<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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(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
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.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
[SHURGARD LETTER HEAD]
March 31, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Shurgard Storage Centers, Inc. at 10:00 a.m. on Tuesday, May 9,
2000, at The Yale Street Landing, located at 1001 Fairview Avenue North,
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
SHURGARD STORAGE CENTERS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2000
To the Stockholders:
The 2000 Annual Meeting of Stockholders of Shurgard Storage Centers, Inc.
will be held at The Yale Street Landing, located at 1001 Fairview Avenue North,
Seattle, Washington on Tuesday, May 9, 2000 at 10:00 a.m. for the following
purposes:
1. To elect two directors to the Company's Board of Directors;
2. To approve the Company's 2000 Long Term Incentive Plan
3. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
The record date for the Annual Meeting is March 16, 2000. Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting. The list of stockholders entitled
to vote at the meeting will be available at the Company's offices at 1155 Valley
Street, Suite 400, Seattle, Washington for ten days immediately prior to the
meeting.
All Stockholders are invited to attend the Annual Meeting. 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,
Christine M. McKay
Secretary
Seattle, Washington
March 31, 2000
<PAGE> 4
SHURGARD STORAGE CENTERS, INC.
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 9, 2000
GENERAL
The enclosed proxy is solicited by the Board of Directors of Shurgard
Storage Centers, Inc. (the "Company") for use at the 2000 Annual Meeting of
Stockholders to be held at 10:00 a.m. on Tuesday, May 9, 2000 at The Yale Street
Landing, located at 1001 Fairview Avenue North, Seattle, Washington, and at any
postponement or adjournment thereof (the "2000 Annual Meeting"). Only holders of
record of the Company's Class A Common Stock and Class B Common Stock
(collectively, the "Common Stock") at the close of business on March 16, 2000
will be entitled to vote at the 2000 Annual Meeting. On that date, the Company
had 29,327,454 shares of Class A Common Stock and 154,604 shares of Class B
Common Stock outstanding. Each share of Common Stock outstanding on the record
date is entitled to one vote.
The address of the Company's principal executive offices is 1155 Valley
Street, Suite 400, Seattle, Washington 98109. This Proxy Statement and the
accompanying proxy card are being mailed to the Company's stockholders on or
about March 31, 2000.
QUORUM
A quorum for the Annual Meeting shall consist of the holders of a majority
of the outstanding shares of Common Stock entitled to vote at the 2000 Annual
Meeting, present in person or by proxy.
VOTING
Shares of Common Stock for which proxies are properly executed and
returned will be voted at the 2000 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 and "FOR"
the approval of the Company's 2000 Long-Term Incentive Plan. If any of the
nominees for the Board of Directors 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. The nominees for election to the Board of
Directors who receive the greatest number of votes cast will be elected as
directors. Abstention from voting on the election of directors will have no
impact on the outcome of this proposal since no vote will have been cast in
favor of any nominee. The Company's 2000 Long-Term Incentive Plan will be
approved if there are more votes cast in favor of this proposal than are cast
against this proposal. Accordingly, abstentions from voting on this matter will
not affect the outcome since they are neither a vote in favor of the proposal
nor a vote against the proposal. There can be no broker nonvotes on the election
of directors or on the approval of the 2000 Long Term Incentive Plan since
brokers who hold shares for the accounts of their clients have discretionary
authority to vote such shares with respect to election of directors.
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 2000 Annual
Meeting and voting in person.
<PAGE> 5
ELECTION OF DIRECTORS AND DIRECTOR INFORMATION
The Board of Directors is divided into three classes. Each class is
elected for a three-year term and directors in the other classes remain in
office until their respective three-year terms expire. The Company's Board of
Directors presently consists of six members, with two members in each class.
INFORMATION ABOUT THE DIRECTORS NOMINATED FOR ELECTION
TERMS EXPIRE IN 2003 (CLASS 3)
Wendell J. Smith (age 67) has served as a director of the Company since
March 1994. Mr. Smith is also currently a director of PGA Tour Properties and
Chastain Capital Corporation, a mortgage based lending company. He has
previously served on the Western and National Advisory Boards for Federal
National Mortgage Association 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 equity and $13 billion in 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 43) 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 Company's merger with Shurgard Incorporated in March 1995 (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. He joined Shurgard
Incorporated 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
Shurgard Incorporated, 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
BOTH NOMINEES FOR DIRECTOR.
INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL
MEETING
TERMS EXPIRE IN 2001 (CLASS 1)
Charles K. Barbo (age 58) has been involved as a principal in the real
estate investment industry since 1969. Mr. Barbo is one of the co-founders of
Shurgard Incorporated, 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 Shurgard Incorporated. 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 and has a Bachelor of Arts degree in history from the University
of Washington. He is an alumnus of the Young Presidents' Organization. Mr. Barbo
is also director of Homegrocer.com, Inc, a home delivery internet grocer.
George P. Hutchinson (age 61) has served as a director of the Company
since his appointment in December 1997. Mr. Hutchinson has been involved in the
securities brokerage and international investment banking industries for over 25
years. From 1970 to 1990, he was with Salomon Brothers in New York, London, Hong
Kong, Tokyo, and Zurich. Since 1990, he has been President of G.P. Hutchinson &
Co., in Seattle, which he established to provide investment banking services to
regional companies. Mr. Hutchinson has a Bachelor of Arts degree from the
University of Washington, and a Master of Business Administration degree from
Columbia University.
2
<PAGE> 6
TERM EXPIRES IN 2002 (CLASS 2)
W. Thomas Porter (age 66) has served as a director of the Company since
his appointment in March 1999. He retired as an Executive Vice President and
member of the senior management committee of Seafirst Bank in March 1999, after
15 years in numerous leadership positions with Rainier Bank, Security Pacific
Bank and Seafirst Bank (a unit of Bank of America). Prior to his career in
banking, for 15 years he was with Touche Ross in New York and Seattle and was
National Partner for Professional Development and Planning. He also was the
National Partner in charge of Executive Financial Counseling. He was a Professor
of Management Control at the University of Washington for 9 years and for one
year at the North Europe Management Institute in Oslo, Norway. Dr. Porter has a
Bachelor of Science degree from Rutgers University, a Master of Business
Administration degree from the University of Washington, and a Doctor of
Philosophy degree from Columbia University.
Raymond A. Johnson (age 58) has served as a director of the Company since
his appointment in September 1997. He retired from Nordstrom, Inc. as its
Co-chairman and a member of its Board of Directors in 1996. Prior to that, he
was Nordstrom, Inc.'s Co-president, as well as holding a variety of executive
and managerial positions at Nordstrom, Inc. in Washington and California, dating
back to 1969. He attended Western Washington University.
Seven Board of Directors meetings were held in 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established four standing committees of its Board of
Directors--an Audit Committee, a Compensation Committee, a Nominating and
Organization Committee, and a European Investment 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 independent accountants' letter of comments and management's responses
thereto, 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 George P. Hutchinson, W.J. Smith, and W. Thomas Porter. The
Audit Committee met three times in 1999.
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 Raymond A. Johnson (Chair), George P. Hutchinson, W.J. Smith and
W. Thomas Porter. The Compensation Committee met seven times in 1999.
Nominating and Organization Committee. The Nominating and Organization
Committee makes recommendations to the Board of Directors regarding the size and
composition of the Board of Directors, nominees for director positions and
regarding the organization of the Company, and performs such other duties as may
be assigned by the Board. This Committee considers nominees recommended by
stockholders in accordance with the procedures governing such nominations set
forth in the Company's Bylaws. The members of the Nominating and Organization
Committee are Charles K. Barbo (Chair), Raymond A. Johnson, W.J. Smith, George
P. Hutchinson and Harrell L. Beck. The Nominating and Organization Committee met
one time in 1999.
3
<PAGE> 7
European Investment Committee. The European Investment Committee was
formed in October 1999. The European Investment Committee is responsible for
reviewing the performance of the Company's European operations and providing
advice to the Board of Directors with respect to the Company's European
expansion and operations strategies. The Committee members also represent the
Company on the Management Committee of SSC Benelux & Co. The members of the
European Investment Committee are George P. Hutchinson and Charles K. Barbo. The
European Investment Committee met one time in 1999.
All members of the Board of Directors attended at least 75% of the total
number of Board meetings and Committee meetings of which they are members.
DIRECTOR COMPENSATION
Fees. Directors who are employees of the Company do not receive any fees
for their services as directors. In 1999, Directors who were not employees of
the Company were paid an annual retainer of $17,000 for serving on the Board of
Directors, an additional fee of $1,000 for each meeting of the Board of
Directors attended and $1,000 for each meeting of a committee of the Board of
Directors attended. In addition, non-employee directors who serve on the
European Investment Committee receive an annual retainer of $17,000 per year for
their service on that committee. The Company reimburses each non-employee
director for travel expenses incurred in connection with activities on behalf of
the Company.
Options. After the Company's 1999 Annual Shareholder Meeting, the Board
granted options for 5,000 shares exercisable at fair market value on the grant
date ($27.65) to each non-employee director. On December 9, 1999, the Board
granted options for an additional 2,920 shares to George P. Hutchinson,
exercisable at fair market value on the grant date ($21.31), for his services as
a member of the European Investment Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 than 10%
beneficial owners are required by Commission regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons required for those
persons, the Company believes that during the 1999 fiscal year all filing
requirements applicable to its officers and directors were complied with by such
persons.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 16, 2000, certain information
with respect to the beneficial ownership of shares of Class A Common Stock and
Class B Common Stock by each director of the Company, each executive officer of
the Company for whom compensation information is reported in this proxy
statement, and all directors and executive officers of the Company as a group.
It also sets forth, as of the dates noted, certain information with respect to
stockholders who beneficially own more than 5% of the shares of Class A Common
Stock or Class B Common Stock. Based on such information furnished by such
owners, and except as otherwise noted, the Company believes that the beneficial
owners of the shares of Common Stock listed below have sole voting and
investment power with respect to such Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------- -------------------- --------
<S> <C> <C> <C>
Charles K. Barbo Class A Common Stock 1,044,660(1) 3.56%
1155 Valley Street, Suite 400 Class B Common Stock 78,075(2) 50.50%
Seattle, WA 98109
Arthur W. Buerk Class A Common Stock 417,597 1.42%
801 SW 150th Street, #212 Class B Common Stock 76,529(2) 49.50%
Seattle, WA 98166
Michael Rowe Class A Common Stock 190,086(3) *
David K. Grant Class A Common Stock 81,701(4) *
Harrell L. Beck Class A Common Stock 104,923(5) *
Steven P. Tyler Class A Common Stock 20,579(6) *
John B. Steckler Class A Common Stock 21,240(7) *
Wendell J. Smith Class A Common Stock 23,017(8) *
George P. Hutchinson Class A Common Stock 19,120(9) *
Raymond A. Johnson Class A Common Stock 12,000(10) *
W. Thomas Porter Class A Common Stock 14,000(11) *
Public Storage, Inc. Class A Common Stock 1,859,775(12) 6.34%
701 Western Avenue
Glendale, CA 91201
All directors and executive Class A Common Stock 1,570,373(13) 5.35%
officers as a group (12 persons) Class B Common Stock 78,075 50.50%
</TABLE>
- ------------------------------------
* Less than 1%.
(1) Includes 6,004 shares held for Mr. Barbo's individual account under the
Company's Employee Retirement Savings Plan and Trust, 4,000 shares held by
trusts of which Mr. Barbo is a trustee, and 264,465 shares issuable on
exercise of stock options currently exercisable or exercisable within 60
days.
(2) Class B Common Stock entitled Mr. Barbo and Mr. Buerk each 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.
With respect to Mr. Barbo, includes 1% of Class B Common Stock held by a
corporation wholly owned by Mr. Barbo.
(3) Includes 103,831 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days, 5,690 shares held for Mr.
Rowe's individual account under the Company's Employee Retirement Savings
Plan and Trust (the "ESOP") and 272 shares directly owned by Mr. Rowe's
wife and children.
(4) Includes 19,740 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 4,702 shares held for Mr.
Grant's individual account under the ESOP.
5
<PAGE> 9
(5) Includes 91,082 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 4,288 shares held for Mr.
Beck's individual account under the ESOP.
(6) Includes 20,112 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 434 shares held for Mr.
Tyler's individual account under the ESOP.
(7) Includes 20,112 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 435 shares held for Mr.
Steckler's individual account under the ESOP.
(8) Includes 22,000 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days.
(9) Includes 1,200 shares directly owned by Mr. Hutchinson's wife and
children, and 14,420 shares currently exercisable or exercisable within 60
days.
(10) Includes 11,500 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days.
(11) Includes 6,000 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days.
(12) Share ownership as reported in 13-D filing filed with the Securities
Exchange Commission on March 2, 2000.
(13) Include an aggregate of 604,533 shares issuable on exercise of stock
options currently exercisable within 60 days.
6
<PAGE> 10
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVES
The following table sets forth the compensation for services rendered
during the fiscal years ended December 31, 1999, 1998, and 1997 for the
Company's Chief Executive Officer, for the four other most highly compensated
executive officers of the Company, and for one former executive officer of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------------------
SHARES
UNDERLYING
OPTIONS/ ALL OTHER
STOCK OPTION LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS(#) PAYOUTS ($)
---- --------- ----------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 1999 300,000 66,564 200,000 21,423(2) 9,600(3)
Chairman, President and 1998 220,000 129,525 141,200 74,056 8,000
Chief Executive Officer 1997 200,000 65,700 62,642 5,337
Michael Rowe(4) 1999 220,000 66,564 88,000 9,738(2) 29,834
Executive Vice President 1998 190,000 105,707 45,900 39,467 25,768
and Chief Operating 1997 170,000 49,275 28,474 19,628
Officer
David K. Grant 1999 190,000 43,600 136,008(5)
Executive Vice President 1998 140,000 16,800 118,855
and Managing Director of 1997 140,000 25,200 112,897
European Operations
Harrell L. Beck 1999 165,000 39,938 146,000 4,674(2) 13,718(3)
Director, Senior Vice 1998 144,000 65,420 35,300 19,721(2) 9,971
President, Chief 1997 115,000 38,325 13,667 7,279
Financial Officer,
Principal Accounting
Officer and Treasurer
John Steckler(6) 1999 125,000 34,985 55,000 3,116 11,957(3)
Senior Vice President
Marketing
Steve Tyler(6) 1999 117,000 26,298 55,000 3,116 15,496(3)
Senior Vice President
Operations
</TABLE>
- --------------
(1) Includes bonus awards earned during 1999 pursuant to the terms of
incentive compensation, discretionary bonus and profit-sharing
arrangements.
(2) Represents a cash payment for long-term compensation earned under a
formula established in 1996 (and modified slightly in 1997 to take into
consideration the start up of the containerized storage business). The
measurement period for the award was 1997-1999.
7
<PAGE> 11
(3) For the year ended December 31, 1999, with respect to Mr. Barbo, Mr. Rowe,
Mr. Beck, Mr. Steckler and Mr. Tyler, includes: $6,400, $6,400, $6,400,
$6,400 and $6,113, respectively, contributed by the Company under its
Employee Retirement Savings Plan (ESOP); employer-matching contributions
made by the Company under its Employee Retirement Savings Plan (401(k)) of
$3,200, $3,200, $3,200, $3,200 and $3,069 respectively; with respect to
Mr. Rowe includes $14,408 relating to interests in cash distributions from
investments in certain partnerships, and, with respect to Mr. Rowe, Mr.
Beck, Mr. Steckler and Mr. Tyler includes payments of $5,826, $4,118,
$2,357 and $6,314, respectively, paid annually towards insurance premiums
on an executive disability plan.
(4) Mr. Rowe's responsibilities as Chief Operating Officer terminated in
September 1999. Mr. Rowe resigned from the Company effective January 27,
2000.
(5) For the year ended December 31, 1999, includes: employer-matching
contributions made by the Company under its 401(k) plan of $3,200, $6,400
contributed by the Company under its ESOP and $14,408 relating to
interests in cash distributions from investments in certain partnerships.
Other compensation amounts relating to Mr. Grant's relocation in
connection with the Company's European joint venture include: $26,000
housing expense adjustment, $45,000 educational expense allowance, $28,000
cost of living expense adjustment and $13,000 car allowance.
(6) Mr. Steckler's and Mr. Tyler's compensation for 1997 and 1998 has not been
included because they were not executive officers in those years.
OPTION GRANTS
The following table sets forth certain information regarding options to
purchase shares of Class A Common Stock granted to the Company's executive
officers for whom compensation information is reported in this proxy statement
during the fiscal year ended December 31, 1999.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(*)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE)(2) DATE 5%($) 10%($)
---- ------------- ----------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 200,000 12.64% $ 25.25 1/27/09 $ 3,175,918 $ 8,048,399
Michael Rowe 88,000(3) 5.56% 25.25 1/27/09 1,397,404 3,541,296
Harrell L. Beck 61,000(3) 3.86% 25.25 1/27/09 968,655 2,454,762
85,000(4) 5.37% 21.63 12/9/09 1,155,987 2,929,498
John Steckler 15,000 0.95% 25.25 1/27/09 238,194 603,630
40,000 2.53% 21.63 12/9/09 543,994 1,378,587
Steve Tyler 15,000 0.95% 25.25 1/27/09 238,194 603,630
40,000 2.53% 21.63 12/9/09 543,994 1,378,587
All Stockholders N/A N/A N/A N/A 455,420,889 1,154,125,950
</TABLE>
- --------------
(1) Unless otherwise noted, the options vest in annual installments of 33.33%
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.
(2) Options were granted at the fair market value on the date of grant.
(3) Of these options, 6,000 vest in 6 months and the remainder vest in three
equal annual installments commencing on the first anniversary of the date
of grant.
8
<PAGE> 12
(4) Of these options, 15,000 vest in 6 months and the remainder vest in three
equal annual installments commencing on the first anniversary of the date
of grant.
(*) The actual value, if any, that 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 $25.25, the closing price per share
of Class A Common Stock as reported by the New York Stock Exchange on
January 27, 1999, the date of the first option grants to the Company's
executive officers and 28,679,639 shares, the number of shares of Class A
Common Stock outstanding as of that date. There can be no assurance that
the actual value per share realized by the named executive officer or by
all stockholders will approximate the potential realizable values set
forth in the table.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding options held
as of December 31, 1999 by each of the Company's executive officers for whom
compensation information is reported in this proxy statement. No options were
exercised by these persons during the fiscal year ended December 31, 1999.
YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)(2)
---------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles K. 129,735 309,244 76,852(2) 14,625
Barbo(3)
Michael Rowe 59,377 122,737 47,614(2) 7,313
David K. Grant 16,740 3,000 47,271(2) 7,313
Harrell L. Beck 44,602 168,735 42,719(2) 140,125
John Steckler 9,075 64,037 -0- 62,500
Steve Tyler 9,075 64,037 -0- 62,500
</TABLE>
- --------------
(1) This amount is the aggregate number of outstanding options multiplied by
the difference between $23.1875 (the closing price of Class A Common Stock
on December 31, 1999) and the exercise price of those options that are
below $23.1875.
(2) This amount includes dividend equivalents of $7.26 per share as of
December 31, 1999, payable to the option holder upon exercise of the
following total number of exercisable stock options: Mr. Barbo, 5,137; Mr.
Rowe, 2,740; Mr. Grant, 2,740; and Mr. Beck, 1,370.
(3) 30,000 stock option shares held by Mr. Barbo, 24,000 of which are
exercisable, include a bonus of $2.25 per share, payable in cash upon
exercise. Such bonus amount is included in the value of the options at
fiscal year end.
9
<PAGE> 13
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY AND HISTORY
The Company's compensation system is structured to attract and retain
executives who are entrepreneurial and agree to be compensated, in significant
part, by creating value for stockholders. The Company believes that this
structure is advantageous to stockholders because the fixed costs of salaries
are minimized and executives' and stockholders' interests are aligned. In the
Fall of 1997, the Compensation Committee engaged an independent consultant to
review the compensation philosophy of the Company and the compensation levels
for the senior executives and board members, in order to ensure that the
compensation system remains aligned with these considerations and corporate
goals. The independent consultant updated this report for the Committee in
October 1999.
COMPENSATION POLICIES
For 1999, the Company's compensation policies reflected the movement from
below market toward market level salaries, and toward incentivizing executives
to earn total compensation at or above median levels through the use of bonus
and equity incentives that are performance based.
Salaries. The Compensation Committee reviewed the independent Compensation
Consultant's reports, which included data from eight surveys in the REIT, retail
and service industries, and a review of proxies of 14 publicly traded REITs with
estimated 1997 assets of between $811 million and $2.9 billion. Some but not all
of the companies included in the NAREIT Equity REIT Index, included in the
Cumulative Total Return Table, were included in this data. These indices were
not matched geographically with the Company, but do cover some of the industries
from which the Company recruits employees, such as retail, fast food,
restaurant, leisure and hospitality. For 1997, compared to the average of this
market data, salaries for Company Executives were at or below the 25th
percentile. For 1998 and 1999, it was the Committee's intention to move base
salaries closer to the 50th percentile. For future years, it is the Committee's
intention to maintain salaries at approximately the 50th percentile.
The Compensation Committee reviewed and approved the salaries for the CEO
and each of the named executive officers. The Committee established Mr. Barbo's
annual salary at $300,000, after considering Mr. Barbo's years of experience in
and knowledge of the self storage industry, his leadership in infusing the
entire Company with strong corporate values and a common mission and the
continued improvement of operating results from the Company's properties.
Annual Incentive Bonus. The Company established target bonuses and
specific performance criteria for the Company's executive officers based on the
Company's funds from operations for 1999, except in the case of Mr. Grant, whose
performance criteria were established in relation to European developments and
budget-to-date actual performance. Based on the Company's performance of its
target, the bonus paid to Mr. Barbo for 1999 was $ 66,564, approximately 67% of
the target amount established for him.
Long Term Equity Incentive. Long-term equity compensation is the linchpin
of the Company's compensation policy of incentivizing entrepreneurial interest
in the creation of stockholder wealth. On January 27, 1999, executives in the
Company, other than Mr. Grant, were granted stock options at fair market value
on the date of the grant. The options for Mr. Rowe and Mr. Beck vest in four
installments, beginning six months after the grant and vesting completely on the
third anniversary of the grant. For the other executives, the options vest
annually over three years. Mr. Barbo was granted options on 200,000 shares. On
December 9, 1999, additional options were granted to the executives, other than
Mr. Grant and Mr. Barbo, at fair market value on the date of the grant. The
options, other than Mr. Beck's, vest annually over three years. Mr. Beck's
options vest in four installments, beginning six months after the grant and vest
completely on the third anniversary of the grant. These options were intended as
a part of the executive
10
<PAGE> 14
compensation package for 2000. The December grants were a result of the
Company's decision to change, on a going forward basis, from granting equity
awards at the beginning of a year for that year's compensation to granting such
awards at the end of the prior year for the next year's compensation.
Limitations in the plan documents prevented the award to Mr. Barbo in December
1999. An option award for Mr. Barbo for year 2000 compensation was made in
January 2000.
Generally, the number of stock options granted to an executive officer
increases in relation to the executive officer's level of responsibility in the
Company and his or her ability to directly impact the profitability of the
Company. The number of options previously granted and other stockholdings by the
named executive officers were not considered in making the awards.
Policy with Respect to Section 162(m) Limitations. Section 162(m) of the
Internal Revenue Code (the "Code") limits the tax deduction available to public
companies for compensation paid to individual executive officers to $1 million
in any taxable year, unless certain performance, disclosure and shareholder
approval requirements are met. The compensation disclosed in this Proxy
Statement does not exceed the $1 million limit, and executive compensation for
2000 is also expected to qualify for deductibility. The Company's executive
compensation programs are designed to provide awards based on individual and
Company performance measures. To the extent there is no adverse effect on this
performance-related approach or on the Company's ability to provide competitive
compensation, it is the Committee's policy to minimize executive compensation
expense that is non-deductible by the Company for tax purposes.
Respectfully submitted,
Raymond A Johnson, Chair
W.J. Smith
George P. Hutchinson
W. Thomas Porter
11
<PAGE> 15
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the cumulative total return on
the Class A Common Stock during the period beginning on January 1, 1995, and
ending on December 31, 1999, the last day of the Company's 1999 fiscal year,
with the cumulative total return on the Standard & Poor's 500 Index and the
Equity REIT Index prepared by NAREIT. The comparison assumes $100 was invested
on January 1, 1995 and assumes reinvestment of dividends. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
<TABLE>
<CAPTION>
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shurgard Storage Centers, Inc. -CIA $ 100 $ 143 $ 166 $ 174 $ 166 $ 162
S&P 500(R) $ 100 $ 138 $ 169 $ 226 $ 290 $ 351
NARE/T Equity REIT Index $ 100 $ 115 $ 156 $ 188 $ 155 $ 148
</TABLE>
12
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOAN RELATING TO CLASS B COMMON STOCK
On March 1, 1994, as a part of the consolidation of 17 partnerships and
formation of the Company ("the Consolidation"), 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 that consolidation. Mr.
Barbo's shares of Class B Common Stock have been pledged as collateral for the
loan. Upon repayment of the loan, 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. As of December 31,
1999, the entire principal amount of the loan remained outstanding.
SHURGARD STORAGE TO GO, INC.
As of December 31, 1999, Shurgard Storage Centers, Inc. had invested $7.7
million in equity and $10.7 Million in debt in Shurgard Storage To Go, Inc., a
Washington corporation ("Shurgard To Go") whose business is to provide services
ancillary to self storage, including but not limited to containerized storage
services. As of the above date, the following officers of the Company have
invested the following amounts in Shurgard Storage To Go, Inc.: Charles K.
Barbo, $63,750 ; Michael Rowe, $38,750; Harrell L. Beck, $9,375; Steven Tyler
$18,750, John Steckler $18,750, representing an aggregate of approximately 54%
of Shurgard To Go's outstanding shares of voting Series A Common Stock. The
majority of the remaining voting shares are owned by other individuals who are
or were key employees of the Company. The Company owns 91% Shurgard To Go's
outstanding shares of non-voting, Series B Common Stock. The Company and Mr.
Barbo have each entered into an agreement with an unaffiliated third party
pursuant to which they have the right and may have an obligation to acquire,
over the next two years, additional shares of Series A Common Stock and Series B
Common Stock, respectively. Under the terms of that Agreement on March 11, 1999
the Company repurchased 23,750 shares of Series B Common Stock and Mr. Barbo
repurchased 1,250 shares of Series A Common Stock on March 11, 1999.
EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL ARRANGEMENTS
1993 Stock Option Plan. The 1993 Stock Option 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 terminate upon consummation of
such transactions. 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 Long-Term 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 Compensation 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.
Business Combination Agreements. The Company has entered into an agreement
with each of its officers that provides for payments in the event that the
employee's employment is terminated by the Company other than for cause, or by
the employee for good reason, within two years after certain business
combination transactions, including but not limited to changes of control. The
agreements provide for the continuation of benefits and continued employment or
pay for two and one-half years of annual salary and average bonus, and, in the
event of certain taxation of payments made under these agreements, additional
payments necessary for the officers to receive the benefits contemplated by the
agreements. In addition, in 1999 the Company entered into an additional
agreement with Mr. Grant providing that, in the event of his termination prior
December 31, 2005, irrespective whether or not such Termination occurs following
a
13
<PAGE> 17
Business Combination, he shall continue to render consultant services to the
Company as an independent consultant of the Company for nominal consideration.
Vision 2003 Bonus Plan. In 1999, the Board approved a Vision 2003 bonus
plan. Under the terms of the Plan, employees of the Company will share a
potential one-time bonus payment of $50 million dollars. The bonus is an all or
nothing bonus, earned upon achievement of the equivalent of $5.00 funds from
operations ("FFO") per share annually (For a detailed definition of FFO please
refer to the Company's Annual Report on Form 10-K). The $5.00 FFO threshold will
be measured by annualizing any single quarter FFO; e.g. a fiscal quarter FFO of
$1.25 is equivalent to $5.00 FFO annually and will result in payment of the
bonus. This goal must be achieved by December 31, 2003, or no bonus will be
paid. The bonus is payable to all employees based on length of service and
position within the company and is subject to adjustment by the Board for
unplanned expansion of existing business or new business ventures.
PROPOSAL TO APPROVE THE 2000 LONG-TERM INCENTIVE PLAN
The Board of Directors has approved, and recommends that the stockholders
approve the 2000 Long-Term Incentive Plan ("2000 Plan"). The 2000 Plan is
successor to the Company's existing 1995 Long-Term Incentive Compensation Plan,
which terminates on June 30, 2000. Approximately 429,500 shares remain available
for grant under the 1995 Plan. On March 16, 2000, approximately 950 employees,
officers, directors, consultants and agents of the Company were eligible to
receive awards under the 2000 Plan. 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 $24.50.
A copy of the 2000 Plan is attached to this Proxy Statement as Appendix A.
The following description of the 2000 Plan is a summary and does not purport to
be fully descriptive. Reference is made to Appendix A for more detailed
information.
INTRODUCTION
The purpose of the 2000 Plan is to enhance the long-term profitability and
shareholder value of the Company by offering incentives and rewards to those
employees, officers, directors, 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 2000 Plan is substantially
similar to the 1995 Plan, except that (i) directors are eligible to receive
grants under the 2000 Plan and (ii) the 2000 Plan authorizes a fixed number of
shares for issuance under the plan, which does not have a fixed term, whereas
the 1995 Plan contained an "evergreen" provision that automatically added a
specified percentage of the outstanding shares to the plan each year during its
five-year term.
AWARDS
The 2000 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, or 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.
The plan administrator may permit or require the deferral of Award payments.
Stock Subject to the 2000 Plan. Subject to adjustment from time to time as
provided in the 2000 Plan, a maximum of 1,400,000 shares of Class A Common Stock
are authorized for issuance under the plan. Subject to such adjustment, no more
than 400,000 shares may be issued as stock awards (including restricted stock),
or other stock-based awards other than stock options under the 2000 Plan. Also
subject to such adjustment, no more than 500,000 shares may be subject to awards
granted to any participant in any one fiscal year, except that one-time grants
to newly hired or newly promoted individuals may be granted
14
<PAGE> 18
during a fiscal year, to the extent such limitations are 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 ceases 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, vested
and nonforfeitable shares) will be available for issuance in connection with
future grants of awards under the 2000 Plan.
Eligibility to Receive Awards. Awards may be granted under the 2000 Plan
to those officers, directors and employees of the Company and its subsidiaries
that 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
2000 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 2000 Plan will be determined by the plan administrator, but will not
be 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
2000 Plan, "fair market value" means the closing price 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 full-recourse 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
Company may require the optionee to pay applicable withholding taxes upon
exercise of the option as a condition to receiving the stock. The withholding
tax may be paid in cash or by the withholding or delivery of Class A Common
Stock.
The option term will be fixed by the plan administrator. If not so fixed,
the term of the option will be ten years. Each option will be exercisable
pursuant to a vesting schedule determined by the plan administrator. If not so
established, options generally will vest one-third 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 2000 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 2000 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 periods of continuous service with the
Company or performance goals related to profits, profit growth, profit-related
15
<PAGE> 19
return ratios, cash flow, total shareholder 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 determine.
Restrictions may include repurchase or forfeiture rights in favor of the
Company.
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 shareholder 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, except that
the plan administrator may not adjust performance goals for any Performance
Award intended to be exempt under Section 162(m) of the Code for the year in
which the Performance Award is settled in such a manner as would increase the
amount of compensation payable to the participant. 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 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 reason 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 2000 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 2000 Plan and must be
consistent with the 2000 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.
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 2000 Plan,
the plan administrator may authorize (a) the extension of a full recourse 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 full recourse loan obtained by the grantee from a third
party. The terms of any loans, installment payments or guarantees, including the
16
<PAGE> 20
interest rate and terms of repayment, will be subject to the plan
administrator's discretion, and may be granted with or without security.
Transferability. Except as otherwise determined by the plan administrator
and to the extent permitted by Section 422 of the Code, 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.
Adjustment of Shares. In the event of any changes in the outstanding stock
of the Company by reason of stock dividends, stock splits, spin-offs,
combinations or exchanges of shares, recapitalizations, mergers, consolidations,
distributions to shareholders 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 it deems
appropriate in (a) the maximum number and kind of securities subject to the 2000
Plan, (b) the maximum number and kind of securities that may be made subject to
awards to any participant, and (c) the number and kind 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
settlements and other modifications, and the plan administrator may take such
action with respect to all holders, to certain categories of holders or only to
individual holders. The plan administrator may take such action 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 2000 Plan will be administered by the Compensation
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 2000 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 2000 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.
17
<PAGE> 21
Amendment and Termination. The Board of Directors may terminate the 2000
Plan, or modify or amend it, subject to shareholder approval in certain
instances, as set forth in the 2000 Plan. The 2000 Plan does not have a fixed
expiration date, but no incentive stock options may be granted more than ten
years after the later of the plan's adoption by the Board of Directors or the
adoption of any amendment to the plan that constitutes a new plan for purposes
of Section 422 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to the Company and to any person
granted an award under the 2000 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.
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.
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
18
<PAGE> 22
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. The 2000 Plan has been drafted to allow compliance with those
performance-based criteria.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE 2000 LONG-TERM INCENTIVE PLAN
INDEPENDENT AUDITORS
Deloitte & Touche LLP, which audited the Company's accounts for the last
fiscal year, has been the Company's independent auditor since the Company's
inception. Representatives of Deloitte & Touche LLP are expected to attend the
2000 Annual Meeting and will have an opportunity to make a statement and respond
to appropriate questions from stockholders.
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 $10,500, 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 2000 Annual Meeting. If, however, other matters not now known or determined
come before the 2000 Annual Meeting, the persons named in the enclosed proxy or
their substitutes will vote such proxy in accordance with their judgment in such
matters.
19
<PAGE> 23
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders must be received in written form to be
considered for inclusion in the Proxy Statement and proxy card for the Company's
2001 Annual Meeting of Stockholders by the Secretary of the Company no later
than December 1, 2000.
In addition, the Company's Bylaws include advance notice provisions that
require stockholders desiring to bring nominations or other business before an
annual shareholder meeting to do so in accordance with the terms of the advance
notice provisions. These advance notice provisions require that, among other
things, shareholders give timely written notice to the Secretary of the Company
regarding such nominations or other business. To be timely, a notice must be
delivered to the Secretary at the principal executive offices of the Company no
later than 90 days prior to the date of such annual meeting (or, if the annual
meeting is not held on the second Tuesday of May and the Company provides less
than 90 days' notice of such meeting, no later than 10 days after the date of
the notice).
Accordingly, subject to the exception noted above, a shareholder who
intends to present a proposal at the 2001 Annual Meeting without inclusion of
the proposal in the Company's proxy materials must provide written notice of the
nominations or other business they wish to propose to the Secretary no later
than February 6, 2001. The Company reserves the right to reject, rule out of
order, or take other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.
ANNUAL REPORT
A copy of the Company's 1999 Annual Report has been mailed to each
stockholder of record. Additional copies of the annual report may be obtained
without charge by writing or calling the Company's Investor Relations Department
at (800) 955-2235.
By Order of the Board of Directors,
Christine M. McKay
Secretary
Seattle, Washington
March 31, 2000
20
<PAGE> 24
APPENDIX A
SHURGARD STORAGE CENTERS, INC.
2000 LONG-TERM INCENTIVE PLAN
SECTION 1 PURPOSE
The purpose of the Shurgard Storage Centers, Inc. 2000 Long-Term Incentive Plan
(the "Plan") is to enhance the long-term profitability and shareholder value of
Shurgard Storage Centers, Inc., a Washington corporation (the "Company"), by
offering incentives to those employees, officers, directors, consultants and
agents of the Company and its Subsidiaries (as defined in Section 2.28 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.
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;
A-1
<PAGE> 25
(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 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 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, 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 EFFECTIVE DATE
"Effective Date" has the meaning set forth in Section 20.
2.11 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.12 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 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.
2.13 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 or 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;
A-2
<PAGE> 26
(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 clauses (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.
2.14 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 completes the corporate action relating to the grant of an Award
and all conditions precedent to the grant have been satisfied; provided,
however, that conditions to the exercisability or vesting of Awards shall not
defer the Grant Date.
2.15 HOLDER
"Holder" means the Participant to whom an Award is granted or the personal
representative of a Holder who has died.
2.16 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an option to purchase Common Stock granted under
Section 7 with the intention that it qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.
2.17 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an option to purchase Common Stock granted
under Section 7 other than an Incentive Stock Option.
2.18 OPTION
"Option" means the right to purchase Common Stock granted under Section 7.
2.19 OPTION TERM
"Option Term" shall have the meaning set forth in Section 7.3.
2.20 OTHER STOCK-BASED AWARD
"Other Stock-Based Award" means an Award granted under Section 12.
A-3
<PAGE> 27
2.21 PARTICIPANT
"Participant" means (a) 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, (b) for a Participant who has died, the personal
representative of the Participant's estate, the person or persons to whom the
Participant's rights under the Award have passed by will or by the applicable
laws of descent and distribution, or the beneficiary designated in accordance
with Section 15, or (c) the person or persons to whom an Award has been
transferred in accordance with Section 15.
2.22 PERFORMANCE AWARD
"Performance Award" means an Award granted under Section 11 the payout of which
is subject to achievement through a performance period of performance goals
prescribed by the Plan Administrator.
2.23 PLAN ADMINISTRATOR
"Plan Administrator" means any committee of the Board designated to administer
the Plan or any person or persons to whom the Board has delegated authority to
administer the Plan under Section 3.1.
2.24 RESTRICTED STOCK
"Restricted Stock" means shares of Common Stock granted under Section 10, the
rights of ownership of which are subject to restrictions prescribed by the Plan
Administrator.
2.25 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.
2.26 STOCK APPRECIATION RIGHT
"Stock Appreciation Right" means an Award granted under Section 9.
2.27 STOCK AWARD
"Stock Award" means an Award granted under Section 10.
2.28 SUBSIDIARY
"Subsidiary," except as expressly provided otherwise in Section 8.3 in
connection with Incentive Stock Options, 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.
2.29 SUCCESSOR CORPORATION
"Successor Corporation" shall have the meaning set forth in Section 16.2.
2.30 TERMINATION DATE
"Termination Date" shall have the meaning set forth in Section 7.6(a).
A-4
<PAGE> 28
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 terms as the Board may
determine, subject to removal by the Board at any time. The Board shall
consider, in selecting the members of any committee responsible for
administering the Plan with respect to any persons subject, or likely to become
subject, to Section 16 of the Exchange Act as officers of the Company, the
requirements of (a) Rule 16b-3 under Section 16(b) of the Exchange Act and (b)
Section 162(m) of the Code, as then in effect. Currently, Rule 16b-3 requires
that Awards granted to directors and officers subject to Section 16 of the
Exchange Act be approved by a committee that consists solely of at least two
"nonemployee" directors of the Company and Section 162(m) requires that Awards
granted to officers subject to Section 162(m) be approved by a committee that
consists solely of at least two "outside" 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
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
Subject to adjustment from time to time as provided in Section 16.1, a maximum
of 1,400,000 shares of Common Stock shall be available for issuance under the
Plan. Shares issued under the Plan shall be drawn from authorized and unissued
shares.
4.2 LIMITATIONS
(a) Subject to adjustment as provided in Section 16.1, not more than an
aggregate of 400,000 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,
not more than 500,000 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, except that the Plan Administrator may make
additional one-time grants of up to 750,000 shares to newly hired or newly
promoted individuals, such limitations 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.
A-5
<PAGE> 29
4.3 REUSE OF SHARES
Any shares of Common Stock made subject to an Award that cease to be subject to
that Award (other than by reason of exercise or payment of the Award to the
extent it is exercised for, or settled in, vested and nonforfeitable 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; provided, however,
that for purposes of this Section 4.3, any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code. 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, directors and 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; provided, however, that such persons render
bona fide services that are not in connection with the offer and sale of the
Company's securities in a capital-raising transaction and that do not directly
or indirectly promote or maintain a market for the Company's securities.
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 SETTLEMENT OF AWARDS
The Plan Administrator may permit or require the deferral of any Award payment,
subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents. The Plan
Administrator may at any time offer to buy out, for a payment in cash or Common
Stock, an Award previously granted, based on such terms and conditions as the
Plan Administrator shall establish and communicate to the Participant at the
time such offer is made.
6.3 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.
A-6
<PAGE> 30
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. For Incentive Stock
Options granted to a more than 10% shareholder, the Option exercise price shall
be as specified in Section 8.2.
7.3 TERM OF OPTIONS
The term of each Option (the "Option Term") shall be as established by the Plan
Administrator or, if not so established, shall be 10 years from the Grant Date.
For Incentive Stock Options, the maximum Option Term shall be as specified in
Sections 8.2 and 8.4.
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 vest and 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 shall vest and become exercisable according to
the following schedule, which may be waived or modified by the Plan
Administrator at any time:
<TABLE>
PERIOD OF HOLDER'S
CONTINUOUS EMPLOYMENT OR SERVICE
WITH THE COMPANY OR ITS PERCENT OF TOTAL
SUBSIDIARIES FROM THE OPTION OPTION THAT
GRANT DATE IS EXERCISABLE
-------------------------------- ----------------
<S> <C>
After one year ......................... 33%
After two years ........................ 66%
After three 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. 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 any
combination of
(a) cash or check;
A-7
<PAGE> 31
(b) tendering (either actually or by attestation) shares of 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;
(c) delivery of a full-recourse promissory note authorized pursuant to
Section 14;
(d) delivery of a properly executed exercise notice, together with
irrevocable instructions, to (i) 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 (ii) 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
(e) such other consideration as the Plan Administrator may permit.
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 shall be exercisable
according to the following terms and conditions, which may be waived or
modified, by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the
date of termination of the Participant's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire on the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Participant's Termination Date occurs for reasons other
than Cause, Retirement, Early Retirement at the Company's request, Disability or
death, the three-month anniversary of such Termination Date; and
(iii) if the Participant's Termination Date occurs by reason of
Retirement, Early Retirement at the Company' request, Disability or death, the
three-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Participant dies after the Termination
Date while the Option is otherwise exercisable, the portion of the Option that
is vested and exercisable on such Termination Date shall expire on the earlier
to occur of (y) the last day of the Option Term and (z) the longer of the first
anniversary of the date of death and the post-termination exercise period
otherwise applicable, unless the Plan Administrator determines otherwise. Also,
notwithstanding the foregoing, in case of termination of the Holder's employment
or services for Cause, the Option shall automatically terminate on 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.
A-8
<PAGE> 32
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.
8.2 MORE THAN 10% SHAREHOLDERS
If a Participant owns more than 10% 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. The
determination of 10% ownership shall be made in accordance with Section 422 of
the Code.
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, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
Subject to Section 8.2, the term of an Incentive Stock Option shall not exceed
10 years.
8.5 EXERCISABILITY
An Option designated as an Incentive Stock Option shall cease to qualify for
favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than Disability or death, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Participant has been on leave of absence for more than 90 days, unless the
Participant's reemployment rights are guaranteed by statute or contract.
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. A tandem Stock Appreciation Right will have the same other terms
A-9
<PAGE> 33
and provisions as the related Option. Upon and to the extent a tandem Stock
Appreciation Right is exercised, the related Option will terminate.
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.
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 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.
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 (which may be based on continuous service with the Company or performance
goals related to profits, profit growth, profit-related return ratios, cash
flow, total return to shareholders, 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 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;
provided, however, that the Plan Administrator may not adjust performance goals
for any Stock Award intended to be exempt under Section 162(m) of the Code for
the year in which the Stock Award is settled in such a manner as would increase
the amount of compensation otherwise payable to a Participant.
A-10
<PAGE> 34
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 shall be profits, profit growth, profit-related return
ratios, cash flow, total return to shareholders, 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), or any 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), 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; provided,
however, that the Plan Administrator may not adjust performance goals for any
Performance Award intended to be exempt under Section 162(m) of the Code for the
year in which the Performance Award is settled in such a manner as would
increase the amount of compensation otherwise payable to a Participant. 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 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 Performance Award at the end of the applicable performance period
(a) 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 (b) 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
A-11
<PAGE> 35
terms and conditions as the Plan Administrator deems appropriate. Except as
otherwise provided in Section 16 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 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) 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, (a) the
extension of a full-recourse loan to the Holder by the Company, (b) the payment
by the Holder of the purchase price, if any, of the Common Stock in
installments, or (c) the guarantee by the Company of a full-recourse loan
obtained by the grantee from a third party. Subject to the foregoing, the Plan
Administrator, in its sole discretion, shall specify the terms of any loans,
installment payments or guarantees, including the interest rate and terms of
repayment. 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.
SECTION 15 ASSIGNABILITY
No Option, Stock Appreciation Right, Restricted Stock Award, Performance Award,
Other Stock-Based Award or Dividend Equivalent Right granted under the Plan may
be assigned, pledged 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 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;
provided, however, that any Award so assigned or transferred shall be subject to
all the same terms and conditions contained in the instrument evidencing the
Award.
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 shareholders other than a normal cash dividend or
other change in the Company's corporate or capital structure results in (a) the
outstanding
A-12
<PAGE> 36
shares, or any securities exchanged therefor or received in their place, being
exchanged for a different number or kind of securities of the Company or any
other corporation or (b) new, different or additional securities of the Company
or 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
(i) the maximum number of and kind of securities subject to the Plan as set
forth in Section 4.1, (ii) the maximum number and kind of securities that may be
made subject to Stock Awards and Awards to any individual Participant as set
forth in Section 4.2, and (iii) the number and kind 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 of
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, (a) such Award is, in connection with
the Corporate Transaction, either to be assumed by the surviving corporation,
the successor corporation or the parent thereof, as applicable (the "Successor
Corporation"), or to be replaced with a comparable award for the purchase of
shares of the capital stock of the Successor Corporation, (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, or (c) the acceleration of such Award is subject to
other limitations imposed by the instrument evidencing the Award. The
determination of Award comparability under clause (a) 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 immediately
following the consummation of the Corporate Transaction, except to the extent
assumed by the Successor Corporation. Any such Awards that are assumed or
replaced in the Corporate Transaction pursuant to clause (a) or (b) above and
that 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 Successor Corporation 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 or otherwise).
16.3 FURTHER ADJUSTMENT OF AWARDS
Without limiting the preceding Section 16.2, and subject to the limitations set
forth in Section 11, 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 actions as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to Awards. Such
authorized actions 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 actions relate 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
actions.
A-13
<PAGE> 37
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.
16.5 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any Award,
each such Award shall cover only the number of full shares resulting from such
adjustment.
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, vesting, 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, (a) by paying cash, (b) by electing to have the Company withhold
shares of Common Stock (up to the minimum required federal tax withholding
rate), or (c) by transferring shares of Common Stock to the Company (already
owned by the Holder for the period necessary to avoid a charge to the Company's
earnings for financial accounting purposes), in such amounts as are equivalent
to the Fair Market Value of the withholding obligation. The Company shall have
the right to withhold from any Award or any shares of Common Stock issuable
pursuant to an Award or from any cash amounts otherwise due, or to become due,
from the Company to the Participant an amount equal to such taxes. The Company
may also deduct from any Award any other amounts due from the Participant to the
Company or a Subsidiary.
SECTION 18 AMENDMENT AND TERMINATION OF PLAN
18.1 AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall deem
advisable; provided, however, that, to the extent required for compliance with
Section 422 of the Code or any applicable law or regulation, shareholder
approval will be required for any amendment that will (a) increase the total
number of shares that may be issued under the Plan or that may be issued as
Stock Awards, (b) materially modify the class of persons eligible to receive
Awards, or (c) otherwise require shareholder approval under any applicable law
or regulation. Any amendment made to the Plan that would constitute a
"modification" to Incentive Stock Options outstanding on the date of such
amendment shall not, without the consent of the Participant, be applicable to
such outstanding Incentive Stock Options but shall have prospective effect only.
18.2 TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. Unless the Plan shall
theretofore have been terminated by the Board, the Plan shall have no fixed
termination date; provided, however, that no Incentive Stock Option may be
granted more than 10 years after the later of (a) the Plan's adoption by the
Board and (b) the adoption by the Board of any amendment to the Plan that
constitutes the adoption of a new plan for purposes of Section 422 of the Code.
18.3 CONSENT OF HOLDER
The amendment or termination of the Plan or the amendment of an outstanding
Award shall not, without the Holder's consent, impair or diminish any rights or
obligations under any Award theretofore granted to the Holder under the Plan.
Any change or adjustment to an outstanding Incentive Stock Option shall not,
without the consent of the Holder, be made in a manner so as to constitute a
"modification" that would cause such Incentive Stock Option to fail to continue
to qualify as an Incentive Stock Option.
A-14
<PAGE> 38
Notwithstanding the foregoing, any adjustments made pursuant to Section 16 shall
not be subject to these restrictions.
SECTION 19 GENERAL
19.1 EVIDENCE OF AWARDS
Awards granted under the Plan shall be evidenced by a written instrument that
shall contain such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and that are not inconsistent with the Plan.
19.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
Neither the Plan nor 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.
19.3 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.
To the extent that the Plan or any instrument evidencing an Award provides for
issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
19.4 NO RIGHTS AS A SHAREHOLDER
No Option, Stock Appreciation Right, Stock Award denominated in units,
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
Rights), voting or other right of a shareholder 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.
19.5 COMPLIANCE WITH LAWS AND REGULATIONS
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.
19.6 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.
A-15
<PAGE> 39
19.7 PARTICIPANTS IN FOREIGN COUNTRIES
The Plan Administrator shall have the authority to adopt such modifications,
procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or its
Subsidiaries may operate to assure the viability of the benefits from Awards
granted to Participants employed in such countries and to meet the objectives of
the Plan.
19.8 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.
19.9 CHOICE OF LAW
The Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Washington without giving effect to
principles of conflicts of laws.
SECTION 20 EFFECTIVE DATE
The Plan's Effective Date is the date on which it is approved by the Company's
shareholders.
Adopted by the Board March 6, 2000 and approved by the Company's shareholders
A-16
<PAGE> 40
SHURGARD STORAGE CENTERS, INC.
PROXY FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2000
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, of Shurgard Storage
Centers, Inc. held of record by the undersigned on March 16, 2000, at the 2000
Annual Meeting of Stockholders to be held on May 9, 2000, or any adjournment or
postponement thereof, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEM 2.
1. ELECTION OF DIRECTORS
Election of the following two nominees to serve as directors for the terms
shown below or until their successors are elected and qualified:
HARRELL L. BECK WENDELL J. SMITH
(Class 3, Three-Year Term) (Class 3, Three-Year Term)
( ) FOR all nominees ( ) WITHHOLD AUTHORITY to ( ) WITHHOLD AUTHORITY to
vote for all nominees vote for the following
only: (write the name(s)
of the nominee(s) in this
space)
-------------------------
2. APPROVAL OF 2000 LONG TERM INCENTIVE PLAN
( ) FOR ( ) AGAINST ( ) ABSTAIN
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE
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, THIS PROXY
WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2.
The undersigned acknowledges receipt from the Company of a Notice of Annual
Meeting of Stockholders and a Proxy Statement dated March 31, 2000.
PLEASE SIGN BELOW EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. When shares are
held jointly, each person must sign. When
signing as attorney, executor, adminis-
trator, trustee or guardian, please give
full title as such. An authorized person
should sign on behalf of corporations,
partnerships and associations and give his
or her title.
Dated: , 2000
-------------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature, if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL
HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
