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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FRANCHISE FINANCE CORPORATION OF AMERICA
----------------------------------------
(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 paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[GRAPHIC OMITTED]
FRANCHISE FINANCE
CORPORATION OF AMERICA
------------
NOTICE OF
1997
ANNUAL MEETING
AND
PROXY STATEMENT
------------
ANNUAL MEETING
TO BE HELD
MAY 6, 1997
<PAGE>
[GRAPHIC OMITTED]
FRANCHISE FINANCE
CORPORATION OF AMERICA
17207 NORTH PERIMETER DRIVE
SCOTTSDALE, ARIZONA 85255-5402
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend
the 1997 Annual Meeting of Shareholders of Franchise Finance Corporation of
America to be held at The Scottsdale Princess Resort, 7575 East Princess Drive,
Scottsdale, Arizona on Tuesday, May 6, 1997 at 10:00 a.m. local time.
The Notice of Annual Meeting of Shareholders and the Proxy Statement
that follow describe the business to be conducted at the meeting. We will also
report on matters of current interest to our shareholders.
Whether you own a few or many shares of stock of Franchise Finance
Corporation of America, it is important that your shares be represented. If you
cannot personally attend the meeting, we encourage you to make certain you are
represented at the meeting by signing and dating the accompanying proxy card and
promptly returning it in the enclosed envelope. Returning your proxy card will
not prevent you from voting in person, but will assure that your vote will be
counted if you are unable to attend the meeting.
Sincerely,
MORTON H. FLEISCHER
March 27, 1997 Morton H. Fleischer, President, Chief
Executive Officer and Chairman of the
Board
<PAGE>
[GRAPHIC OMITTED]
FRANCHISE FINANCE
CORPORATION OF AMERICA
17207 NORTH PERIMETER DRIVE
SCOTTSDALE, ARIZONA 85255-5402
----------------------------------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1997
----------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Franchise Finance Corporation of America (the "Company") will be
held on Tuesday, May 6, 1997 at 10:00 a.m. local time, at The Scottsdale
Princess Resort, 7575 East Princess Drive, Scottsdale, Arizona for the following
purposes:
1. To elect ten directors to the Board of Directors.
2. To consider and vote upon a proposal to amend and restate the
Company's Restated Certificate of Incorporation which would,
among other things, authorize the issuance of 10,000,000
shares of preferred stock.
3. To consider and vote upon a proposal to approve the Company's
1997 Employee Stock Purchase Plan, as more fully described in
the accompanying Proxy Statement.
4. To ratify the selection of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1997.
5. To transact such other business as may properly come before
the Meeting and at any postponements or adjournments thereof.
Only shareholders of record at the close of business on March 14, 1997
are entitled to notice of and to vote at the Meeting or at any postponements or
adjournments thereof.
You are cordially invited and urged to attend the Meeting. All
shareholders, whether or not they expect to attend the Meeting in person, are
requested to complete, date and sign the enclosed form of Proxy and return it
promptly in the postage paid, return-addressed envelope provided for that
purpose. By returning your Proxy promptly you can help the Company avoid the
expense of follow-up mailings to ensure a quorum so that the Meeting can be
held. Shareholders who attend the Meeting may revoke a prior proxy and vote in
person as set forth in the Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
Christopher H. Volk
Christopher H. Volk, Secretary
Scottsdale, Arizona
Dated: March 27, 1997
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
17207 North Perimeter Drive
Scottsdale, Arizona 85255
-----------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held May 6, 1997
-----------------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors (the "Board") of Franchise
Finance Corporation of America, a Delaware corporation (the "Company") for use
at the Annual Meeting of Shareholders of the Company to be held at The
Scottsdale Princess Resort, 7575 East Princess Drive, Scottsdale, Arizona, on
Tuesday, May 6, 1997 at 10:00 a.m. local time, and at any and all postponements
or adjournments thereof (collectively referred to herein as the "Meeting"). This
Proxy Statement, the accompanying form of proxy (the "Proxy") and the Notice of
Annual Meeting will be first mailed or given to the Company's shareholders on or
about March 27, 1997.
Because many of the Company's shareholders may be unable to attend the
Meeting in person, the Board solicits proxies by mail to give each shareholder
an opportunity to vote on all matters presented at the Meeting. Shareholders are
urged to: (i) read this Proxy Statement carefully; (ii) specify their choice in
each matter by marking the appropriate box on the enclosed Proxy; and (iii)
sign, date and return the Proxy by mail in the postage-paid, return addressed
envelope provided for that purpose.
All shares of the Company's common stock, $.01 par value per share (the
"Shares"), represented by properly executed and valid Proxies received in time
for the Meeting will be voted at the Meeting in accordance with the instructions
marked thereon or otherwise as provided therein, unless such Proxies have
previously been revoked. Unless instructions to the contrary are marked, or if
no instructions are specified, Shares represented by the Proxies will be voted
for the proposals set forth on the Proxy, and in the discretion of the persons
named as proxies on such other matters as may properly come before the Meeting.
Any Proxy may be revoked at any time prior to the exercise thereof by submitting
another Proxy bearing a later date or by giving written notice of revocation to
the Company at the Company's address indicated above or by voting in person at
the Meeting. Any notice of revocation sent to the Company must include the
shareholder's name and must be received prior to the Meeting to be effective.
VOTING
Only persons holding Shares of record at the close of business on March
14, 1997 (the "Record Date") will be entitled to receive notice of and to vote
at the Meeting. On the Record Date there were __________ Shares outstanding,
each of which will be entitled to one vote on each matter properly submitted for
vote to the Company's shareholders at the Meeting. The presence, in person or by
proxy, of holders of a majority of outstanding Shares entitled to vote at the
Meeting constitutes a quorum for the transaction of business at the Meeting.
The election of each director nominee requires the affirmative vote of
a plurality of the Shares cast in the election of directors. An affirmative vote
of the holders of a majority of the outstanding Shares entitled to vote at the
Meeting is required for approval of Proposal No.2 to amend and restate the
Company's Restated Certificate of
1
<PAGE>
Incorporation. An affirmative vote of a majority of the votes cast at the
Meeting is required for approval of all other items being submitted to the
shareholders for their consideration.
Those Shares present, in person or by proxy, including Shares as to
which authority to vote on any proposal is withheld, Shares abstaining as to any
proposal, and broker non-votes (where a broker submits a proxy but does not have
authority to vote a customer's Shares on one or more matters) on any proposal,
will be considered present at the Meeting for purposes of establishing a quorum.
Each will be tabulated separately.
Brokers who hold shares in street name for customers have the authority
to vote on certain items when they have not received instructions from
beneficial owners. Brokers that do not receive instructions are entitled to vote
on all proposals contained in this Proxy except such brokers cannot vote on
Proposal No. 2 to approve the amendment to and restatement of the Company's
Restated Certificate of Incorporation, or Proposal No. 3 to approve the
Company's 1997 Employee Stock Purchase Plan.
Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders, while broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
Votes cast by proxy will be tabulated by an automated system
administered by Gemisys Transfer Agents, the Company's transfer agent. Votes
cast by proxy or in person at the Meeting will be counted by the independent
persons appointed by the Company to act as election inspectors for the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
It is intended that the Shares represented by properly executed Proxies
will be voted to elect the director nominees, unless authority so to vote is
withheld. Each nominee is currently a member of the Board and all of the
nominees have indicated a willingness to serve as a director if re-elected. If
elected, each nominee will serve until the 1998 Annual Meeting of Shareholders
or until his earlier removal or resignation. The Board has no reason to believe
that any of the director nominees will be unable to serve as directors or become
unavailable for any reason. If, at the time of the meeting, any of the director
nominees shall become unavailable for any reason, the persons entitled to vote
the Proxy will vote, as such persons shall determine in his or her discretion,
for such substituted nominee or nominees, if any, nominated by the Board.
There are no arrangements or understandings between or among any of the
officers or directors and any other person pursuant to which any officer or
director was selected as such. There are no family relationships among any
directors and executive officers of the Company.
The affirmative vote of a plurality of the Shares present or
represented to vote at the Meeting is necessary to elect each director nominee.
Shareholders of the Company will have an opportunity on their Proxy to vote in
favor of one or more director nominees while withholding authority to vote for
one or more director nominees.
THE BOARD RECOMMENDS THAT SHAREHOLDERS GRANT AUTHORITY FOR THE ELECTION
OF THE NOMINEES TO THE BOARD OF DIRECTORS
2
<PAGE>
Directors
The following table sets forth certain information with respect to the
directors of the Company (all of whom are nominees for re-election):
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director of the
Name and Age Five Years; Other Directorships Company Since
------------ ------------------------------- -------------
<S> <C> <C>
Morton H. Fleischer Director, Chairman of the Board, President and June 22, 1993
(60) Chief Executive Officer of the Company. Mr.
Fleischer previously served as the President,
Chief Executive Officer and director of Franchise
Finance Corporation of America I, a Delaware
corporation ("FFCA I") (a predecessor corporation
of the Company) since its formation in 1980. Mr.
Fleischer has acted as an individual general
partner (or general partner of the general
partner) of the eleven public limited
partnerships that were consolidated to form the
Company in 1994. In addition, he is a general
partner (or general partner of the general
partner) in the following public limited
partnerships whose investments are set forth in
parentheticals: Participating Income Properties
1986, L.P. ("PIP 86") (travel plazas);
Participating Income Properties II, L.P. (travel
plazas); Participating Income Properties III
Limited Partnership (travel plazas); and
Scottsdale Land Trust Limited Partnership ("SLT")
(commercial land development).
Robert W. Halliday Director and Chairman Emeritus of the Board of June 22, 1993
(77) the Company. Mr. Halliday previously served as
the Chairman of the Board of the Company since
its organization and of FFCA I since its
formation in 1980. He has served as a director of
several publicly held American and Canadian
companies, including Great Pacific Corporation,
Mitchell Energy & Development Corporation, Boise
Cascade Corporation and Jim Pattison Enterprises.
Willie R. Barnes Corporate and securities law attorney. Mr. Barnes March 14, 1995
(65) has been a partner in the law firm of Musick,
Peeler & Garrett since June 1992. He was a
partner in the law firm of Katten, Muchin Zavis &
Weitzman from March 1991 to January 1992. He is a
member of the Business Law Section of the
American Bar Association, in addition to other
committees. Mr. Barnes was appointed as the
Commissioner of Corporations for the State of
California in 1975 and is a member of the
California Senate Commission on Corporate
Governance, Shareholder Rights and Securities
Transactions. He is currently a director and
secretary of American Shared Hospital Services.
William C. Foxley President of Foxley Cattle Company. From 1983 to August 1, 1994
(62) 1993, Mr. Foxley served as a consultant to a
group of investment limited partnerships managed
by Bridge Capital of Teaneck, New Jersey. He
previously served as chairman of publically held
Flavorland Industries. He is currently Chairman
of the Board of the Museum of Western Art in
Denver.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director of the
Name and Age Five Years; Other Directorships Company Since
------------ ------------------------------- -------------
<S> <C> <C>
Donald C. Hannah Chairman and Chief Executive Officer of U.S. August 1, 1994
(64) Properties, Inc. Mr. Hannah is a member of the
Chief Executives Organization and the World
Presidents' Organization, and is a director of
the Precision Standard Corporation (NASDAQ), the
Samoth Capital Corporation and the Marine
Resources Foundation.
Dennis E. Mitchem Executive Director of Habitat for Humanity, January 29, 1996
(65) Valley of the Sun, since April 1996, and prior to
that time was an independent management
consultant for privatization and financial
services projects. From March 1994 to December
1995, Mr. Mitchem worked in Moscow serving as a
consultant to the Russian Privatization Center in
the establishment of its local Privatization
Centers. From July 1992 to February 1994, he was
Managing Director of CAJV, a joint venture
between Arthur Andersen LLP and Castillo Company,
Inc., and managed the Denver, Colorado, financial
processing center of the Resolution Trust
Corporation. From 1954 to June 1993, he was
employed by Arthur Andersen LLP, where he became
a partner in 1967 and retired as a senior partner
in June 1993.
Louis P. Neeb Chairman of the Board and Chief Executive Officer August 1, 1994
(57) of Casa Ole Restaurants, Inc. since October 1995.
Mr. Neeb also serves as President of Neeb
Enterprises, Inc., a restaurant consulting firm.
He was President and Chief Executive Officer of
Spaghetti Warehouse, Inc., from 1991 to January
1994 and President of Geest Foods USA from
September 1989 to June 1991, prior to which he
served as President and Chief Executive Officer
of Taco Villa, Inc. Mr. Neeb spent ten years with
the Pillsbury Company in various positions which
included: Executive Vice President, Pillsbury;
Chairman of the Board, Burger King; and
President, Steak 'N Ale Restaurants. Mr. Neeb is
also a director of ShowBiz Pizza Time, Inc. and
Silver Diner Development Inc. and was previously
a director of On the Border Cafes, Inc.
Kenneth B. Roath Chairman and Chief Executive Officer of Health August 1, 1994
(61) Care Property Investors, Inc., a real estate
investment trust organized in 1985 to invest, on
a net lease basis, in health care properties. Mr.
Roath is the past Chairman of the National
Association of Real Estate Investment Trusts,
Inc. ("NAREIT"), and is currently a member of the
Executive Committee and the Board of Governors of
NAREIT.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director of the
Name and Age Five Years; Other Directorships Company Since
------------ ------------------------------- -------------
<S> <C> <C>
Wendell J. Smith President of W.J.S. & Associates, which was August 1, 1994
(64) established by Mr. Smith in 1984 as a consultant
to pension funds and pension fund real estate
advisors. Mr. Smith also serves as a director of
Shurgard Storage Centers (NYSE), a real estate
investment trust organized to invest in
self-storage facilities. He is also a member of
the Board of Directors of PGA Tour Properties,
which invests in TPC courses throughout the
world. Mr. Smith retired in 1991 from the State
of California Public Employees Retirement System
("CALPERS"), after 27 years of employment during
which time he had responsibility for all real
estate equities and mortgage acquisitions for
CALPERS. Mr. Smith previously served on the
Western and National Advisory Boards of the
Federal National Mortgage Association and the
Advisory Board of the Center for Real Estate
Research at the University of California.
Casey J. Sylla Senior Vice President and Chief Investment August 1, 1994
(53) Officer of Allstate Insurance Company. From 1992
until July 1995, Mr. Sylla was an Executive
Officer and Vice President and head of the
Securities Department of The Northwestern Mutual
Life Insurance Company.
</TABLE>
Board Meetings
The Board held five (5) meetings during the fiscal year ended December
31, 1996. The Board also took action one (1) time by unanimous written consent.
During a director's tenure, no director attended fewer than 75% of the aggregate
of (i) the total number of meetings of the Board during 1996; and (ii) the total
number of meetings held by all committees of the Board on which he served during
1996.
Committees of the Board
Audit Committee. The current members of the Audit Committee are Messrs.
Kenneth B. Roath, Chairman, Wendell J. Smith, Willie R. Barnes and Dennis E.
Mitchem. The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non- audit fees
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee held three (3) meetings in 1996.
Executive Committee. The current members of the Executive Committee are
Messrs. Morton H. Fleischer, Chairman, Robert W. Halliday and Donald C. Hannah.
The Executive Committee has the authority to acquire, dispose of and finance
investments for the Company and execute contracts and agreements, including
those related to the borrowing of money by the Company, and generally exercise
all other powers of the Board except as prohibited by law. The Executive
Committee held four (4) meetings in 1996 and took action seven (7) times by
unanimous written consent.
Compensation Committee. The current members of the Compensation
Committee are Messrs. Casey J. Sylla, Chairman, Louis P. Neeb and William C.
Foxley. The Compensation Committee, among other things, advises the Board on all
matters pertaining to compensation programs and policies, establishes guidelines
for employee incentive and benefit programs, makes specific recommendations to
the Board relating to salaries of officers and all incentive awards and
administers the Company's 1995 Stock Option and Incentive Plan. The
5
<PAGE>
Compensation Committee held three (3) meetings in 1996 and took action two (2)
times by unanimous written consent.
The Board does not presently have a separate nominating committee, the
function of which is handled by the Board as a whole.
Compensation of Directors
The Company pays an annual fee of $30,000 to its Independent Directors
(i.e., directors who are not employees of the Company or its affiliates). In
1996, the Independent Directors received 20% of such annual fee in non-qualified
stock options to purchase Shares based upon the Black-Scholes option pricing
model. The Independent Directors agreed to use at least one-half of their
remaining annual fees received from the Company for open market purchases of
common stock of the Company. Messrs. Barnes, Foxley, Halliday, Hannah, Mitchem,
Neeb, Roath, Smith and Sylla each received options to purchase 2,899 Shares at
$21.75 per Share, the fair market value of the Shares on May 13, 1996, the date
of grant. These options are exercisable when granted.
Directors who are employees of the Company are not paid director's
fees. The Company also reimburses directors for travel expenses incurred in
connection with their activities on behalf of the Company. In addition, each
director receives $500 for each committee meeting the director attends, with the
chairman of the respective committee receiving $1,000 for each committee
meeting.
Executive Officers
Set forth below is certain information regarding the executive officers
of the Company, including age, principal occupation during the last five years
and the date each became an executive officer of the Company.
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director of the
Name and Age Five Years; Other Directorships Company Since
------------ ------------------------------- -------------
<S> <C> <C>
Morton H. Fleischer Chairman of the Board, President and Chief June 22, 1993
(60) Executive Officer of the Company. More detailed
information regarding Mr. Fleischer's business
experience is set forth under "Directors."
John R. Barravecchia Executive Vice President, Chief Financial June 1, 1994
(41) Officer, Treasurer and Assistant Secretary. Mr.
Barravecchia previously served as Senior Vice
President, Chief Financial Officer and Treasurer
of the Company from June 1, 1994 until July 28,
1995, and as Senior Vice President of FFCA I from
October 1989 until June 1, 1994. Prior to joining
FFCA I, Mr. Barravecchia was associated with the
international public accounting firm of Arthur
Andersen LLP.
Christopher H. Volk Executive Vice President, Chief Operating June 1, 1994
(40) Officer, Secretary and Assistant Treasurer. Mr.
Volk previously served as Senior Vice
President-Underwriting and Research of the
Company from June 1, 1994 until July 28, 1995,
and as Vice President- Research of FFCA I from
October 1989 until June 1, 1994. Mr. Volk is a
member of NAREIT and currently serves as co-
chair of its Public Relations Committee.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director of the
Name and Age Five Years; Other Directorships Company Since
------------ ------------------------------- -------------
<S> <C> <C>
Dennis L. Ruben Executive Vice President and General Counsel. Mr. June 1, 1994
(44) Ruben served as Senior Vice President and General
Counsel of the Company from June 1, 1994 to
January 28, 1997. Mr. Ruben previously served as
an attorney and counsel of FFCA I from March 1991
until June 1, 1994. Prior to joining FFCA I, Mr.
Ruben was a partner with the national law firm of
Kutak Rock.
Stephen G. Schmitz Executive Vice President-Chief Investment May 31, 1995
(42) Officer. Mr. Schmitz served as Senior Vice
President - Corporate Finance from June 1, 1994
to January 28, 1997. Mr. Schmitz previously
served as Senior Vice President of the Company
and served in various positions as an officer of
FFCA I from 1986 to June 1, 1994.
Catherine F. Long Senior Vice President-Finance, Principal June 1, 1994
(40) Accounting Officer, Assistant Secretary and
Assistant Treasurer. Ms. Long served as Vice
President - Finance of the Company from June 1,
1994 to January 28, 1997. Ms. Long previously
served as Vice President-Finance of FFCA I from
June 1990 until June 1, 1994. From 1978 to May
1990, Ms. Long was associated with the
international public accounting firm of Arthur
Andersen LLP.
</TABLE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation awarded to, earned by,
or paid to (i) the Company's Chief Executive Officer ("CEO") during 1996 and
1995 and the pro rata partial payments received by the CEO during 1994 (from
June 1, 1994 to December 31, 1994) following the Consolidation on June 1, 1994,
and (ii) the Company's other four most highly compensated executive officers
whose total annual compensation exceeded $100,000 during 1996 and 1995 (the
"Named Executive Officers") and the pro rata partial payments received by the
Named Executive Officers during 1994 following the Consolidation.
7
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM AWARDS
---------------------------------------- ----------------------- --------------
Other Annual Securities Underlying All Other
Name and Principal Positions Year Salary($) Bonus($)(1) Compensation($) Options(#) Compensation(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Morton H. Fleischer 1996 $450,000 $250,000 -0- 200,000 -0-
Director, Chairman of the 1995 $400,000 $250,000 -0- -0- -0-
Board, President and Chief 1994 $400,000(3) $116,667 -0- -0- -0-
Executive Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Christopher H. Volk 1996 $222,917 $125,000 -0- 30,000 $8,183
Executive Vice President, Chief 1995 $180,122 $125,000 -0- 138,000 $9,000
Operating Officer, Secretary and 1994 $165,000(4) $ 48,125 -0- -0- $2,045
Assistant Treasurer
- ---------------------------------------------------------------------------------------------------------------------------------
John R. Barravecchia 1996 $200,000 $100,000 -0- 30,000 $9,000
Executive Vice President, Chief 1995 $180,122 $100,000 -0- 138,000 $9,000
Financial Officer, Treasurer and 1994 $165,000(4) $ 48,125 -0- -0- $2,080
Assistant Secretary
- ---------------------------------------------------------------------------------------------------------------------------------
Stephen G. Schmitz 1996 $165,000 $135,000 -0- 20,000 $9,000
Executive Vice President- 1995 $151,917 $100,000 -0- 138,000 $7,825
Chief Investment Officer and
Assistant Secretary 1994 $100,000(5) $ 23,333 -0- -0- $1,500
- ---------------------------------------------------------------------------------------------------------------------------------
Dennis L. Ruben 1996 $172,500 $ 86,250 -0- -0- $9,000
Executive Vice President, 1995 $165,000 $ 82,500 -0- 138,000 $8,775
General Counsel and Assistant 1994 $165,000(4) $ 48,125 -0- -0- $2,475
Secretary
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Bonus includes the amount of cash bonus earned and accrued (a) during the
period from January 1, 1996 to December 31, 1996 and paid in January 1997;
(b) during the period from January 1, 1995 to December 31, 1995 and paid in
January 1996 and (c) during the period from June 1, 1994 to December 31,
1994 and paid in January 1995.
(2) Amounts included in All Other Compensation represent matching Company
contribution amounts received under the Company's 401(k) Plan.
(3) Received approximately $233,333 representing pro rata portion of annual
salary paid by the Company from June 1, 1994 to December 31, 1994.
(4) Received approximately $96,250 representing pro rata portion of annual
salary paid by the Company from June 1, 1994 to December 31, 1994.
(5) Received approximately $58,333 representing pro rata portion of annual
salary paid by the Company from June 1, 1994 to December 31, 1994.
The foregoing compensation tables do not include certain fringe benefits
made available on a nondiscriminatory basis to all Company employees such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, the Company makes available certain
non-monetary benefits to its executive officers with a view to acquiring and
retaining qualified personnel and facilitating job performance. The Company
considers such benefits to be ordinary and incidental business costs and
expenses. The aggregate value of such benefits in the case of each executive
officer and of the group listed in the above table is less than the lesser of
(a) ten percent of the cash compensation paid to each such executive officer or
to the group, respectively, or (b) $50,000, or $50,000 times the number of
individuals in the group, as the case may be, and is not included in such table.
8
<PAGE>
Compensation Pursuant to Plans
401(k) Plan. The Company has adopted a defined contribution savings
plan (the "401(k) Plan") to provide retirement income to employees of the
Company, including the executive officers referred to in the Summary
Compensation Table. The 401(k) Plan is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
incorporates features permitted under Section 401(k) of the Code.
The 401(k) Plan covers all employees who have completed six months of
service. Participants can elect to contribute up to 15% of annual compensation
on a pre-tax basis. The Company provides a 100% matching contribution, in the
Company's common stock, up to 6% of annual compensation, with a maximum of
$9,000.
All participant contributions are fully vested as soon as they are
made. Company contributions are subject to a vesting schedule and are 100%
vested after six years of service. In determining the years of service, the
Company includes the time a participant was an employee of FFCA I, a predecessor
corporation of the Company. Participant contributions are invested as directed
by each participant in investment funds available under the 401(k) Plan. Full
retirement benefits are payable to each participant in a single cash payment or
an actuarial equivalent form of annuity on the first day of the month following
the participant's retirement or after his or her 65th birthday. In general, if
employment ceases before the employee reaches age 65, the vested benefits under
the 401(k) Plan are paid in full at termination of employment or a later date
elected by the participant. The 401(k) Plan provides death benefits to a
participant's beneficiary if the participant dies before his or her retirement
benefits commence or if a survivor form of annuity is in effect.
Stock Option Plans. The Company has one stock option plan, the 1995
Stock Option and Incentive Plan (the "Stock Option Plan") under which options
may currently be granted. Directors, executive officers, other key employees and
other key persons associated with the Company are eligible to receive options
under this plan.
The Compensation Committee and the Board believe that stock-based
compensation programs are a key element in achieving the Company's continued
financial and operational success. The Company has established the Stock Option
Plan to enable directors, executive officers, other key employees and other key
persons associated with the Company to participate in the ownership of the
Company. Initially, the Company reserved 3,018,804 Shares, which equals Stock
Option 7-1/2% of the Shares outstanding as of March 14, 1997, for grant under
the Stock Option Plan, and this amount may not be increased without the approval
of the shareholders. The maximum number of Shares with respect to which awards
may be granted to any one individual during any calendar year is 200,000. In
addition, Shares may not be acquired pursuant to the Stock Option Plan if the
acquisition violates the ownership limit or causes the Company to fail to
qualify as a real estate investment trust ("REIT") for federal income tax
purposes.
The Stock Option Plan is designed to attract and retain directors,
executive officers, key employees and other key persons associated with the
Company and to provide incentives to such persons to maximize the Company's cash
flow available for distribution. The Stock Option Plan provides for the award to
executive officers (including officers who are also directors) and other key
employees of the Company of a broad variety of stock-based compensation
alternatives such as non-qualified stock options, incentive stock options
(unless the context indicates to the contrary, the term "option" shall refer to
both incentive and non-qualified stock options), restricted stock and
performance awards.
The Stock Option Plan is administered by the Compensation Committee,
consisting entirely of Independent Directors. The Committee shall construe and
interpret the Plan and, subject to the express provisions of the Plan, is
authorized to select from among the eligible employees of the Company the
individuals to whom options, restricted stock purchase rights and performance
awards are to be granted and to determine the number of Shares to be subject
thereto and the terms and conditions thereof. The Compensation Committee is also
authorized to adopt, amend and rescind rules relating to the administration of
the Stock Option Plan.
9
<PAGE>
Awards under the Stock Option Plan
Terms and Conditions of Options; Payment. Incentive stock options
granted under the Stock Option Plan are exercisable for a period of not more
than ten (10) years from the date of the grant. Any non-qualified options
granted under the Stock Option Plan are exercisable at such times, in such
amounts and during such periods as the Compensation Committee determines at the
date of the grant. Such options generally vest over a three-year period for
employees. If the optionee exercises the option, payment may be made either in
cash, certified check or other immediately available funds, with previously
issued Shares (valued as of the date of the option exercise), a combination of
cash, certified check or other immediately available funds and Shares or any
other consideration permitted under applicable law. The Compensation Committee
may allow a delay in payment up to thirty days from the date the option is
exercised; however, the Company will not issue stock certificates until it has
received full payment for the Shares.
Non-qualified Stock Options. The Compensation Committee may grant
non-qualified stock options to employee directors, officers, employees and other
persons associated with the Company and such options may provide for the right
to purchase Shares at a specified price which may be less than fair market value
on the date of grant (but not less than par value), and usually will become
exercisable in installments after the grant date. Non- qualified stock options
may be granted to employee directors, officers and employees and other persons
associated with the Company for any reasonable term.
In addition, non-employee directors of the Company will automatically
receive certain non-qualified stock options in an amount equal to 20% of the
dollar amount of the directors' annual retainer fee. The exercise price of the
options will equal the fair market value of the Company's common stock on the
date of grant. The amount of options received will be determined through the
application of the Black-Scholes option pricing model.
Incentive Stock Options. Incentive stock options are designed to comply
with the provisions of the Code and are subject to restrictions contained in the
Code, including a requirement that exercise prices are equal to at least 100% of
fair market value of the Shares on the grant date and a ten-year restriction on
the option term, but may be subsequently modified to disqualify them from
treatment as incentive stock options. To the extent the aggregate fair market
value of Shares with respect to which incentive stock options are exercisable
for the first time by the optionee during any calendar year under the Stock
Option Plan exceeds $100,000, such options shall be treated as non-qualified
options to the extent required by the Code.
Restricted Stock. Restricted stock may be sold to participants at
various prices (but not below par value) and made subject to such restrictions
as may be determined by the Compensation Committee. Typically, restricted stock
may be repurchased by the Company at the original purchase price if the
conditions or restrictions are not met. In general, restricted stock may not be
sold, or otherwise transferred or hypothecated, until the restrictions are
removed or expire. Purchasers of restricted stock, unlike recipients of options,
will have voting rights and will receive dividends prior to the time when the
restrictions lapse. The Company has not issued any restricted stock.
Performance Awards. The value of performance awards may be limited to
the market value, book value or other measure of the Company's common stock or
other specific performance criteria deemed appropriate by the Compensation
Committee. In making such determinations, the Compensation Committee considers,
among other factors it deems relevant, the contributions, responsibilities and
other compensation of the key employee, or person associated with the Company,
at issue. The manner of exercise, payment of consideration and term of the
performance awards are generally the same as those applying to stock options
granted under the Stock Option Plan. The Company has not issued any performance
awards.
10
<PAGE>
Employment and Change-in-Control Arrangements
The Company has no employment or change-in-control agreements with any
executive officer of the Company.
Option Grants Table
The following table provides information relating to the grant of stock
options to the Company's CEO and the Named Executive Officers during the fiscal
year ended December 31, 1996 under the Company's 1995 Stock Option and Incentive
Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------
Grant Date
Individual Grants Value(1)
- ---------------------------------------------------------------------------- ------------------
Number of
Securities Percent of
Underlying Total Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration Grant Date
Name (#)(2) Fiscal Year ($/Sh)(3) Date Present Value ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Morton H. Fleischer 200,000 40.0% $21.875 1/2/06 $352,000
- -------------------------------------------------------------------------------------------------
Christopher H. Volk 30,000 6.0% $21.875 1/2/06 $ 52,800
- -------------------------------------------------------------------------------------------------
John R. Barravecchia 30,000 6.0% $21.875 1/2/06 $ 52,800
- -------------------------------------------------------------------------------------------------
Stephen G. Schmitz 20,000 4.0% $21.875 1/2/06 $ 35,200
- -------------------------------------------------------------------------------------------------
Dennis L. Ruben -0- 0.0% -- -- --
- -------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) These values were calculated as of the grant date (January 2, 1996) using
the Black-Scholes option pricing model. The values shown are theoretical and
do not necessarily reflect the actual values the recipients may eventually
realize. The following assumptions were made for purposes of calculating
Grant Date Present Value: expected option term of seven years, expected
stock price volatility of 20.16% (calculated weekly over the period since
the stock began trading), expected dividend yield of 8.2% and risk-free rate
of return of 5.53% (equal to the yield on a seven-year Treasury bond at
grant date). Any actual value to the officer will depend on the extent to
which the market value of the Company's stock at a future date exceeds the
exercise price.
(2) These options vest in three equal installments on the first, second and
third anniversaries of the date of grant.
(3) All options were granted at the fair market value of the Shares based upon
an average closing price for the 10 consecutive trading days prior to the
date of grant.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table provides information related to the exercise of
stock options during the year ended December 31, 1996 by the CEO and each of the
Named Executive Officers and the 1996 fiscal year-end value of
11
<PAGE>
unexercised options. Neither the CEO nor any of the Named Executive Officers
exercised stock options during 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
- ---------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End
---------------------- --------------------
Name Shares Acquired Value Realized Exercisable/ Exercisable/
on Exercise (#) ($) Unexercisable Unexercisable ($)(1)
- -------------------- ---------------- --------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Morton H. Fleischer 0 0 0/200,000 0/$1,150,000
- ---------------------------------------------------------------------------------------------------------
Christopher H. Volk 0 0 46,000/122,000 $373,750/$920,000
- ---------------------------------------------------------------------------------------------------------
John R. Barravecchia 0 0 46,000/122,000 $373,750/$920,000
- ---------------------------------------------------------------------------------------------------------
Stephen G. Schmitz 0 0 46,000/112,000 $373,750/$862,500
- ---------------------------------------------------------------------------------------------------------
Dennis L. Ruben 0 0 46,000/92,000 $373,750/$747,500
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Market value of underlying Shares on date of fiscal year-end minus the
exercise price. The closing price of the Company's Shares on December 31,
1996 was $27-5/8.
Compliance with Section 16(a) of
the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own more
than ten percent (10%) of a registered class of the Company's equity securities
("10% Shareholders") to file with the Securities and Exchange Commission (the
"Commission") and the NYSE reports of ownership and changes in ownership of
equity securities of the Company and to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge (based solely upon a review of the copies of
such Section 16(a) reports furnished to the Company and written representations
that no other reports were required), for the Company's fiscal year ended
December 31, 1996, the Company's officers, directors and 10% Shareholders have
complied with the Section 16(a) filing requirements, except that on one occasion
Mr. Neeb was inadvertently late in reporting on Form 4 the acquisition of 185
shares of common stock through a reinvestment of dividends.
Compensation Committee Interlocks
and Insider Participation
In fiscal 1996, the members of the Compensation Committee were Casey J.
Sylla, Louis P. Neeb and William C. Foxley. No member of the Compensation
Committee was previously an officer or an employee of the Company or any of its
subsidiaries.
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON FISCAL 1996 EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for establishing
compensation policy and administering the compensation programs of the Company's
officers. The Compensation Committee is comprised of three independent outside
directors. The Compensation Committee meets at least once a year to review
executive compensation policies, design of compensation programs and individual
salaries and awards for the executive officers.
Pursuant to the rules regarding disclosure of Company polices
concerning executive compensation, this report is submitted by Messrs. Sylla,
Foxley and Neeb in their capacity as members of the Compensation Committee and
addresses the Company's compensation policies for 1996 as they affected Mr.
Fleischer, the chief executive officer ("CEO"), and the Company's other
executive officers, including the Named Executive Officers.
Overview of Executive Compensation Policy
The Company's compensation philosophy for executive officers is
incentive oriented. The incentive portion of the Company's executive
compensation program is designed to be closely linked to corporate performance
and returns to shareholders. Accordingly, the Company has developed an overall
compensation strategy and specific compensation plans that tie a significant
portion of executive compensation to the Company's success in meeting specified
performance goals.
The key elements of the Company's executive compensation program
consist of salary, annual bonus and stock options. The Compensation Committee's
policies with respect to each of these elements, including the basis for the
compensation awarded to the CEO, are discussed below. The process used by the
Compensation Committee in determining executive officer compensation levels for
all of these components takes into account both qualitative and quantitative
factors. Among the factors considered by the Compensation Committee are the
recommendations of the CEO with respect to the compensation of the Company's
other key executive officers. However, the Compensation Committee makes the
final compensation decisions concerning such officers.
In making compensation decisions, the Compensation Committee considers
compensation practices and financial performance of the other industry
participants. This information provides guidance to the Compensation Committee,
but the Compensation Committee does not target total executive compensation or
any component thereof to any particular point within, or outside, the range of
Peer Group results. However, the Compensation Committee believes that
compensation at or near the 75th percentile is generally appropriate for the
Compensation Committee to use as a framework for compensation decisions. The
specified percentiles are considered on both an absolute basis and a
size-adjusted basis (i.e., reflecting compensation levels that are commensurate
with the Company's size relative to the sizes of the other industry
participants). Specific compensation for individual officers will vary from
these levels as the result of other factors considered by the Compensation
Committee.
13
<PAGE>
In making compensation decisions, the Compensation Committee also from
time to time receives assessments and advice regarding the compensation
practices of the Company and others from independent compensation consultants.
The Compensation Committee does not believe that Internal Revenue Code
Section 162(m), which denies a deduction for compensation payments in excess of
one million dollars to the CEO or a Named Executive Officer, is likely to be
applicable to the Company in the near future, but will reconsider the
implications of Section 162(m) if and when it appears that the section may
become applicable.
Salaries
Salaries for executive officers are determined by evaluating
subjectively the responsibilities of the position held and the experience and
performance of the individual and comparing base salaries for comparable
positions at Peer Group entities. Subject to an executive officer's individual
performance, the Compensation Committee sets salaries at or about the median as
reflected by such information.
In evaluating the CEO's salary for 1996, the Compensation Committee
considered quantitative factors such as the Company's increased investments
resulting in the Company attaining increased market share in both the ownership
of real estate and the financing of chain restaurant properties, and increased
returns to shareholders. In addition, the Compensation Committee considered
qualitative factors such as Mr. Fleischer's development of long-term financing
strategies for the Company.
Annual Bonus
All Company employees, including the Company's executive officers and
CEO, are eligible for an annual cash bonus. The purpose of the incentive bonus
is to supplement the pay of executive officers (and other key management
personnel) so that overall total cash compensation (salary and bonus) is
competitive and properly rewards them for their efforts in achieving certain
funds from operations ("FFO") targets. FFO generally includes net income, plus
certain non-cash items, primarily depreciation and amortization. The Company's
objective is for the CEO and executive officers to be paid a mix of total cash
compensation of salary and annual bonus, if the target performance (as described
below) under the plan is achieved.
During the beginning of each year the Compensation Committee and the
Board sets minimum targeted FFO per share levels. A bonus pool begins to be
funded at the point FFO per share exceeds the minimum targeted level. The
minimum targeted level is 95% of target performance and is designed to assure a
threshold return to Company shareholders before a bonus pool is funded. The pool
is 10 percent of the amount in excess of the minimum level and if the target FFO
level is attained, the pool will be sufficient to pay the executive officers, as
well as other key management personnel, their target bonuses. Each executive
officer, including the CEO, has a target bonus of 50 percent of salary. There is
no cap on the size of the pool and thus bonuses in excess of the target bonus
may be earned if FFO exceeds the target level. For 1996, the FFO target level
was reached.
The Board reserves the right to make whatever changes it deems
necessary in the size of the pool and to make such other changes it deems
necessary to preserve the purpose and objectives of the incentive bonus
arrangement. According, the Compensation Committee awarded additional bonuses
based on exceeding the target investment activity for the year.
The CEO receives a nondiscretionary annual bonus of 50% of annual
salary if the FFO target level is met. The Named Executive Officers, including
the chief financial officer and the chief operating officer, each receive half
of their target bonus (or 25% of annual salary) if the FFO target is met. The
remaining portion of each of the Named Executive Officers' bonuses is based upon
other factors with an emphasis on individual performance. Thus, the total annual
bonus for a Named executive officer, other than
14
<PAGE>
the CEO, may exceed 50% of annual salary. Bonuses up to 82% of January 1 through
December 31, 1996 salary were earned by each executive officer, including the
CEO, under the plan.
Stock Options
The long-term incentive component of the CEO's and the executive
officers' compensation is stock options. The Company believes that providing
executive officers with opportunities to acquire significant equity positions in
the Company and thus, the opportunity to share in its growth and prosperity,
through the grant of stock options will enable the Company to attract and retain
qualified and experienced executive officers. Stock options represent a valuable
portion of the compensation program for the Company's executive officers. The
exercise price of stock options has thus been tied to the fair market value of
the Company's Shares on the date of the grant, and will only have value if the
value of the Company's Shares increases. In addition, stock options are granted
to executive officers to vest annually and ratably over a three-year period from
the date of grant. The purpose of such options is to encourage long-term
dedication to the Company. Grants of stock options to executive officers are
made by the Compensation Committee upon the recommendation of senior management
and are based upon the level of each executive officer's position with the
Company, an evaluation of the executive officer's past and expected future
performance, the number of outstanding and previously granted options, and
discussions with the executive officer.
Compensation Committee:
Casey J. Sylla, Chairman
William C. Foxley
Louis P. Neeb
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder
returns (assuming reinvestment of dividends before consideration of income
taxes) of the Company's Shares, the S&P 500 Index and the NAREIT Equity Index.
The graph assumes $100 invested on June 30, 1994 in the Company's Shares and
each of the indices. The stock price performance shown on the graph below are
not necessarily indicative of future price performance.
[PERFORMANCE GRAPH]
15
<PAGE>
NAREIT Equity
Date FFCA Index S&P 500 Index Index
---- ---------- ------------- -------------
6/30/94 100.00 100.00 100.00
9/30/94 83.09 104.89 97.96
12/31/94 86.17 104.87 97.97
3/31/95 96.09 115.08 97.81
6/30/95 109.25 126.07 103.56
9/30/95 111.55 136.09 108.44
12/31/95 119.75 144.29 112.93
3/31/96 108.10 152.03 115.50
6/30/96 126.87 158.86 120.63
9/30/96 132.13 163.77 128.59
12/31/96 158.14 177.42 152.74
Measurement Period S&P NAREIT Equity
(Fiscal Year Covered) FFCA 500 Index Index
--------------------- ---- --------- ------
Measurement Pt 6/30/94 $100.00 $100.00 $100.00
12/31/94 86.17 104.87 97.97
12/31/95 119.75 144.29 112.93
12/31/96 158.14 177.42 152.74
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings by reference, including this Proxy Statement, in whole or in part, the
previous report of the Compensation Committee and the Performance Graph and
Table shall not be incorporated by reference into any such filings.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO AND RESTATEMENT OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
The Board has adopted, subject to shareholder approval, the Second
Amended and Restated Certificate of Incorporation of the Company (the "Restated
Certificate"). If the proposal to adopt the Restated Certificate is approved by
the shareholders at the Meeting, the Restated Certificate will become effective
at the time the Company files the Restated Certificate with the office of the
Delaware Secretary of State. It is anticipated that such action will occur on or
about May 7, 1997.
The substance and effect of certain provisions of the Restated
Certificate are described below and the complete text of the proposed Restated
Certificate is set forth in Appendix "A" to this Proxy Statement. The following
discussion is qualified in its entirety by reference to the text of the proposed
Restated Certificate.
The Restated Certificate increases the authorized capital stock of the
Company by authorizing the issuance of 10,000,000 shares of preferred stock
having a par value of $.01 per share ("Preferred Stock"). The Restated
Certificate also grants authority to the Board to authorize the issuance of one
or more series of Preferred Stock, and
16
<PAGE>
with respect to each such series to fix by resolution or resolutions providing
for the issuance of such series the number of shares of such series, the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof,
including without limitation the dividend rights, dividend rate, terms of
redemption (including sinking fund provisions), redemption price or prices,
conversion rights, transfer and ownership restrictions and liquidation
preferences, that are permitted by the General Corporation Law of Delaware in
respect of any class or classes of stock or any series of any class of stock of
the Company, without further action or vote by the Company's stockholders.
Notwithstanding the foregoing (i) any series of Preferred Stock may be voting or
non-voting, provided that the voting rights of any voting shares of Preferred
Stock will be limited to no more than one vote per share on matters voted upon
by the holders of such series, and (ii) in the event any person acquires 20% or
more of the outstanding shares of Common Stock and/or Preferred Stock, the Board
cannot issue any series of Preferred Stock unless such issuance is approved by
the vote of the holders of 50% of the outstanding shares of Common Stock. The
Company has no present plans to issue any shares of Preferred Stock.
Notwithstanding the foregoing, any shares of Preferred Stock issued by
the Company must comply with the requirements of the NYSE (even if such
Preferred Stock is not listed on the NYSE) including the requirement that such
shares of Preferred Stock, voting as a class, have the right to elect a minimum
of two directors upon default of the equivalent of six quarterly dividends,
regardless of whether defaulted dividends occurred in consecutive periods. Such
right to elect directors should remain in effect until cumulative dividends have
been paid in full or until non-cumulative dividends have been paid regularly for
at least a year. In addition, the NYSE recommends that the quorum fixed for
holders of Preferred Stock entitled to vote on such election of directors be low
enough that the right to elect directors can be exercised as soon as it accrues,
but in no event should the quorum exceed the percentage required for a quorum of
the Shares required for the election of directors.
The Restated Certificate also contains provisions relating to ownership
limits and transfer restrictions with respect to the Shares as well as the
Preferred Stock. Such limitations and restrictions, among other things, are
necessary for the Company to maintain its status as a REIT.
The Company's Certificate of Incorporation authorizes the issuance of
200,000,000 Shares and does not currently authorize the issuance of Preferred
Stock. The Board believes that it would be in the Company's best interests to
have the flexibility to issue different classes of stock in pursuit of its
capital raising transactions, as well as for general corporate purposes. The
issuance of Preferred Stock could adversely affect the voting rights of the
holders of, or the market price of, the Shares. In addition to the voting rights
required by the NYSE, the holders of Preferred Stock also would have the right
to vote separately as a class on any proposal involving fundamental changes in
the rights of holders of Preferred Stock pursuant to the General Corporation Law
of Delaware.
Adoption of this proposal requires an affirmative vote by the holders
of a majority of the outstanding Shares. Any shares not voted (whether by
abstention, broker non-vote or otherwise) have the effect of a negative vote.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
PROPOSAL NO. 3
PROPOSAL TO APPROVE THE COMPANY'S 1997
EMPLOYEE STOCK PURCHASE PLAN
In January 1997, the board adopted, subject to shareholder approval,
the Company's 1997 Employee Stock Purchase Plan (the "Plan"). If approved by the
shareholders, the Plan provides eligible employees (defined below) with an
opportunity to purchase the Company's Common Stock through payroll deductions.
The Plan is intended
17
<PAGE>
to assist eligible employees in acquiring a stock ownership interest in the
Company pursuant to a plan that is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), to help eligible employees provide for their future
security and to encourage them to remain in the employment of the Company and
participating subsidiaries.
The substance and effect of certain provisions of the Plan are
described below and the complete text of the proposed Plan is set forth in
Appendix "B" to this Proxy Statement. The following discussion is qualified in
its entirety by reference to the text of the proposed Plan.
Shares Reserved for the Plan
The aggregate number of shares of Common Stock which may be purchased
under the Plan shall not exceed 50,000, subject to adjustment in the event of
stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Any such adjustment will be made
by the Board. Shares issued under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
Eligible Participants
Full-time employees of the Company (or a subsidiary designated by the
Company) are eligible if they meet certain conditions. To be eligible the
employee must have completed six months of employment and the employee's
customary employment must be greater than 20 hours per week.
Approximately 90 employees would have been eligible to participate as
of December 31, 1996.
Material Features of the Plan
Beginning July 1, 1997, the Company may make grants of options on
January 1 and/or July 1 of each year the Plan is in effect or on such other date
as the Committee (as defined herein) shall designate. Each option period shall
last for six months ending on the June 30 or December 31 immediately following
the grant of options or on such dates as the Committee determines.
Each eligible employee on a date of exercise shall be entitled to
purchase shares of Common Stock at a purchase price equal to 85% of the average
of the reported highest and lowest sale prices of shares of Common Stock on the
New York Stock Exchange on the applicable date of exercise. Dates of exercise
shall take place on the last day of each six-month period.
Payment for shares of Common Stock purchased under the Plan will be
made by authorized payroll deductions from an eligible employee's Eligible
Compensation (as defined herein) or, when authorized by the Committee, an
eligible employee may pay an equivalent amount for such shares. "Eligible
Compensation" means an eligible employee's total regular compensation payable
from the Company or a participating subsidiary of the Company during an option
period.
Eligible employees who elect to participate in the Plan will designate
a stated whole percentage equaling at least 1%, but no more than 10% of Eligible
Compensation, to be deposited into a periodic deposit account. On each date of
exercise, the entire periodic deposit account of each participant in the Plan is
used to purchase whole and/or fractional shares of Common Stock. The Company
shall maintain a stock purchase account for each participant to reflect the
shares of Common Stock purchased under the Plan by each participant. No
participant in the Plan is permitted to purchase Common Stock under the Plan at
a rate that exceeds $25,000 in fair market value of Common Stock, determined at
the time options are granted, for each calendar year.
All funds received by the Company from the sale of Common Stock under
the Plan may be used for any corporate purpose.
18
<PAGE>
New Plan Benefits
It is not possible to determine how many eligible employees will
participate in the Plan in the future. Therefore, it is not possible to
determine with certainty the dollar value or number of shares of Common Stock
that will be distributed under the Plan. Because participation in the Plan is
optional, it is not possible to determine the benefits or amounts that would
have been received by the CEO, Named Executive Officers, or any other directors
or officers of the Company under the Plan during 1996.
Tax Treatment
The Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code. Under the Code, an employee who
elects to participate in an offering under the Plan will not realize income at
the time the offering commences or when the shares purchased under the Plan are
transferred to him or her. If an employee disposes of such shares after two
years from the date the offering of such shares commences and after one year
from the date of the transfer of such shares to him or her, the employee will be
required to include in income, as compensation for the year in which such
disposition occurs, an amount equal to the lesser of (a) the excess of the fair
market value of such shares at the time of disposition over the purchase price,
or (b) 15% of the fair market value of such shares at the time the offering
commenced. The employee's basis in the shares disposed of will be increased by
an amount equal to the amount so includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of the disposition will be a capital gain
or loss, either short-term or long-term, depending on the holding period for
such shares. In the event of a disposition within such two-year or one-year
period, the Company (or the subsidiary by which the employee is employed) will
be entitled to a tax deduction from income equal to the amount the employee is
required to include in income as a result of such disposition.
An employee who is a nonresident of the United States will generally
not be subject to the U.S. federal income tax rules described above with respect
to the shares of Common Stock purchased under the Plan.
Plan Administration and Termination
The Board, or its delegate, shall appoint a committee (the
"Committee"), which shall be composed of one or more employees, to administer
the Plan on behalf of the Company. The Committee may delegate any or all of the
administrative functions under the Plan to such individuals, subcommittees, or
entities as the Committee considers appropriate. The Committee may adopt rules
and procedures not inconsistent with the provisions of the Plan for its
administration. The Committee's interpretation and construction of the Plan is
final and conclusive.
The Board may at any time, or from time to time, alter or amend the
Plan in any respect, except that, without approval of the Company's
shareholders, no amendment may increase the number of shares reserved for
purchase, or reduce the purchase price per share under the Plan, other than as
described above.
The Board shall have the right to terminate the Plan or any offering at
any time for any reason. The Plan is anticipated to continue in effect through
June 30, 2002.
Adoption of this proposal requires an affirmative vote a majority of
the votes cast at the Meeting. Any shares not voted (whether by abstention,
broker non-vote or otherwise) have the effect of a negative vote.
19
<PAGE>
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board, upon the recommendation of the Audit Committee, has selected
Arthur Andersen LLP to serve as independent auditors of the Company for the
fiscal year ending December 31, 1997. The shareholders of the Company are being
asked to ratify this selection at the Meeting. Arthur Andersen LLP has served as
the Company's independent auditors since the Company's inception.
Representatives of Arthur Andersen LLP will be present at the Meeting and will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders.
Although it is not required to do so, the Board is submitting its
selection of the Company's independent auditors for ratification by the
shareholders at the Meeting in order to ascertain the views of shareholders
regarding such selection. A majority of the votes cast at the Meeting, if a
quorum is present, will be sufficient to ratify the selection of Arthur Andersen
LLP as the Company's independent auditors for the fiscal year ending December
31, 1997. Whether the proposal is approved or defeated, the Board may reconsider
its selection.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of February 14, 1997
regarding beneficial ownership of Shares by (i) each director of the Company,
(ii) the CEO and each of the Named Executive Officers, and (iii) all directors
and executive officers of the Company as a group.
Shares of Common
Stock Beneficially Percent
Name of Beneficial Owner Owned(1)(2) of Class
- ------------------------ ------------------ --------
Morton H. Fleischer............................ 1,275,135 3.1%
Robert W. Halliday............................. 445,698 1.1
Willie R. Barnes............................... 6,841 *
William C. Foxley.............................. 9,419 *
Donald C. Hannah............................... 12,019 *
Dennis E. Mitchem.............................. 3,533 *
Louis P. Neeb.................................. 17,480 *
Kenneth B. Roath............................... 9,418 *
Wendell J. Smith............................... 8,994 *
Casey J. Sylla................................. 10,134 *
John R. Barravecchia........................... 81,528 *
Christopher H. Volk............................ 82,700 *
Stephen G. Schmitz............................. 54,666 *
Dennis L. Ruben ............................... 62,500 *
Directors and executive officers as a group ... 2,099,564 5.2%
(16 persons)
- ---------------
*Less than one percent
(1) Share amount and percentage figures are rounded to the nearest whole
number. All Shares not outstanding but which may be acquired by such
stockholder within 60 days by the exercise of any stock option or any
other right, are deemed to be outstanding for the purposes of
calculating beneficial ownership and computing the percentage
20
<PAGE>
of the class beneficially owned by such stockholder, but not by any
other stockholder. The foregoing share amounts include the following
number of shares which may be acquired pursuant to stock options
exercisable within 60 days of February 14, 1997: Mr. Fleischer, 6,666
shares; Mr. Halliday, 16,666 shares; Mr. Mitchem, 2,899 shares; Mr.
Barravecchia, 56,000; Mr. Volk, 56,000 shares; Mr. Schmitz, 52,666
shares; Mr. Ruben, 46,000 shares; and all executive officers and
directors as a group, 354,178 shares. The Shares beneficially owned by
Messrs. Barnes, Foxley, Hannah, Neeb, Roath, Smith and Sylla include
5,826 shares representing stock options currently exercisable by each
individual.
(2) Does not include Shares awarded to employees as the matching portion of
the Company's 401(k) plan.
(3) Includes an aggregate of 10,000 Shares held by Donna H. Fleischer, the
wife of Mr. Fleischer.
To the best of the Company's knowledge, no shareholder beneficially
owned more than 5% of the Company's Common Stock as of February 14, 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Services Agreements. The Company has entered into
administrative services agreements (the "Administrative Agreements") with the
following entities: FFCA Mortgage Corporation; FFCA Management Company Limited
Partnership; FFCA Participating Management Company Limited Partnership;
Perimeter Center Management Company; Franchise Finance Corporation of America
II; and Franchise Finance Corporation of America III (collectively the
"Companies"). The Companies are affiliates of the Company primarily due to Mr.
Fleischer's individual ownership interest or interest as an individual general
partner of such entities. Mr. Fleischer and other executive officers and
directors of the Company also serve as executive officers and directors in
certain of the Companies.
The Administrative Agreements appoint the Company as administrator of
the Companies other than FFCA Mortgage Corporation. As administrator, the
Company supervises all aspects of the operations of such Companies. The Company
charges for all personnel expenses directly attributable to the individual
company and allocates overhead to the Companies pursuant to a predetermined
formula, as determined in the Company's reasonable discretion. The Company also
adds a profit percentage not to exceed 20% of the sum of the total expenses
charged to each individual entity. In the 1996 fiscal year, the above Companies
paid approximately $1.6 million to the Company pursuant to the Administrative
Agreements.
Related Party Employment. Jeffrey Fleischer, son of Morton H.
Fleischer, is employed by the Company as Vice President. In 1996, Jeffrey
Fleischer received total cash compensation in the amount of $116,000 from the
Company and was granted options to purchase 10,000 shares of common stock.
Morton H. Fleischer is the Chairman of the Board, President, Chief Executive
Officer of the Company.
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of the Board, but may
also be made without additional remuneration by officers or employees of the
Company by telephone, telegraph, facsimile transmission or personal interview.
The expense of the preparation, printing and mailing of this Proxy Statement and
the enclosed form of Proxy and Notice of Annual Meeting, and any additional
material relating to the Meeting which may be furnished to shareholders by the
Board subsequent to the furnishing of this Proxy Statement, has been or will be
borne by the Company. The Company will reimburse banks and brokers who hold
Shares in their name or custody, or in the name of nominees for others, for
their out-of-pocket expenses incurred in forwarding copies of the proxy
materials to those persons for whom they hold such Shares. To obtain the
necessary representation of shareholders at the Meeting, supplementary
solicitations may be made by mail, telephone or interview by officers of the
Company or selected securities dealers. The cost of such supplementary
solicitations is not anticipated to exceed $240,000. In addition, the Company
has retained D.F. King & Co., Inc. ("D.F. King") to solicit proxies from
shareholders by mail, in person and by telephone. The Company will pay D.F. King
a fee of $12,000 for its services, plus reimbursement of reasonable
out-of-pocket expenses incurred in connection with the proxy solicitation.
ANNUAL REPORT
The Annual Report of the Company for the 1996 fiscal year has been
mailed to shareholders along with this Proxy Statement. The Company will, upon
written request and without charge, provide to any person solicited hereunder a
copy of the Company's Annual Report on Form 10-K for the year ended December 31,
1996, including financial statements and financial statement schedules, as filed
with the Securities and Exchange Commission. Requests should be addressed to
John R. Barravecchia, the Chief Financial Officer of the Company, 17207 North
Perimeter Drive, Scottsdale, Arizona 85255.
21
<PAGE>
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any shareholder who intends to submit a proposal at the 1998 Annual
Meeting of Shareholders and who wishes to have the proposal considered for
inclusion in the proxy statement and form of proxy for that meeting must, in
addition to complying with the applicable laws and regulations governing
submission of such proposals, deliver the proposal to the Company for
consideration no later than November 28, 1997. Such proposals should be sent to
Christopher H. Volk, Executive Vice President and Secretary of the Company, at
17207 North Perimeter Drive, Scottsdale, Arizona 85255.
OTHER MATTERS
The Board is not aware of any matters to come before the Meeting, other
than those specified in the Notice of Annual Meeting. However, if any other
matter requiring a vote of the shareholders should arise at the Meeting, it is
the intention of the persons named in the accompanying Proxy to vote such Proxy
in accordance with their best judgment.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial
owners of the Shares for which proxies are being solicited from you, and, if so,
the number of copies of this Proxy Statement and other soliciting materials you
wish to receive in order to supply copies to the beneficial owners of the
Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS,
WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE URGED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING YOUR PROXY CARD PROMPTLY YOU
CAN HELP THE COMPANY AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM
SO THAT THE MEETING CAN BE HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE
A PRIOR PROXY AND VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY
STATEMENT.
By Order of the Board of Directors
Christopher H. Volk
Christopher H. Volk, Secretary
Scottsdale, Arizona
March 27, 1997
22
<PAGE>
APPENDIX A
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
FRANCHISE FINANCE CORPORATION OF AMERICA
Franchise Finance Corporation of America, a Delaware corporation (the
"Corporation"), does hereby certify that (i) the name of the Corporation is
Franchise Finance Corporation of America, (ii) the Certificate of Incorporation
of the Corporation was originally filed with the Secretary of State of the State
of Delaware on June 22, 1993, and (iii) pursuant to and in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware, the text of the Certificate of Incorporation of the Corporation is
hereby restated, integrated and further amended to read in its entirety as
follows:
ARTICLE I
The name of the Corporation is Franchise Finance Corporation of
America.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, in the County of New Castle, City of Wilmington, Delaware 19801.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
A. The total number of shares of all classes of capital stock that the
Corporation shall have authority to issue is 210,000,000 shares, consisting of
200,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock") and 10,000,000 shares of preferred stock having a par value of $.01 per
share (the "Preferred Stock"). Authority is hereby expressly granted to the
Board of Directors of the Corporation to authorize the issuance of one or more
series of Preferred Stock, and with respect to each such series to fix by
resolution or resolutions providing for the issuance of such series the number
of shares of such series, the voting powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, including without
limitation the dividend rights, dividend rate, terms of redemption (including
sinking fund provisions), redemption price or prices, conversion rights,
transfer and ownership restrictions and liquidation preferences, that are
permitted by the General Corporation Law of Delaware in respect of any class or
classes of stock or any series of any class of stock of the Corporation, without
further action or vote by the Corporation's stockholders; provided, however,
that notwithstanding the foregoing (i) any series of Preferred Stock issued
pursuant to the authority granted herein may be voting or non-voting, provided
that the voting rights of any voting shares of Preferred Stock shall be limited
to no more than one vote per share on matters voted upon by the holders of such
series, and (ii) in the event any Person acquires 20% or more of the outstanding
shares of Common Stock and/or Preferred Stock, the Board of Directors shall not
issue any series of Preferred Stock pursuant to the authority granted herein
unless such issuance is approved by the vote of the holders of 50% of the
outstanding shares of Common Stock.
A-1
<PAGE>
B. Rights and Restrictions of Common Stock and Preferred Stock.
1. Restrictions on Transfer to Preserve Tax Benefit.
(a) Definitions. For the purposes of this
Article IV, the following terms shall have the following
meanings:
"Beneficial Ownership" shall mean ownership of Common
Stock or Preferred Stock by a Person who would be treated as
an owner of such shares of Common Stock or Preferred Stock
either directly or constructively through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B)
of the Code. The terms "Beneficial Owner," "Beneficially Owns"
and "Beneficially Owned" shall have the correlative meanings.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Common Stock" shall mean the $.01 par value common
stock issued by the Corporation.
"Constructive Ownership" shall mean ownership of
Common Stock or Preferred Stock by a Person who would be
treated as an owner of such shares of Common Stock or
Preferred Stock either directly or constructively through the
application of Section 318 of the Code, as modified by Section
856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have
the correlative meanings.
"Initial Public Offering" means the issuance of
shares of Common Stock pursuant to the Corporation's first
effective registration statement for such Common Stock filed
under the Securities Act of 1933, as amended.
"Market Price" shall mean, (i) with respect to the
Common Stock, the last reported sales price reported on the
New York Stock Exchange on the trading day immediately
preceding the relevant date, or if the Common Stock is not
then traded on the New York Stock Exchange, the last reported
sales price of the Common Stock on the trading day immediately
preceding the relevant date as reported on any exchange or
quotation system over which the Common Stock may be traded, or
if the Common Stock is not then traded over any exchange or
quotation system, then the market price of the Common Stock on
the relevant date as determined in good faith by the Board of
Directors of the Corporation; and (ii) with respect to the
Preferred Stock, the market price of the Preferred Stock on
the relevant date as determined in good faith by the Board of
Directors of the Corporation.
"Ownership Limit" shall initially mean 9.8% (in value
or in number of shares, whichever is more restrictive) of the
outstanding Common Stock and/or Preferred Stock, applied
separately to the Common Stock and Preferred Stock, provided
that the Ownership Limit shall apply to each series of
Preferred Stock as set forth in the resolutions providing for
the issuance of such series of Preferred Stock of the
Corporation, and after any adjustment as set forth in
subparagraph B(1)(j) of this Article IV, shall mean such
greater percentage of the outstanding Common Stock or
Preferred Stock as so adjusted, provided that the Board of
Directors may, in its discretion, adjust the Ownership Limit
of any Person provided that after such adjustment, the
Ownership Limit of all other persons shall be adjusted such
that in no event may any five Persons Beneficially Own more
than 49% of the Common Stock and/or the Preferred Stock.
"Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under
Section 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside for or to be used exclusively for
the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section
509(a) of the Code, joint stock company or other entity; but
does not include an underwriter which participates in a public
A-2
<PAGE>
offering of the Common Stock or Preferred Stock for a period
of 25 days following the purchase by such underwriter of the
Common Stock or the Preferred Stock, as the case may be.
"Preferred Stock" shall mean the $.01 par value
preferred stock issued by the Corporation in such series and
with such voting powers, and such designations, preferences
and relative, participating, optional or other special rights,
and qualifications, or restrictions thereof, as shall be
stated in the resolutions providing for the issue of such
stock adopted by the board of directors, and subject to the
limitations set forth in Section A of this Article IV.
"Redemption Price" shall mean the price at which the
Corporation shall be entitled to redeem shares of Common Stock
or Preferred Stock which shall equal the lesser of (i) the
price per share to be paid in the transaction which if
effective would cause the Ownership Limit of the transferee to
be violated or in the case of a gift, the Market Price of the
shares of Common Stock or Preferred Stock, as the case may be,
as of the date of the gift; or (ii) the Market Price of the
shares of Common Stock or Preferred Stock on the date the
Corporation calls such shares for redemption.
"REIT" shall mean a Real Estate Investment Trust
under Section 856 of the Code.
"Restriction Termination Date" shall mean the first
day after the date of the Initial Public Offering on which the
Board of Directors of the Corporation determines that it is no
longer in the best interests of the Corporation to attempt to,
or continue to, qualify as a REIT, and only after the
stockholders of the Corporation have approved the
discontinuation of the Corporation to qualify as a REIT by a
majority vote of outstanding Common Stock and of each
outstanding series of Preferred Stock with the power to vote
thereon.
"Transfer" shall mean any sale, transfer, gift,
assignment, devise or other disposition of Common Stock or
Preferred Stock (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other
disposition of such Common Stock or Preferred Stock or (ii)
the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for
Common Stock or Preferred Stock), whether voluntary or
involuntary, whether of record or beneficially and whether by
operation of law or otherwise.
(b) Restriction on Transfers. Subject to the
provisions of subparagraph B(1)(i) of this Article IV:
(i) from the date of the Initial Public
Offering and prior to the Restriction Termination
Date, no Person shall Beneficially Own shares of
Common Stock or Preferred Stock in excess of the
Ownership Limit, and no Person shall Constructively
Own shares of Common Stock or Preferred Stock in
excess of 9.8% of the outstanding Common Stock and/or
the Preferred Stock;
(ii) from the date of the Initial Public
Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result
in any Person Beneficially Owning Common Stock or
Preferred Stock in excess of the Ownership Limit
shall be void ab initio as to the Transfer of such
shares of Common Stock or Preferred Stock, as the
case may be, which would be otherwise Beneficially
Owned by such Person in excess of the Ownership
Limit; and the intended transferee shall acquire no
rights in such shares of Common Stock or Preferred
Stock;
(iii) from the date of the Initial Public
Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result
in any Person Constructively Owning Common Stock or
Preferred Stock in excess of 9.8% of the outstanding
Common Stock or Preferred Stock shall be void ab
initio as to the Transfer
A-3
<PAGE>
of such shares of Common Stock or Preferred Stock
which would be otherwise Constructively Owned by such
Person in excess of such amount; and the intended
transferee shall acquire no rights in such shares of
Common Stock or Preferred Stock; and
(iv) from the date of the Initial Public
Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result
in the Common Stock or Preferred Stock being
Beneficially Owned by less than 100 Persons
(determined without reference to any rules of
attribution) shall be void ab initio as to the
Transfer of such shares of Common Stock or Preferred
Stock which would be otherwise beneficially owned by
the transferee; and the intended transferee shall
acquire no rights in such shares of Common Stock or
Preferred Stock.
(c) Remedies For Breach. If the Board of Directors or
its designees shall at any time determine in good faith that a
Transfer has taken place in violation of subparagraph B(1)(b)
of this Article IV or that a Person intends to acquire or has
attempted to acquire beneficial ownership (determined without
reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Common Stock or
Preferred Stock of the Corporation in violation of
subparagraph B(1)(b) of this Article IV, the Board of
Directors or its designees shall take such action as it deems
advisable to refuse to give effect or to prevent such
Transfer, including, but not limited to, refusing to give
effect to such Transfer on the books of the Corporation,
instituting proceedings to enjoin such Transfer or redeeming
the shares of Common Stock or Preferred Stock purported to be
transferred for an amount equal to their Redemption Price.
(d) Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire Common Stock or Preferred
Stock in violation of subparagraph B(1)(b) of this Article IV,
shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other
information as the Corporation may request in order to
determine the effect, if any, of such Transfer or attempted
Transfer on the Corporation's status as a REIT.
(e) Owners Required To Provide Information. From the
date of the Initial Public Offering and prior to the
Restriction Termination Date,
(i) every Beneficial Owner of more than 5%
(or such other percentage, between 1/2 of 1% and 5%,
as provided in the Code) of the outstanding Common
Stock or the outstanding Preferred Stock of the
Corporation shall, within 30 days after January 1 of
each year, give written notice to the Corporation
stating the name and address of such Beneficial
Owner, the number of shares of Common Stock or
Preferred Stock Beneficially Owned, and description
of how such shares are held. Each such Beneficial
Owner shall provide to the Corporation such
additional information as the Corporation may request
in order to determine the effect, if any, of such
Beneficial Ownership on the Corporation's status as a
REIT.
(ii) each Person who is a Beneficial Owner
or Constructive Owner of Common Stock or Preferred
Stock and each Person (including the shareholder of
record) who is holding Common Stock or Preferred
Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation such information
that the Corporation may request, in good faith, in
order to determine the Corporation's status as a
REIT.
(f) Remedies Not Limited. Subject to the provisions
of paragraph (l) of this Subsection B(1), nothing contained in
this Article IV shall limit the authority of the Board of
Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as a
REIT.
A-4
<PAGE>
(g) Ambiguity. In the case of an ambiguity in the
application of any of the provisions of subparagraph B(1) of
this Article IV, including any definition contained in
subparagraph B(1)(a), the Board of Directors shall have the
power to determine the application of the provisions of this
subparagraph B(1) with respect to any situation based on the
facts known to it.
(h) Modification of Ownership Limit. Subject to the
limitations provided in subparagraph B(1)(i), the Board of
Directors may from time to time adjust the Ownership Limit
with regard to any Person.
(i) Limitations on Modifications.
(i) If the Ownership Limit of any Person
shall be increased, the Ownership Limit of all other
Persons shall be adjusted such that no five Persons
Beneficially Own in excess of 49% of the Common Stock
and/or the Preferred Stock.
(ii) Prior to the modification of any
Ownership Limit pursuant to subparagraph B(1)(h) or
B(1)(j) of this Article IV, the Board of Directors of
the Corporation may require such opinions of counsel,
affidavits, undertaking or agreements as it may deem
necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.
(j) Exceptions.
(i) The Board of Directors, with a ruling
from the Internal Revenue Service or an opinion of
counsel, may exempt a Person from the Ownership
Limits if such Person is not an individual for
purposes of Section 542(a)(2) of the Code as modified
by Section 856(h) of the Code, and the Board of
Directors obtains such representations and
undertakings from such Person as are reasonably
necessary to ascertain that no individual's
Beneficial Ownership of such Common Stock or
Preferred Stock will violate the Ownership Limit and
agrees that any violation or attempted violation will
result in the redemption of such Common Stock or
Preferred Stock, as the case may be, in accordance
with this Article IV.
(ii) The Board of Directors, with a ruling
from the Internal Revenue Service or an opinion of
counsel, may exempt a Person from the limitation on a
Person Constructively Owning shares of Common Stock
or Preferred Stock in excess of 9.8% of the
outstanding Common Stock or Preferred Stock, as the
case may be, if such Person does not and represents
that it will not own, directly or constructively (by
virtue of the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code), more
than a 9.8% interest (as set forth in Section
856(d)(2)(B)), in a tenant of the Corporation and the
Corporation obtains such representations and
undertakings from such Person as are reasonably
necessary to ascertain this fact and agrees that any
violation or attempted violation will result in the
exemption of such shares of Common Stock or Preferred
Stock in excess of 9.8% of the outstanding Common
Stock or Preferred Stock, as the case may be, in
accordance with this Article IV.
(k) Termination of REIT Status. The Corporation shall
maintain its status as a REIT until such time as the Board of
Directors of the Corporation determines that it is no longer
in the best interests of the Corporation to attempt to, or
continue to, qualify as a REIT, and after the stockholders of
the Corporation have approved the discontinuation of the
Corporation to qualify as a REIT by a majority vote of
outstanding Common Stock and a majority vote of all
outstanding series of Preferred Stock with the power to vote
thereon.
A-5
<PAGE>
(l) New York Stock Exchange Transactions. Nothing in
this subsection B(1) shall preclude the settlement of any
transaction entered into through the facilities of the New
York Stock Exchange.
2. (a) Legend. Each certificate for Common Stock and
Preferred Stock shall bear the following legend:
"THE SHARES OF [COMMON STOCK] [PREFERRED STOCK]
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF
ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED. NO PERSON MAY
BENEFICIALLY OWN SHARES OF (i) COMMON STOCK IN EXCESS OF 9.8%
(OR SUCH OTHER PERCENTAGE AS MAY BE DETERMINED BY THE BOARD OF
DIRECTORS OF THE CORPORATION) OF THE OUTSTANDING COMMON STOCK
OF THE CORPORATION, OR (ii) PREFERRED STOCK IN EXCESS OF 9.8%
(OR SUCH OTHER PERCENTAGE AS MAY BE DETERMINED BY THE BOARD OF
DIRECTORS OF THE CORPORATION) OF THE OUTSTANDING PREFERRED
STOCK OF THE CORPORATION AND NO PERSON MAY CONSTRUCTIVELY OWN
SHARES OF COMMON STOCK AND/OR PREFERRED STOCK IN EXCESS OF THE
ABOVE LIMITATIONS. ANY PERSON WHO ATTEMPTS TO BENEFICIALLY OWN
OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK AND/OR PREFERRED
STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY
NOTIFY THE CORPORATION. ANY TRANSFER WHICH IF EFFECTIVE WOULD
CAUSE ANY PERSON TO BENEFICIALLY OWN MORE THAN 9.8% OF THE
OUTSTANDING COMMON STOCK AND/OR PREFERRED STOCK OF THE
CORPORATION (OR SUCH OTHER LIMITS AS THE BOARD OF DIRECTORS OF
THE CORPORATION SHALL DETERMINE) SHALL BE VOID AB INITIO.
AMONG OTHER THINGS, IF THE BOARD OF DIRECTORS DETERMINES THAT
A PURPORTED TRANSFER, IF EFFECTIVE, WOULD VIOLATE THE
FOREGOING RESTRICTIONS, THE PURPORTED TRANSFEREE OF SUCH
SHARES SHALL BE DEEMED TO HAVE GRANTED AN OPTION TO THE
CORPORATION TO ACQUIRE SUCH SHARES AT A PRICE EQUAL TO THE
LESSER OF: (i) THE PRICE TO BE PAID IN THE TRANSACTION WHICH,
IF EFFECTIVE, WOULD VIOLATE THE FOREGOING LIMITATIONS; OR (ii)
THE FAIR MARKET VALUE OF SUCH SHARES AS OF THE DATE OF
EXERCISE OF SUCH OPTION. ALL TERMS IN THIS LEGEND HAVE THE
MEANINGS DEFINED IN THE CORPORATION'S CERTIFICATE OF
INCORPORATION, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS. IF THE RESTRICTIONS ON TRANSFER ARE VIOLATED, THE
SHARES OF COMMON STOCK REPRESENTED HEREBY MAY BE AUTOMATICALLY
REDEEMED."
(b) Each certificate for Preferred Stock shall also bear
substantially the following legend:
"THE CORPORATION SHALL FURNISH WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE
CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
SUCH REQUESTS SHALL BE MADE TO THE CORPORATION'S SECRETARY AT
THE PRINCIPAL OFFICE OF THE CORPORATION.
A-6
<PAGE>
THE SHARES OF PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER FOR THE
PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED. EXCEPT AS OTHERWISE PROVIDED BY THE
CORPORATION'S CERTIFICATE OF INCORPORATION, NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF (i) COMMON
STOCK IN EXCESS OF 9.8% (IN VALUE OR IN NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK
OF THE CORPORATION OR (ii) PREFERRED STOCK IN EXCESS OF 9.8%
(IN VALUE OR IN NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE) OF THE OUTSTANDING PREFERRED STOCK OF THE
CORPORATION, WITH CERTAIN FURTHER RESTRICTIONS AND EXCEPTIONS
SET FORTH IN OR PURSUANT TO THE CORPORATION'S CERTIFICATE OF
INCORPORATION. ANY PERSON WHO ATTEMPTS TO BENEFICIALLY OWN OR
CONSTRUCTIVELY OWN COMMON STOCK AND/OR PREFERRED STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST NOTIFY THE CORPORATION IN
WRITING AT LEAST 15 DAYS PRIOR TO SUCH PROPOSED OR ATTEMPTED
TRANSFER OR OWNERSHIP. TRANSFERS IN VIOLATION OF THE
RESTRICTIONS DESCRIBED ABOVE AND TRANSFERS IN VIOLATION OF
CERTAIN OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION
SHALL BE VOID AB INITIO. AMONG OTHER THINGS, IF THE BOARD OF
DIRECTORS DETERMINES THAT A PURPORTED TRANSFER, IF EFFECTIVE,
WOULD VIOLATE THE FOREGOING RESTRICTIONS, THE PURPORTED
TRANSFEREE OF SUCH SHARES SHALL BE DEEMED TO HAVE GRANTED AN
OPTION TO THE CORPORATION TO ACQUIRE SUCH SHARES AT A PRICE
EQUAL TO THE LESSER OF: (i) THE PRICE TO BE PAID IN THE
TRANSACTION WHICH, IF EFFECTIVE, WOULD VIOLATE THE FOREGOING
LIMITATIONS; OR (ii) THE FAIR MARKET VALUE OF SUCH SHARES AS
OF THE DATE OF EXERCISE OF SUCH OPTION. ALL CAPITALIZED TERMS
IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE CORPORATION'S
CERTIFICATE OF INCORPORATION."
3. Severability. If any provision of this Article IV or any
application of any such provision is determined to be invalid by any
federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provisions shall be affected only to the extent
necessary to comply with the determination of such court.
ARTICLE V
The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors. The Board of Directors of the
Corporation shall consist of one or more members as determined by the Bylaws of
the Corporation.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, alter, amend
or repeal the Bylaws of the Corporation.
ARTICLE VI
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
A-7
<PAGE>
ARTICLE VII
No amendment may be made to this Restated Certificate of Incorporation
unless approved by the vote of the holders of a majority of the voting
securities of the Corporation; except that no amendment which would change any
rights with respect to any outstanding class of securities of the Corporation,
by reducing the amount payable thereon upon liquidation of the Corporation, or
by diminishing or eliminating any voting rights pertaining thereto, may be made
unless approved by the vote of the holders of 66-2/3% of the outstanding
securities of such class.
IN WITNESS WHEREOF, the undersigned has executed and acknowledged this
Second Amended and Restated Certificate of Incorporation as of this day of May,
1997.
FRANCHISE FINANCE CORPORATION OF AMERICA
By
--------------------------------------
Morton H. Fleischer, President
ATTEST:
- --------------------------------------
Christopher H. Volk, Secretary
A-8
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
1997 EMPLOYEE STOCK PURCHASE PLAN
Franchise Finance Corporation of America, a Delaware corporation,
hereby adopts this Franchise Finance Corporation of America 1997 Employee Stock
Purchase Plan (the "Plan"') as of the Effective Date. The purposes of this Plan
are as follows:
(1) To assist employees of the Company and its Participating
Subsidiaries in acquiring a stock ownership interest in the Company
pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986,
as amended.
(2) To help employees provide for their future security and to
encourage them to remain in the employment of the Company and its
Participating Subsidiaries.
1. Definitions.
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless the
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as
amended.
(b) "Committee" means the committee appointed to administer
the Plan pursuant to paragraph 10.
(c) "Company" means Franchise Finance Corporation of America,
a Delaware corporation.
(d) "Dates of Exercise" means the dates as of which an Option
is exercised and the Stock subject to that Option is purchased. With
respect to any Option, the Dates of Exercise are the last day of June
and December on which Stock is traded on the New York Stock Exchange
during the Option Period in which that Option was granted.
(e) "Date of Grant" means the date as of which an Option is
granted, as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation
received from the Company or a Participating Subsidiary as regular
compensation during an Option Period.
<PAGE>
By way of illustration, and not by way of limitation, Eligible
Compensation includes regular compensation such as salary, wages,
overtime, shift differentials, bonuses, commissions, and incentive
compensation, but excludes relocation expense reimbursements, foreign
service premiums, tuition or other reimbursements, income realized as a
result of participation in any stock option, stock purchase, or similar
plan of the Company or any Participating Subsidiary.
(g) "Effective Date" means February ___, 1997.
(h) "Eligible Employee" means any employee of the Company or a
Participating Subsidiary who meets the following criteria:
(1) the employee does not, immediately after the
Option is granted, own (within the meaning of Section
423(b)(3) and 424(d) of the Code) stock possessing five
percent or more of the total combined voting power or value of
all classes of stock of the Company or of a Subsidiary;
(2) the employee has completed six months of
employment for the Company or a Subsidiary; and
(3) the employee's customary employment is 20 hours
or more a week.
(i) "Option" means an option granted under the Plan to an
Eligible Employee to purchase shares of Stock.
(j) "Option Period" means with respect to any Option the
period beginning upon the Date of Grant and ending on the June 30 or
December 31 immediately following the Date of Grant, whichever is
earlier, or ending on such other date as the Committee shall determine.
No Option Period may exceed 5 years from the Date of Grant.
(k) "Option Price" with respect to any Option has the meaning
set forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied
with the provisions of paragraph 3(b).
(m) "Participating Subsidiary" means any present or future
Subsidiary that the Committee designates to be eligible to participate
in the Plan, and that elects to participate in the Plan.
(n) "Periodic Deposit Account" means the account established
and maintained by the Company to which shall be credited pursuant to
Section 3(c) amounts received from Participants for the purchase of
Stock under the Plan.
B-2
<PAGE>
(o) "Plan" means this Franchise Finance Corporation of America
1997 Employee Stock Purchase Plan.
(p) "Plan Year" means the calendar year.
(q) "Stock" means shares of common stock, par value $.01 per
share, of the Company.
(r) "Stock Purchase Account" means the account established and
maintained by the Company to which shall be credited pursuant to
Section 4(c) Stock purchased upon exercise of an Option under the Plan.
(s) "Subsidiary" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the
Company, if at the time of the granting of the Option, each of the
corporations, other than the last corporation, in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
2. Stock Subject to Plan.
Subject to the provisions of paragraph 8 (relating to adjustment upon
changes in the Stock), the Stock which may be sold pursuant to Options granted
under the Plan shall not exceed in the aggregate Fifty Thousand (50,000) shares,
and may be newly issued shares or treasury shares or shares bought in the
market, or otherwise, for purposes of the Plan.
3. Grant of Options.
(a) General Statement. The Company may grant Options under the
Plan to all Eligible Employees on January 1 and/or July 1 of each Plan
Year or on such other date as the Committee shall designate. The term
of each Option shall end on the last day of the Option Period with
respect to which the Option is granted. With respect to each Offering
Period, each Eligible Employee shall be granted an Option, on the Date
of Grant, for as many full and fractional shares of Stock as the
Eligible Employee may purchase with up to 10% of the Compensation he or
she receives during the Option Period (or during any portion of the
Option Period as the Eligible Employee may elect to participate).
(b) Election to Participate. Each Eligible Employee who elects
to participate in the Plan shall communicate to the Company, in
accordance with procedures established by the Committee, an election to
participate in the Plan whereby the Eligible Employee designates a
stated whole percentage equaling at least 1%, but no more than 10%, of
his or her Eligible Compensation during the Option Period to be
deposited periodically in his or her Periodic Deposit Account under
subparagraph (c). The cumulative amount deposited in the Periodic
Deposit Account during a Plan Year with respect to any Eligible
B-3
<PAGE>
Employee may not exceed the limitation stated in subparagraph (d). A
Participant's election to participate in the Plan shall continue in
effect during the current and subsequent Option Periods until changed
pursuant to subparagraph 3(c).
(c) Periodic Deposit Accounts. The Company shall maintain a
Periodic Deposit Account for each Participant and shall credit to that
account in U.S. dollars all amounts received under the Plan from the
Participant. No interest will be paid to any Participant or credited to
his or her Periodic Deposit Account under the Plan with respect to such
funds. All amounts credited to a Participant's Periodic Deposit Account
shall be used to purchase Stock under subparagraph 4(c) and no portion
of a Participant's Periodic Deposit Account shall be refunded to him or
her.
Credits to an Eligible Employee's Periodic Deposit Account
shall be made by payroll deduction or by other alternate payment
arrangements, in accordance with rules and procedures established by
the Committee. An Eligible Employee may increase, decrease or eliminate
the periodic credits to his or her Periodic Deposit Account for future
periods by filing a new election amount at any time during an Option
Period. The change shall become effective in accordance with the
Committee's rules and procedures as soon as practicable after the
Company receives the election, but the change will not affect the
amounts deposited with respect to Eligible Compensation sooner than the
Eligible Compensation payable with respect to the next pay period after
the Company receives the authorization.
(d) $25,000 Limitation. No Eligible Employee shall be
permitted to purchase Stock under the Plan or under any other employee
stock purchase plan of the Company or of any Subsidiary which is
intended to qualify under Section 423 of the Code, at a rate which
exceeds $25,000 in fair market value of Stock (determined at the time
the Option is granted) for each calendar year in which any such Option
granted to such Participant is outstanding at any time.
4. Exercise of Options.
(a) General Statement. On each Date of Exercise, the entire
Periodic Deposit Account of each Participant shall be used to purchase
at the Option Price whole and/or fractional shares of Stock subject to
the Option. Each Participant automatically and without any act on his
or her part will be deemed to have exercised his or her Option on each
such Date of Exercise to the extent that the amounts then credited to
the Participant's Periodic Deposit Account under the Plan are used to
purchase Stock.
(b) Option Price Defined. The Option Price per share of Stock
to be paid by each Participant on each exercise of his or her Option
shall be an amount in U.S. dollars equal to 85% of the fair market
value of a share of Stock as of the applicable Date of Exercise. The
fair market value of a share of Stock as of an applicable Date of
Exercise
B-4
<PAGE>
shall be the average of the high and low price of a share of Stock on
the New York Stock Exchange on such date.
(c) Stock Purchase Accounts; Stock Certificates. The Company
shall maintain a Stock Purchase Account for each Participant to reflect
the Stock purchased under the Plan by the Participant. Upon exercise of
an Option by a Participant pursuant to subparagraph 4(a), the Company
shall credit to the Participant's Stock Purchase Account the whole or
fractional shares of Stock purchased at that time.
Except as provided in paragraph 5, certificates with respect to Stock
credited to a Participant's Stock Purchase Account shall be issued only
on request by the Participant for a distribution of whole shares or
when necessary to comply with the transaction requirements outside the
United States. Upon issuance of such a Stock certificate to a
Participant, the Participant's Stock Purchase Account shall be adjusted
to reflect the number of shares of Stock distributed to the
Participant.
5. Rights on Retirement, Death, Termination of Employment.
If a Participant retires, dies, or otherwise terminates employment, or
if the corporation that employs a participant ceases to be a Participating
Subsidiary, then to the extent practicable, no further amounts shall be credited
to the Participant's Periodic Deposit Account from any pay due and owing with
respect to the Participant after such retirement, death, or other termination of
employment. All amounts credited to such a Participant's Periodic Deposit
Account shall be used on the next Date of Exercise in that Option Period to
purchase Stock under paragraph 4. Such a Participant's Stock Purchase Account
shall be terminated, and Stock certificates with respect to whole shares of
Stock and cash with respect to fractional shares of Stock shall be distributed
as soon as practicable after such Date of Exercise.
Notwithstanding anything in this Plan to the contrary and except to the
extent permitted under Section 423(a) of the Code, a Participant's Option shall
not be exercisable more than three months after the Participant retires or
otherwise ceases to be employed by the Company or a Participating Subsidiary,
including as a result of the corporation ceasing to be a Participating
Subsidiary.
6. Restriction Upon Assignment.
An Option granted under the Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, and is exercisable during
the Participant's lifetime only by the Participant. The Company will not
recognize and shall be under no duty to recognize any assignment or purported
assignment by a Participant, other than by will or the laws of descent and
distribution, of the Participant's interest in the Plan or of his or her Option
or of any rights under his or her Option.
B-5
<PAGE>
7. No Rights of Stockholder Until Exercise of Option.
A Participant shall not be deemed to be a stockholder of the Company,
nor have any rights or privileges of a stockholder, with respect to the number
of shares of Stock subject to an Option. A Participant shall have the rights and
privileges of a stockholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the Participant's
Stock Purchase Account.
8. Changes in the Stock; Adjustments of an Option.
If, while any Options are outstanding, the outstanding shares of Stock
have increased, decreased, changed into, or been exchanged for a different
number or kind of shares or securities of the Company, or there has been any
other change in the capitalization of the Company, through reorganization,
merger, recapitalization, reclassification, stock split, reverse stock split,
spinoff or similar transaction, appropriate and proportionate adjustments may be
made by the Committee in the number and/or kind of shares which are subject to
purchase under outstanding Options and to the Option Exercise Price or prices
applicable to such outstanding Options, including, if the Committee deems
appropriate, the substitution of similar options to purchase shares of another
company (with such other company's consent). In addition, in any such event, the
number and/or kind of shares which may be offered in the Options shall also be
proportionately adjusted. No adjustments to outstanding Options shall be made
for dividends paid in the form of stock.
9. Use of Funds; Repurchase of Stock.
All funds received or held by the Company under the Plan will be
included in the general funds of the Company free of any trust or other
restriction and may be used for any corporate purpose. The Company shall not be
required to repurchase from any Eligible Employee shares of Stock which such
Eligible Employee acquires under the Plan.
10. Administration by Committee.
(a) Appointment of Committee. The board of directors of the
Company, or its delegate, shall appoint a Committee, which shall be
composed of one or more members, to administer the Plan on behalf of
the Company. Each member of the Committee shall serve for a term
commencing on the date specified by the board of directors of the
Company, or its delegate, and continuing until he or she dies or
resigns or is removed from office by such board of directors, or its
delegate.
(b) Duties and Powers of Committee. It shall be the duty of
the Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the power to:
B-6
<PAGE>
(1) determine when the initial and subsequent Option
Periods will commence;
(2) interpret the Plan and the Options;
(3) adopt such rules for the administration,
interpretation, and application of the Plan as are consistent
with the Plan and Section 423 of the Code; and
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the Board of Directors of the Company may
at any time and from time to time exercise any and all rights and duties of the
Committee under the Plan. The Committee may delegate any of its responsibilities
under the Plan by designating in writing other persons who carry out any or all
of such responsibilities.
(c) Majority Rule. The Committee shall act by a majority of
its members in office. The Committee may act either by vote at a
meeting or by a memorandum or other written instrument signed by a
majority of the Committee.
(d) Compensation; Professional Assistance; Good Faith Actions.
Each member of the Committee who is an employee of the Company or a
Subsidiary shall receive no additional compensation for his or her
services under the Plan. Each Committee member who is not an employee
of the Company or a Subsidiary shall receive such compensation for his
or her services under the Plan as may be determined by the Board of
Directors of the Company, or its delegate. All expenses and liabilities
incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee
may employ attorneys, consultants, accountants, appraisers, brokers, or
other persons. The Committee, the Company, and its officers and
directors shall be entitled to rely upon the advice, opinions, or
valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Participants, the Company and all
other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Options, and all members
of the Committee shall be fully protected by the Company in respect to
any such action, determination or interpretation.
11. No Rights as an Employee.
Nothing in the Plan nor any Option shall be construed to give any
person (including any Eligible Employee or Participant) the right to remain in
the employ of the Company or a Subsidiary or to affect the right of the Company
and Subsidiaries to terminate the employment of any person (including any
Eligible Employee or Participant) at any time with or without cause, to the
extent otherwise permitted under law.
B-7
<PAGE>
12. Term of Plan.
No Option may be granted during any period of suspension of the Plan or
after termination of the Plan, and in no event may any Option be granted under
the Plan after five years from the commencement of the initial Option Period.
13. Amendment of the Plan.
The Board of Directors of the Company, or its delegate, may amend,
suspend, or terminate the Plan at any time; provided that approval by the vote
of the holders of more than 50% of the outstanding shares of the Stock entitled
to vote shall be required to amend the Plan to reduce the Exercise Price or
increase the number of shares of Stock reserved for the Options under the Plan.
14. Effect Upon Other Plans.
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary, except to the
extent required by law. Nothing in this Plan shall be construed to limit the
right of the Company or any Subsidiary (a) to establish any other forms of
incentives or compensation for employees of the Company or any Subsidiary or (b)
to grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
15. Notices.
Any notice to be given under the terms of the Plan to the Company shall
be addressed to the Company in care of the Committee and any notice to be given
to the Eligible Employee shall be addressed to the Eligible Employee at his or
her last address as reflected in the Company's records. By a notice given
pursuant to this paragraph, either party may hereafter designate a different
address for notices to be given to it or the Eligible Employee. Any notice which
is required to be given to the Eligible Employee shall, if the Eligible Employee
is then deceased, be given to the Eligible Employee's personal representative if
such representative has previously informed the Company of his or her status and
address by written notice under this paragraph. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office,
branch post office, or other depository regularly maintained by the United
States Postal Services.
16. Titles.
Titles are provided herein for convenience only and are not no serve as
a basis for interpretation or construction of the Plan.
B-8
<PAGE>
PROXY/VOTING INSTRUCTION CARD
FRANCHISE FINANCE CORPORATION OF AMERICA
c/o Gemisys Transfer Agents, P.O. Box 3287, Englewood, CO 80155-9758
ANNUAL MEETING DATE: May 6, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned shareholder of Franchise Finance Corporation of America
(the "Company"), a Delaware corporation, hereby constitutes and appoints
Christopher H. Volk and John R. Barravecchia, and each of them, proxies, with
full power of substitution, for and on behalf of the undersigned to vote, as
designated below, according to the number of shares of the Company's $.01 par
value common stock held of record by the undersigned on March 14, 1997, and as
fully as the undersigned would be entitled to vote if personally present, at the
Annual Meeting of Shareholders to be held at The Scottsdale Princess Resort,
7575 E. Princess Drive, Scottsdale, Arizona on Tuesday, May 6, 1997 at 10:00
a.m. local time, and at any postponements or adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If properly executed and no direction is made, this
proxy will be voted IN FAVOR of the election of all listed nominees to the Board
of Directors and FOR each of the other items set forth on the Proxy.
Please mark boxes x in ink. Sign, date and return this Proxy promptly, using the
enclosed envelope.
1. Election of Directors:
<TABLE>
<S> <C> <C> <C>
|_| FOR ALL NOMINEES LISTED BELOW |_| WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below)
- --------------------------------------------------------------------------------
Morton H. Fleischer, Robert W. Halliday, Willie R. Barnes, William C.
Foxley, Donald C. Hannah, Dennis E. Mitchem, Louis P. Neeb, Kenneth B.
Roath, Wendell J. Smith and Casey J. Sylla
2. Proposal to amend and restate the Company's Restated Certificate of
Incorporation to, among other things, authorize the issuance of
10,000,000 shares of preferred stock.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve the Company's 1997 Employee Stock Purchase Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
4. Proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending December 31,
1997.
|_| FOR |_| AGAINST |_| ABSTAIN
5. In the discretion of such proxy holders, upon such other business as
may properly come before the Meeting or any and all postponements or
adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, dated March 27, 1997 and the Proxy Statement furnished
therewith.
Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. Executors, administrators, trustees and other
fiduciaries, and persons signing on behalf of corporations or partnerships,
should so indicate when signing.
Dated , 1997
-----------------------------
----------------------------------------
Authorized Signature
----------------------------------------
Title
----------------------------------------
Authorized Signature
----------------------------------------
Title
To save the Company additional vote solicitation expenses, please sign,
date and return this Proxy promptly, using the enclosed envelope.
NON-VOTING INSTRUCTIONS
|_| ANNUAL MEETING. Please check here to indicate that you plan to attend
the Annual Meeting of Shareholders on May 6, 1997.
