"), for which options may be granted under the Plan
is 200,000 (the "Shares"). The Shares shall be shares presently authorized but
unissued or subsequently acquired by the Corporation and shall include shares
representing the unexercised portion of any option granted under the Plan that
expires or terminates without being exercised in full.
SECTION 3. ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the
Board of Directors of the Corporation (the "Board"). Subject to the terms of
the Plan, the Plan Administrator shall have the power to construe the
provisions of the Plan, to determine all questions arising thereunder and to
adopt and amend such rules and regulations for the administration of the Plan
as it may deem desirable. No member of the Plan Administrator shall
participate in any vote by the Plan Administrator on any matter materially
affecting the rights of any such member under the Plan.
SECTION 4. PARTICIPATION IN THE PLAN
4.1 ELIGIBILITY
Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall be eligible to participate in the Plan.
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4.2 ORIGINAL GRANTS
Each person who becomes an Eligible Director prior to the first Annual
Meeting of Stockholders held after the consolidating transaction among up to 17
limited partnerships sponsored by Shurgard Incorporated as described in the
Registration Statement on Form S-4 (No. 33-57794) filed with the Securities
Exchange Commission on February 2, 1993, as amended (the "Consolidation"),
shall automatically receive the grant of an option (an "Original Option") to
purchase 400 Shares upon their election or appointment to the Board, such
option to vest and become exercisable upon the optionee's continued service as
a director until the first anniversary of the date of grant.
Each person who is an Eligible Director on May 9, 1995 shall
automatically receive a grant of an option to purchase 3,000 Shares, such
option to vest and become exercisable upon the optionee's continued service
until the 1995 Annual Meeting (as hereinafter defined).
4.3 ANNUAL GRANTS
In addition, each Eligible Director shall automatically receive the
grant of an option (an "Annual Option") to purchase 3,000 Shares immediately
following each Annual Meeting of Stockholders commencing with the first Annual
Meeting of Stockholders held after the Consolidation, such option to vest and
become exercisable upon the optionee's continued service as a director until
the next Annual Meeting of Stockholders after the date of grant.
SECTION 5. OPTION TERMS
Each option granted to an Eligible Director under the Plan and the
issuance of Shares thereunder shall be subject to the following terms:
5.1 OPTION AGREEMENT
Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Plan Administrator.
5.2 OPTION EXERCISE PRICE
The option exercise price for each Annual Option granted under the
Plan shall be the fair market value of the Shares covered by the option at the
time the option is granted. For purposes of the Plan, "fair market value" as
of a given date shall be: (i) the closing price of a share of the Common Stock
on the principal exchange on which the Common Stock is then trading, if any, on
the day previous to such date or, if no Common Stock was traded on such date,
on the next preceding date on which Common Stock was so traded; or (ii) if the
Common Stock is not traded on an exchange, the average of the high and low
sales prices at which the Common Stock was sold on the day previous to such
date as reported by the NASDAQ National Market on such date or, if no Common
Stock was traded on such date, on the next preceding date on which Common Stock
was so traded. The option exercise price for each Original Option granted
under the Plan shall be the average fair market value of
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the Shares covered by the option during the 30 business days immediately after
the date the Common Stock is first publicly traded.
5.3 HOLDING PERIOD
If a person subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), sells shares of Common Stock obtained
upon the exercise of any option granted under the Plan within six months after
the date the option was granted, the option grant will no longer be deemed a
nonexempt, matchable purchase under Section 16 as of the date of the option
grant.
5.4 TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from
time to time; provided, however, that no fewer than 50 Shares (or the remaining
Shares then purchasable under the option, if less than 50 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by payment in
full for such Shares, which payment may be in whole or in part (i) in cash or
by check, (ii) in shares of Common Stock already owned for at least six months
by the person exercising the option, valued at fair market value at the time of
such exercise, or (iii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, to properly deliver to the
Corporation the amount of sale or loan proceeds to pay the exercise price, all
in accordance with the regulations of the Federal Reserve Board.
5.5 TERM OF OPTIONS
Each option shall expire ten years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
(a) In the event that an optionee ceases to be a director
of the Corporation for any reason other than the death of the
optionee, the vested portion of the options granted to such optionee
may be exercised by him or her only within one year after the date
such optionee ceases to be a director of the Corporation.
(b) In the event of the death of an optionee, whether
during the optionee's service as a director or during the one-year
period referred to in Section 5.5(a), the vested portion of the
options granted to such optionee shall be exercisable, and such
options shall expire unless exercised within one year after the date
of the optionee's death, by the legal representatives or the estate of
such optionee, by any person or persons whom the optionee shall have
designated in writing on forms prescribed by and filed with the
Corporation or, if no such designation has been made, by the person or
persons to whom the optionee's rights have passed by will or the laws
of descent and distribution.
5.6 TRANSFERABILITY
During an optionee's lifetime, an option may be exercised only by the
optionee. Options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution,
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attachment or similar process and may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by the applicable laws of descent and distribution except that,
to the extent permitted by applicable law and Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act, the Plan Administrator may permit a
recipient of an option to designate in writing during the optionee's lifetime a
beneficiary to receive and exercise options in the event of the optionee's
death (as provided in Section 5.5(b)). Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any option under the Plan or of any
right or privilege conferred thereby, contrary to the provisions of the Plan,
or the sale or levy or any attachment or similar process upon the rights and
privileges conferred hereby, shall be null and void.
5.7 PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares.
5.8 LIMITATION AS TO DIRECTORSHIP
Neither the Plan, nor the granting of an option, nor any other action
taken pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an optionee has a right to continue as
a director for any period of time or at any particular rate of compensation.
5.9 REGULATORY APPROVAL AND COMPLIANCE
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by
the Plan Administrator, and without complying, to the Plan Administrator's
complete satisfaction, with all rules and regulations under federal, state or
local law deemed applicable by the Plan Administrator.
SECTION 6. CAPITAL ADJUSTMENTS
The aggregate number and class of Shares with respect to which options
may be granted under the Plan, as provided in Section 2, the number and class
of Shares covered by each automatic grant and each outstanding option and the
exercise price per share thereof (but not the total price), shall all be
proportionately adjusted for any stock dividends, stock splits,
recapitalizations, combinations or exchanges of shares, split-ups, spinoffs or
other similar changes in capitalization. Upon the effective date of a
dissolution or liquidation of the Corporation, or of a reorganization, merger
or consolidation of the Corporation with one or more corporations that results
in more than 80% of the outstanding voting shares of the Corporation being
owned by one or more affiliated corporations or other affiliated entities, or
of a transfer of all or substantially all of the assets or more than 80% of the
then outstanding shares of the Corporation to another corporation or other
entity, this Plan and all options granted hereunder shall terminate. In the
event of such dissolution, liquidation, reorganization, merger, consolidation,
transfer of assets or transfer of stock, each optionee shall be entitled, for a
period of 20 days prior to the effective date of such transaction, to purchase
the full number of Shares under his or her option that he or she otherwise
would have been entitled to purchase during the remaining term of such option.
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Adjustment under this Section 6 shall be made by the Plan
Administrator, whose determination shall be final. In the event of any
adjustment in the number of Shares covered by any option, any fractional Shares
resulting from such adjustment shall be disregarded and each such option shall
cover only the number of full Shares resulting from such option.
SECTION 7. EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan
shall be borne by the Corporation; none of such expenses shall be charged to
any optionee.
SECTION 8. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective on upon approval of the Corporation's
shareholders. The Plan shall continue in effect until it is terminated by
action of the Board or the Corporation's shareholders, but such termination
shall not affect the then-outstanding terms of any options.
SECTION 9. TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that if required to qualify
the Plan under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act,
no amendment may be made more than once every six months that would change the
amount, price, timing or vesting of the options, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, or the rules and
regulations promulgated thereunder; and provided, further, that to the extent
required for compliance with applicable law or regulation, the Board may not
amend the Plan without the approval of the Corporation's stockholders,
including any amendment that would: (a) materially increase the number of
shares that may be issued under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan to add a class of
participants who are subject to Section 16 of the Exchange Act; or (c)
otherwise materially increase the benefits accruing under the Plan to
participants who are subject to Section 16 of the Exchange Act.
SECTION 10. COMPLIANCE WITH RULE 16b-3
It is the intention of the Corporation that the Plan comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act
and that Plan participants remain disinterested persons ("disinterested
persons") for purposes of administering other employee benefit plans of the
Corporation and having such other plans be exempt from Section 16(b) of the
Exchange Act. Therefore, if any Plan provision is later found not to be in
compliance with Rule 16b-3 or if any Plan provision would disqualify Plan
participants from remaining disinterested persons, that provision shall be
deemed null and void, and in all events the Plan shall be construed in favor of
its meeting the requirements of Rule 16b-3.
Adopted by the Corporation's Board of Directors on July 24, 1993 and
approved by the Corporation's shareholders on July 24, 1993. Amended by the
Corporation's Board of Directors on May 9, 1995 and amendment approved by the
Corporation's shareholders on July 26, 1995.
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SHURGARD STORAGE CENTERS, INC.
------------
PROXY FOR THE 1995 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 26, 1995
------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles K. Barbo and Harrell L. Beck,
and each of them, as Proxies with full power of substitution and hereby
authorizes them to represent and to vote as designated below all the shares of
Class A Common Stock and Class B Common Stock, par value $.001 per share
(collectively, the "Common Stock") of Shurgard Storage Centers, Inc. held of
record by the undersigned on June 2, 1995, at the 1995 Annual Meeting of
Stockholders to be held on July 26, 1995 or any adjournment or postponement
thereof as follows:
1. ELECTION OF DIRECTORS.
A. Election of the following two nominees to serve as directors for
three-year terms or until their respective successors are elected
and qualified:
Charles K. Barbo Donald W. Lusk
/ / FOR all / / WITHHOLD AUTHORITY / / WITHHOLD AUTHORITY for the
nominees to vote for all following only: (write the
nominees name(s) of the nominee(s)
in this space)
B. Election of the following two nominees to serve for two-year terms
or until their respective successors are elected and qualified:
Wendell J. Smith Harrell L. Beck
/ / FOR all / / WITHHOLD AUTHORITY / / WITHHOLD AUTHORITY for the
nominees to vote for all following only: (write the
nominees name(s) of the nominee(s)
in this space)
C. Election of the nominee to serve as director for a one-year term or
until his respective successor is elected and qualified:
Dan Kourkoumelis
/ / FOR the / / WITHHOLD AUTHORITY / / WITHHOLD AUTHORITY for the
nominee to vote for the following only: (write the
nominee name(s) of the nominee(s)
in this space)
2. AMENDMENT TO CERTIFICATE OF INCORPORATION. Approve amendments to the
Company's Certificate of Incorporation to provide for a
classified Board of Directors and to adopt certain New York Stock
Exchange requirements.
/ / FOR / / AGAINST / / ABSTAIN
3. AMENDMENT TO BY-LAWS. Approve amendments to the Company's By-Laws.
/ / FOR / / AGAINST / / ABSTAIN
4. STOCK OPTION PLAN. Approve the Shurgard Storage Centers, Inc. 1995
Long-Term Incentive Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
5. STOCK OPTION PLAN. Approve an amendment to the Shurgard Storage Centers,
Inc. Stock Option Plan for Nonemployee Directors to increase the
number of shares issuable under the plan.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
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In their discretion, the Proxies are authorized to vote upon such other
business as may properly be brought before the meeting or any adjournment or
postponement thereof. This Proxy, when properly executed, will be voted in the
manner directed herein by the undersigned. IF NO DIRECTION IS MADE, THE PROXY
WILL BE VOTED "FOR" ALL NOMINEES IN ITEM 1 AND "FOR" IN ITEMS 2, 3, 4 AND 5 ON
THE REVERSE SIDE.
The undersigned acknowledges receipt from the Company prior to the
execution of this Proxy of a Notice of Annual Meeting of Shareholders and a
Proxy Statement dated June 14, 1995.
Please sign below exactly as your name appears on your
stock certificate. When shares are held jointly, each
person must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. An authorized person should sign on
behalf of corporations, partnerships and associates
and give his or her title.
Dated:__________________________________________, 1995
______________________________________________________
Signature
______________________________________________________
Signature if held jointly
YOUR VOTE IS IMPORTANT, PROMPT RETURN OF THIS PROXY CARD WILL
HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
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