SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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)(1) 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:
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<PAGE>
NOTICE OF 2000 ANNUAL MEETING
AND PROXY STATEMENT
ANNUAL MEETING TO BE HELD
MAY 10, 2000
----------
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2000 Annual Meeting of Shareholders of Franchise Finance Corporation of America
to be held at The Fairmont Scottsdale Princess, 7575 East Princess Drive,
Scottsdale, Arizona on Wednesday, May 10, 2000 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. In
addition to the election of directors and the ratification of the selection of
the Company's independent auditors, there are two important proposals being
presented at this year's meeting for you to review. 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.
You will notice that this year we have changed the format of the proxy
statement to make it easier to understand. The Securities and Exchange
Commission is encouraging companies to write documents for investors in plain
English and we support this effort.
Sincerely,
/s/ Morton H. Fleischer
March 31, 2000 Morton H. Fleischer,
Chairman of the Board and
Chief Executive Officer
<PAGE>
---------------------------------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------------
TO BE HELD MAY 10, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Franchise Finance Corporation of America, a Delaware corporation
(the "Company"), will be held on Wednesday, May 10, 2000 at 10:00 a.m. local
time, at The Fairmont Scottsdale Princess, 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 the Company's 1995 Stock
Option and Incentive Plan (the "Stock Option Plan") to extend the term
of the Stock Option Plan to June 1, 2004.
3. To consider and vote upon a proposal to change the state of
incorporation of the Company from Delaware to Maryland (the
"Re-Incorporation").
4. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
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 15, 2000 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
Scottsdale, Arizona Dennis L. Ruben,
Dated: March 31, 2000 Secretary
<PAGE>
TABLE OF CONTENTS
Page
----
General Information......................................................... 1
About the Meeting........................................................... 1
What is being voted on at the Meeting?................................ 1
Who can vote at the Meeting?.......................................... 2
What constitutes a quorum for the Meeting?............................ 2
How do I vote?........................................................ 2
Can I vote by telephone or electronically?............................ 2
Can I change my vote after I return my proxy card?.................... 2
What vote is required to approve each item?........................... 3
Proposal No. 1 - Election of Directors...................................... 4
Executive Compensation...................................................... 9
Report of the Compensation Committee on Fiscal 1999 Executive Compensation.. 15
Shareholder Return Performance Graph........................................ 20
Proposal No. 2 - Amendment to the Company's 1995 Stock Option and
Incentive Plan............................................................ 21
Proposal No. 3 - Change of the Company's State of Incorporation from
Delaware to Maryland...................................................... 24
Proposal No. 4 - Ratification of Selection of Independent Auditors.......... 35
Security Ownership of Certain Beneficial Owners and Management.............. 36
Certain Relationships and Related Transactions.............................. 37
Solicitation of Proxies..................................................... 38
Annual Report............................................................... 38
Shareholder Proposals for 2001 Annual Meeting............................... 38
Other Matters............................................................... 38
Notice to Banks, Broker-Dealers and Voting Trustees and their Nominees...... 39
APPENDIX A - Articles of Amendment and Restatement
APPENDIX B - Bylaws
<PAGE>
FRANCHISE FINANCE CORPORATION OF AMERICA
17207 North Perimeter Drive
Scottsdale, Arizona 85255-5402
----------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 2000
----------------------------------------
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 Fairmont
Scottsdale Princess, 7575 East Princess Drive, Scottsdale, Arizona, on
Wednesday, May 10, 2000 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 31, 2000.
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:
(1) read this proxy statement carefully;
(2) specify their choice in each matter by marking the appropriate box on
the enclosed Proxy; and
(3) sign, date and return the Proxy by mail in the postage-paid, return
addressed envelope provided for that purpose.
ABOUT THE MEETING
WHAT IS BEING VOTED ON AT THE MEETING?
The Board is asking shareholders to consider four items at this year's
Meeting: (1) the election of ten directors to the Board, (2) a proposal to
extend the term of the Company's 1995 Stock Option and Incentive Plan to June 1,
2004, (3) a proposal to change the state of incorporation of the Company from
Delaware to Maryland (the "Re-Incorporation"), and (4) a proposal to ratify the
selection of Arthur Andersen LLP as the Company's independent auditors for the
fiscal year ending December 31, 2000.
The Re-Incorporation is being proposed in order to save the Company
approximately $150,000 annually. This is the amount that the Company currently
pays each year in Delaware franchise taxes. Your consideration of this proposal
is very important as it requires the approval of a majority of the outstanding
shares of the Company's common stock, $.01 par value per share (the "Shares"),
which is a greater approval percentage than required for items the Company
typically presents for your consideration each year. If the Re-Incorporation is
approved:
* the Company will be merged with a newly organized Maryland
corporation;
* there will be no change in the Company's name, business, directors,
management, fiscal year, assets or liabilities or the location of its
principal executive offices; and
* the Company will then be governed by Maryland law and the charter and
bylaws attached to this proxy statement as appendices A and B,
respectively.
For a more detailed description of the Re-Incorporation, including a comparison
of Delaware and Maryland law, see "PROPOSAL NO. 3 - CHANGE OF THE COMPANY'S
STATE OF INCORPORATION FROM DELAWARE TO MARYLAND" below.
WHO CAN VOTE AT THE MEETING?
The Board of Directors set March 15, 2000 as the record date for the
meeting. Only persons holding Shares of record at the close of business on March
15, 2000 will be entitled to receive notice of and to vote at the Meeting. On
<PAGE>
the Record Date there were 56,319,099 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.
WHAT CONSTITUTES A QUORUM FOR THE MEETING?
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
for the transaction of business at the Meeting. Each of these categories will be
tabulated separately. The presence, in person or by Proxy, of 28,159,550 Shares
are necessary to establish a quorum at the Meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct, unless you later revoke the
Proxy. Unless instructions to the contrary are marked, or if no instructions are
specified, Shares represented by a Proxy 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. If you are a
registered shareholder (that is, if you hold your Shares in certificate form)
and you attend the meeting, you may deliver your completed proxy card in person.
If you hold your Shares in "street name" (that is, if you hold your Shares
through a broker or other nominee) and you wish to vote in person at the
meeting, you will need to obtain a proxy form from the institution that holds
your Shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you hold your Shares in "street name", you may be able to grant your
Proxy by telephone, or electronically over the Internet, by following the
instructions included with your proxy card. If your shares are held in "street
name," please check your proxy card or contact your broker or nominee to
determine whether you will be able to grant your Proxy by telephone or
electronically.
The deadline for granting your Proxy by telephone or electronically is
11:59 p.m., New York City time, on May 9, 2000.
If you are a registered shareholder, then you may not grant your Proxy by
telephone or over the Internet. You must complete and sign the accompanying
proxy card and return it to the Company in the enclosed postage pre-paid
envelope. You may also vote in person at the Meeting.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your Proxy, you may change your vote at
any time before the Proxy is exercised by filing with the Secretary of the
Company, at the address indicated above, either a written notice of revocation,
a duly executed Proxy bearing a later date, or if you vote in person at the
Meeting. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request. However, attendance at the meeting will not by
itself revoke a previously granted Proxy. If you want to change or revoke your
Proxy and you hold your Shares in "street name," contact your broker or the
nominee that holds your Shares.
Any written notice of revocation sent to the Company must include the
shareholder's name and must be received prior to the Meeting to be effective.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The election of each director nominee (Proposal 1)
requires the affirmative vote of a plurality of the Shares present or
represented to vote at the Meeting (which is the ten directors receiving the
most votes). The Company's shareholders are not entitled to cumulate votes with
respect to the election of directors.
THE RE-INCORPORATION. The approval of the Re-Incorporation (Proposal 3)
requires the affirmative vote of a majority of the Company's outstanding Shares.
OTHER ITEMS. The affirmative vote of a majority of the voting power present
at the Meeting is required for approval of the amendment to the Stock Option
Plan (Proposal 2), ratification of the selection of Arthur Andersen LLP as the
2
<PAGE>
Company's independent auditors (Proposal 4) and all other business not described
in this proxy statement and properly submitted to the shareholders for their
consideration at the Meeting.
If you hold your shares in "street name", your broker or nominee may not be
permitted to exercise voting discretion with respect to some of the matters to
be acted upon. Thus, if you do not give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether there is a quorum.
Abstentions are counted in tabulations of the voting power present for each
proposal presented to shareholders, while broker non-votes are not counted for
purposes of determining whether a proposal has been approved. Therefore, for
Proposal No. 1, the election of directors, abstentions and broker non-votes have
no effect. For Proposal No. 3, the Re-Incorporation, abstentions and broker
non-votes have the same effect as votes against the Re-Incorporation. For all
other matters presented at the meeting, broker non-votes will have no effect and
abstentions will have the same effect as votes against the proposals.
Votes cast by Proxy will be tabulated by an automated system administered
by Gemisys Transfer Agents, the Company's tabulation 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.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
It is intended that the Shares represented by properly granted 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 elected. If
elected, each nominee will serve until the 2001 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 a director 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 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
DIRECTORS
The following table sets forth certain information with respect to the
directors 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 Director, Chairman of the Board and Chief June 22, 1993
(63) 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 was a general partner (or general
partner of the general partner) in the following
public limited partnerships which invested in travel
plazas and were liquidated in 1999: Participating
Income Properties 1986, L.P.; Participating Income
Properties II, L.P.; and Participating Income
Properties III Limited Partnership. Mr. Fleischer is
currently the general partner of the general partner
of Scottsdale Land Trust Limited Partnership, a
publicly owned limited partnership involved in
commercial land development.
Willie R. Barnes, Esq. Corporate and securities law attorney. Mr. Barnes March 14, 1995
(68) has been a partner in the law firm of Musick, Peeler
& Garrett since June 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.
</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>
Kelvin L. Davis Mr. Davis is a partner in The Texas Pacific Group, March 13, 1998
(36) an international private equity investment firm. Mr.
Davis joined The Texas Pacific Group in March 2000.
Prior to joining The Texas Pacific Group, Mr. Davis
was the President and Chief Operating Officer of
Colony Capital, Inc., an international real
estate-related investment firm. Mr. Davis was
employed with Colony since its formation in 1991.
Prior to 1991, Mr. Davis was a principal of RMB
Realty, Inc. Prior to that time he was employed by
Goldman, Sachs & Co. and Trammell Crow Company. Mr.
Davis is currently a director of Crestline Capital
Corporation and a director of Harvey's Casin*
Resorts.
Kathleen H. Lucier Ms. Lucier is Principal of Stiglich Lucier & Co., a January 28, 2000
(46) strategic visioning firm focused on international
and national banking, finance and retail
enterprises. Ms. Lucier has been with Stiglich
Lucier & Co. since its formation in August 1999. She
previously served as Executive Vice President for
the Southwest Region for Wells Fargo Bank with
responsibility for Arizona and Nevada from November
1996 to November 1998. Prior to that time, she held
various management, sales, marketing and operation
positions at Wells Fargo.
Dennis E. Mitchem Director of Corporate Relations, Northern Arizona January 29, 1996
(68) University since October 1998. Mr. Mitchem has also
served as Executive Director of Habitat for
Humanity, Valley of the Sun, from April 1996 t*
October 1998, 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 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 of August 1, 1994
(60) Mexican 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 CEC Entertainment, Inc. (formerly
ShowBiz Pizza Time, Inc.) and Silver Diner
Development Inc. and was previously a director of On
the Border Cafes, Inc.
</TABLE>
5
<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>
Kenneth B. Roath Chairman, President and Chief Executive Officer of August 1, 1994
(64) Health 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 a director and chairman of the compensation
committee of Arden Realty, Inc. (NYSE), a real
estate investment trust. Mr. Roath is also the past
Chairman and a past member of the executive
committee of the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"). Mr. Roath is an
Ex-Officio member of the Board of Governors of
NAREIT.
Casey J. Sylla Senior Vice President and Chief Investment Officer August 1, 1994
(56) 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.
Christopher H. Volk Director, President, Chief Operating Officer, January 28, 2000
(43) Assistant Secretary and Assistant Treasurer of the
Company. Mr. Volk previously served as Executive
Vice President of the Company from July 28, 1995 to
December 31, 1999, 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.
Shelby Yastrow Mr. Yastrow is an attorney and counsel to the law July 24, 1997
(64) firm of Sonnenschein Nath & Rosenthal in Chicago,
Illinois. He joined McDonald's Corporation in 1978
as Vice President, Chief Counsel of Litigation and
Assistant Secretary. He was appointed Vice
President, General Counsel of McDonald's Corporation
in 1982 and Senior Vice President in 1988, before
being named Executive Vice President in 1995. He
retired from McDonald's Corporation in December
1997. Mr. Yastrow received his law degree from
Northwestern University in 1959.
</TABLE>
Each of the persons named above has been nominated for election to the Board of
Directors of the Company.
ARRANGEMENTS REGARDING THE SELECTION OF DIRECTORS
Mr. Kelvin L. Davis is currently serving on the Board pursuant to the terms
of an Investor's Agreement dated March 13, 1998 (the "Investor's Agreement"),
together with a Stock Purchase Agreement dated February 13, 1998, whereby Colony
SB, LLC, a Delaware limited liability company ("Colony"), an affiliate of Colony
Capital, Inc., acquired 3,792,112 shares of the Company's common stock and
warrants to purchase an additional 1,476,908 shares of the Company's common
stock. As provided in the Investor's Agreement, Colony Investors III, L.P., the
sole managing member of Colony, may designate one nominee for election to the
Board at each annual meeting of shareholders of the Company, so long as Colony
beneficially owns common stock representing at least 50% of its initial
purchase. Pursuant to the Investor's Agreement, Mr. Davis is currently serving
on the Board and is a nominee for election to the Board at the Meeting.
BOARD MEETINGS
The Board held sixteen (16) meetings during the fiscal year ended December
31, 1999. 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 (a) the total number of meetings of the Board during 1999; and (b) the total
number of meetings held by all committees of the Board on which he served during
1999.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The current members of the Audit Committee are Messrs.
Willie R. Barnes, Chairman, Dennis E. Mitchem and Casey J. Sylla. 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
6
<PAGE>
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees, reviews the
Company's corporate compliance procedures and reviews the adequacy of the
Company's internal accounting controls. The Audit Committee held three (3)
meetings in 1999.
EXECUTIVE COMMITTEE. The current members of the Executive Committee are
Messrs. Morton H. Fleischer, Chairman, Kelvin L. Davis and Shelby Yastrow. 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 two (2) meetings in 1999 and took action one (1) time by
unanimous written consent.
COMPENSATION COMMITTEE. The current members of the Compensation Committee
are Messrs. Kenneth B. Roath, Chairman, Kelvin L. Davis and Louis P. Neeb. 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 the executive officers and all incentive awards,
reviews recommendations of the executive officers regarding salaries of the
other officers of the Company and administers the Company's 1995 Stock Option
and Incentive Plan. The Compensation Committee held seven (7) meetings in 1999
and took action one (1) time by unanimous written consent.
NOMINATING AND GOVERNANCE COMMITTEE. The current members of the Nominating
and Governance Committee are Messrs. Shelby Yastrow, Chairman, Willie R. Barnes
and Louis P. Neeb. The Nominating and Governance Committee makes recommendations
to the Board regarding the size of the Board and its makeup in terms of specific
areas of expertise and diversity. The Nominating and Governance Committee also
recommends the nomination of directors to be elected at each annual meeting and
nominates candidates to fill any vacancies on the Board. The Nominating and
Governance Committee will also consider nominees recommended by shareholders.
Recommendations for the Company's 2001 Annual Meeting of Shareholders must be
submitted in writing to Dennis L. Ruben, Executive Vice President, General
Counsel and Secretary of the Company, at 17207 North Perimeter Drive,
Scottsdale, Arizona 85255-5402. Such recommendations must include the name,
address and principal business occupation of the candidate for the last five (5)
years, and must be received at the Company's offices on or before December 2,
2000. The Nominating and Governance Committee held two (2) meetings in 1999.
COMPENSATION OF DIRECTORS
The Company currently pays an annual fee of $30,000 to its Independent
Directors (directors who are not employees of the Company or its affiliates). In
1999, the Independent Directors received 20% of their annual fee in
non-qualified stock options to purchase Shares based upon the Black-Scholes
option pricing model. In 1999, Messrs. Barnes, Davis, Halliday, Mitchem, Neeb,
Roath, Sylla and Yastrow each received options to purchase 3,062 Shares at
$23.375 per Share, the fair market value of the Shares on May 17, 1999, the date
of grant. These options are exercisable when granted and expire ten years after
the grant date.
Directors who are employees of the Company are not paid director's fees.
The Company reimburses all directors for travel expenses incurred in connection
with their activities on behalf of the Company. In 1999, each Independent
Director also received $500 for each committee meeting the director attended,
with the chairman of the respective committee receiving $1,000 for each
committee meeting.
Following the Meeting, the Company intends to compensate its Independent
Directors as follows:
* An annual fee of $24,000, of which the Independent Directors may elect
to receive all or a portion in non-qualified stock options to purchase
Shares based upon the Black-Scholes pricing model that will vest
quarterly during the director's annual term;
* For the Independent Directors serving on a committee, a fee of $1,000
for each committee meeting attended in person or a fee of $500 for
each committee meeting attended by telephone conference;
* An annual grant of 6,000 non-qualified stock options to purchase
Shares with an exercise price equal to the fair market value of the
Shares on the date of grant, which options will vest quarterly during
the director's annual term and will expire ten years after the grant
date; and
* An annual grant of 300 shares of restricted common stock of the
Company that will vest upon completion of the director's annual term.
EXECUTIVE OFFICERS
Set forth below is information about the executive officers of the Company
that are not also directors of the Company, including age, principal occupation
during the last five years and the date each became an executive officer of the
Company. Similar information about Mr. Fleischer and Mr. Volk is provided above
under "-Directors."
<TABLE>
<CAPTION>
Executive Officer
of the Company
Name/Age Present Executive Office Since
- -------- ------------------------ -----
<S> <C> <C>
John Barravecchia Executive Vice President, Chief Financial Officer, June 1, 1994
(44) 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 in March 1984, Mr.
Barravecchia was associated with the international
public accounting firm of Arthur Andersen LLP.
Dennis L. Ruben Executive Vice President, General Counsel and June 1, 1994
(47) Secretary. Mr. 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 LLP.
Stephen G. Schmitz Executive Vice President, Chief Investment Officer May 31, 1995
(45) and Assistant Secretary. Mr. Schmitz served as
Senior Vice President--Corporate Finance from June
1, 1994 to January 28, 1997. Mr. Schmitz previously
served in various other positions as an officer of
FFCA I from 1986 to June 1, 1994.
Catherine F. Long Senior Vice President--Finance, Principal Accounting June 1, 1994
(43) 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>
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by, or
paid to (1) the Company's Chief Executive Officer ("CEO") during 1999, 1998 and
1997, and (2) the Company's other four most highly compensated executive
officers whose total annual compensation exceeded $100,000 during 1999, 1998 and
1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Awards
----------------------------------- ----------------------
Securities
Other Annual Restricted Underlying
Bonus Compensation Stock Options All Other
Name and Principal Positions Year Salary ($) ($)(1) ($) ($)(2) (#) Compensation(3)
- ---------------------------- ---- ---------- ------ ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Morton H. Fleischer 1999 $500,000 $500,000 -0- -0- -0- -0-
Director, Chairman of 1998 $450,000 $450,000 -0- $138,075 -0- -0-
the Board and Chief Executive 1997 $450,000 -0- -0- -0- 200,000 -0-
Officer
Christopher H. Volk 1999 $300,000 $300,000 -0- -0- -0- $10,430
Director, President, 1998 $250,000 $250,000 -0- $124,958 -0- $10,000
Chief Operating Officer, 1997 $250,000 $165,000 -0- -0- 157,000 $ 9,500
Assistant Secretary and
Assistant Treasurer
John R. Barravecchia 1999 $225,000 $250,000 -0- -0- -0- $10,450
Executive Vice President, 1998 $200,000 $200,000 -0- $99,966 -0- $10,000
Chief Financial Officer, 1997 $200,000 $138,000 -0- -0- 82,000 $ 9,500
Treasurer and Assistant
Secretary
Dennis L. Ruben 1999 $225,000 $260,000 -0- -0- -0- $10,510
Executive Vice President, 1998 $200,000 $250,000 -0- $99,966 -0- $10,000
General Counsel and 1997 $200,000 $154,000 -0- -0- 62,000 $ 9,180
Secretary
Stephen G. Schmitz 1999 $300,000 $300,000 -0- -0- -0- $10,480
Executive Vice President, 1998 $200,000 $300,000 -0- $99,966 -0- $10,000
Chief Investment Officer and 1997 $200,000 $193,000 -0- -0- 92,000 $ 9,375
Assistant Secretary
</TABLE>
- ----------
(1) Bonus includes the amount of cash bonus earned and accrued (a) during the
period from January 1, 1999 to December 31, 1999 and paid in January 2000;
(b) during the period from January 1, 1998 to December 31, 1998 and paid in
January 1999; and (c) during the period from January 1, 1997 to December
31, 1997 and paid in January 1998.
(2) As of December 31, 1999, there were outstanding 37,978 shares of restricted
stock which were valued at $909,098 using the market value of the Company's
Shares at fiscal year end. The closing price of the Company's Shares on
December 31, 1999 was $23 15/16. The restricted stock was granted on
January 30, 1998 and January 4, 1999, and is subject to continued-service
conditions on vesting. The stock granted in 1998 vests in three equal
installments on the third, fourth and fifth anniversaries of the date of
grant and the stock granted in 1999 vests on the first, second and third
anniversaries of the date of grant. Dividends are paid on the restricted
stock at the same rate as is paid on the Company's common stock. The
restricted stock held at December 31, 1999 by the CEO and each of the Named
Executive Officers was granted in 1998, and will first vest on January 30,
2001. Restricted stock holdings for the CEO and each of the Named Executive
Officers as of December 31, 1999 and the fair market value of the
restricted stock on December 31, 1999 is as follows:
9
<PAGE>
RESTRICTED STOCK HOLDINGS
Name Number of Restricted Shares Value on December 31, 1999
---- --------------------------- --------------------------
Morton H. Fleischer 5,000 $119,687
Christopher H. Volk 4,525 $108,317
John R. Barravecchia 3,620 $ 86,654
Dennis L. Ruben 3,620 $ 86,654
Stephen G. Schmitz 3,620 $ 86,654
The values are based upon the closing price of the Company's common stock
at fiscal year end and do not reflect diminution of value attributable to the
restrictions on such stock.
(3) Amounts included for Messrs. Volk, Barravecchia, Ruben and Schmitz for 1997
and 1998 in All Other Compensation represent matching Company contribution
amounts received under the Company's 401(k) Plan. Amounts included for 1999
include (a) $10,000 each, representing matching Company contribution
amounts received under the Company's 401(k) Plan, and (b) split dollar life
insurance premiums paid by the Company corresponding to the term portion of
the insurance in the following amounts: Mr. Volk $430, Mr. Barravecchia
$450, Mr. Ruben $510 and Mr. Schmitz $480.
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.
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 (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. A participant can elect to contribute up to 15% of annual compensation
on a pre-tax basis with a maximum pre-tax contribution of $10,500 for 2000. The
Company provides a matching contribution, in the Company's common stock, equal
to 100% of each participant's pre-tax contribution, disregarding any
contribution in excess of 6% of annual compensation.
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 qualified joint and
survivor annuity ("QJSA") form of payment on the first day of the month
following the participant's retirement on or after his or her 65th birthday. A
participant, with spousal consent, may elect to receive a cash payment in lieu
of the QJSA. In general, if employment ceases before the participant 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. If the participant dies
before his or her retirement benefits commence, the 401(k) Plan provides a
qualified pre-retirement survivor annuity to the participant's spouse, or a
single-sum payment to the participant's beneficiary (if the participant has not
been continuously married throughout the one-year period ending on the date of
his or her death).
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 equaled 7-1/2%
of the Shares outstanding as of March 14, 1995, for grant under the Stock Option
Plan. On May 12, 1999, the shareholders approved the increase of this amount to
4,518,804 Shares. This amount may not be increased without the approval of the
shareholders. The maximum number of Shares with respect to which awards may be
10
<PAGE>
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 Compensation Committee shall
construe and interpret the Stock Option Plan and, subject to the express
provisions of the Stock Option 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.
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.
Options vest over a three or five 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, in accordance with the current terms of the Stock Option Plan,
non-employee directors of the Company automatically received non-qualified stock
options in 1999 in an amount equal to 20% of the dollar amount of the directors'
annual retainer fee. The exercise price of the options equaled the fair market
value of the Company's common stock on the date of grant. The amount of options
received is 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. For purposes of the Stock Option Plan, the
fair market value of a Share as of a given date is the average of the daily
market price for the ten consecutive trading days immediately preceding the
valuation date. 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
11
<PAGE>
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.
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.
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements (the "Employment Agreements") with
the CEO and each of the Named Executive Officers of the Company (collectively,
the "Executives"). The Employment Agreements were required by Washington Mutual
Bank, FA ("Washington Mutual") in connection with a master loan purchase
agreement between FFCA Acquisition Corporation, a wholly-owned subsidiary of the
Company, and Washington Mutual, which agreement was subsequently assigned by
FFCA Acquisition Corporation to FFCA Funding Corporation, an affiliate of the
Company. Under the loan purchase agreement, Washington Mutual will purchase
loans from the Company and its affiliates during a three year term ending
December 31, 2002, unless extended by mutual agreement. The Company has entered
into another agreement under which the loans purchased by Washington Mutual will
be serviced by the Company.
Each Employment Agreement is effective as of January 1, 2000, and
terminates on December 31, 2002, unless the Executive's employment is terminated
under the terms of the Employment Agreement prior to December 31, 2002. The
provisions of the Employment Agreements are substantially similar except for the
base salary of each Executive and the payments to Mr. Fleischer discussed below.
The title and base salary for each Executive as of January 1, 2000 are:
Name Title Base Salary
- ---- ----- -----------
Morton H. Fleischer Chairman of the Board and
Chief Executive Officer $525,000
Christopher H. Volk President, Chief Operating Officer,
Assistant Secretary $350,000
John Barravecchia Executive Vice President, Chief
Financial Officer, $250,000
Dennis L. Ruben Executive Vice President, General
Counsel and Secretary $275,000
Stephen G. Schmitz Executive Vice President,
Chief Investment Officer and
Assistant Secretary $315,000
SALARY AND BONUS. On January 1 of each year during the term of the
Employment Agreements, the base salary of each Executive will be increased by
the greater of (1) five percent, (2) the average percentage salary increase
awarded to all employees of the Company who are not senior executives of the
Company, or (3) an amount determined by the Compensation Committee of the
Company.
In addition to base salary, the Employment Agreements require the Company
to pay each Executive an annual cash bonus. The annual cash bonus will be
calculated and paid to each Executive in substantially the same way as the
bonuses for fiscal 1999 were calculated and paid. See "REPORT OF THE
COMPENSATION COMMITTEE ON FISCAL 1999 EXECUTIVE COMPENSATION."
ADDITIONAL BENEFITS. Each Executive is:
* eligible to participate in any compensation plan program, employee
pension, welfare benefit programs, plans and practices of the Company
comparable to those maintained by the Company for other senior
executives;
* eligible to receive grants of stock options and restricted stock
awards as determined in the discretion of the Compensation Committee;
* entitled to paid vacation in the same number of business days as he
was entitled to prior to the execution of the Employment Agreements;
and
* entitled to reimbursement by the Company of reasonable expenses in
carrying out his duties and responsibilities.
12
<PAGE>
TERMINATIONS. Either the Company or the Executive may terminate the
Executive's employment under the Employment Agreement. The amount paid to the
Executive upon termination depends upon whether the termination is by the
Company with or without "Cause" (as defined below) or by the Executive with or
without "Good Reason" (as defined below). Cause includes:
* the willful failure of an Executive to perform a substantial portion
of his duties;
* gross misconduct by the Executive, including fraud or embezzlement; or
* the Executive's conviction of, or plea of guilty or nolo contendere
to, a felony.
"Good Reason" includes:
* a material diminution or adverse change in the Executive's duties,
titles or responsibilities with the Company after a Change-in-Control
(as defined below);
* a reduction in the Executive's aggregate annual cash compensation
under the Employment Agreement then in effect; or
* the relocation of the Executive's office more than 35 miles from the
Company's current headquarters.
If the Executive's employment is terminated by the Company without Cause,
or if the Executive terminates his employment for Good Reason, the Executive is
entitled to a cash lump-sum payment equal to three times the sum of (1) the
Executive's base salary, plus (2) the actual bonus received by the Executive for
the fiscal year prior to the termination (the "Actual Bonus"). In this case, the
Executive is also entitled to receive standard employee benefits until December
31, 2002, immediate vesting of all outstanding stock options, stock appreciation
rights and restricted stock, and some other benefits.
If the Executive's employment is terminated by the Company for Cause, or if
the Executive terminates his employment without Good Reason, the Executive is
entitled to receive payments for unused vacation time and to be reimbursed by
the Company for expenses payable prior to the date of termination.
TERMINATIONS WHEN A CHANGE-IN-CONTROL OCCURS. A Change-in-Control is
generally defined to include (1) transactions where a person acquires at least
25% of the voting power of the Company's then outstanding securities, (2) some
mergers and business combinations, (3) the liquidation or dissolution of the
Company, and (4) a change in a majority of the Board of Directors of the
Company. In the event of a Change-in-Control, an Executive may voluntarily
terminate his employment for any reason or no reason at all during the
thirty-day period following the first annual anniversary of a Change-in-Control.
In this case, the Executive will receive a cash severance payment equal to two
times his base salary plus his Actual Bonus. Mr. Fleischer's Employment
Agreement contains these same terms except that in this case he is entitled to
receive a cash lump-sum equal to three (instead of two) times the sum of (a) his
base salary, plus (b) Actual Bonus.
AGREEMENT NOT TO COMPETE. During the term of the Executive's employment
under the Employment Agreement and for the first to occur of (1) one year from
the date of termination of employment of the Executive, or (2) December 31,
2002, the Executives have agreed that they will not directly or indirectly
engage or have any financial interest (other than an ownership interest of less
than 5% in a Company whose shares are publicly traded) in any business which is
competitive with the existing business of the Company or its subsidiaries and
they will not directly or indirectly solicit or offer employment to any person
who is employed by the Company at any time during the 12 months immediately
preceding such termination. For purposes of the Employment Agreements, a
business is competitive with the Company if a significant portion of its
business is derived from providing financing to operators in the chain
restaurant, convenience store or automotive service and parts industries
anywhere in the United States.
EXCISE TAXES. Termination payments made under the Employment Agreements, if
any, will be increased to take into account excise taxes imposed by Section 4999
of the Internal Revenue Code of 1986, or any similar tax by reason of being
"contingent on a change in ownership or control" of the Company. These amounts
may be material to the Company.
OPTION GRANTS TABLE
Neither the CEO nor any of the Named Executive Officers were granted stock
options under the Stock Option Plan during the fiscal year ended December 31,
1999.
13
<PAGE>
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, 1999 by the CEO and each of the Named
Executive Officers and the 1999 fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options At Fy-end (#) At Fy-end
---------------------- --------------------
Shares Acquired Value Realized Exercisable/ Exercisable/
Name On Exercise (#) ($) Unexercisable Unexercisable ($)(1)
---- --------------- -------------- ------------- --------------------
<S> <C> <C> <C> <C>
Morton H. Fleischer 0 0 333,333/66,667 $412,500/$-0-
Christopher H. Volk 0 0 267,541/52,334 $651,508/$-0-
John R. Barravecchia 0 0 222,666/27,334 $674,250/$-0-
Dennis L. Ruben 0 0 179,333/20,667 $612,375/$-0-
Stephen G. Schmitz 0 0 219,333/30,667 $653,625/$-0-
</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,
1999 was $23 15/16.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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 New
York Stock Exchange ("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, 1999, the Company's officers, directors and 10% Shareholders, if
any, have complied with the Section 16(a) filing requirements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Kenneth B.
Roath, Chairman, Kelvin L. Davis and Louis P. Neeb. No member of the
Compensation Committee was previously an officer or an employee of the Company
or any of its subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE
ON FISCAL 1999 EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Compensation Committee") 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 executive officers.
Pursuant to the rules regarding disclosure of Company policies concerning
executive compensation, this report is submitted by Messrs. Roath, Davis and
Neeb in their capacity as members of the 1999 Compensation Committee and
addresses the Company's compensation policies for 1999 as they affected Mr.
Fleischer (the Company's CEO) and the Company's other executive officers,
including the Named Executive Officers.
14
<PAGE>
OVERVIEW OF EXECUTIVE COMPENSATION POLICY AND PHILOSOPHY
The Company's compensation philosophy for executive officers is designed to
support the Company's key compensation goals which are to:
* Create value for our shareholders;
* Align compensation with the Company's strategies;
* Reward the achievement of strategies and financial goals using
incentive compensation; and
* Provide a competitive program that will attract and retain top talent.
To achieve these goals, the Committee believes that a significant portion
of executive compensation should be earned through short-term and long-term
incentives. Currently, the executive officers' total compensation program is
weighted about 30% on base salary and 70% on incentives.
The Committee believes executive officer total compensation levels should
be positioned between the 50th and 75th percentiles of larger high-performing
REIT, real estate, and financial services organizations. With a significant
weighting on incentives, the executive compensation program should allow for
compensation in the upper quartile for superior financial and strategic results
and below-average pay for below-average financial and strategic results.
Specific compensation for individual officers will vary from these levels as the
result of other factors considered by the Committee.
The Committee has retained the services of independent compensation
consultants to assist in the evaluation of the key elements of the Company's
compensation program. The compensation consultants provide advice to the
Committee with respect to competitive practices and the reasonableness of
compensation paid to the executives of the Company. The Committee reviews
surveys and other data supplied by the consultants in the course of their
deliberations relating to compensation proposals. The Committee believes that
the Company's most direct competitors for executive talent are not necessarily
all of the companies that would be included in the NAREIT Equity Index in the
Stock Price Performance chart that compares shareholder returns. Some, but not
all, of the companies included in the Stock Price Performance chart are included
in the compensation surveys. The Committee reviews the available competitive
data, evaluates the particular needs of the Company, and evaluates each
executive's performance to arrive at a decision regarding compensation programs.
The key elements of the Company's executive compensation program consist of
base salary, annual bonus, stock options and restricted stock awards. The
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 Committee in determining executive officer compensation levels for all of
these components takes into account both qualitative and quantitative factors.
These factors are not formally weighted. Among the factors considered by the
Committee are the recommendations of the CEO with respect to the compensation of
the Company's other key executive officers. However, the Committee makes the
final compensation decisions concerning such officers.
In making compensation decisions, the Committee considers competitive
compensation practices of larger high-performing REIT, real estate, and
financial services organizations. The Committee also reviews the Company's
financial performance as compared to the Company's business plan and the
performance of the REIT industry, particularly the Net Lease REIT business
segment and other segments that have like business structures. The Committee
does not formally weight these factors in its decision making process. For 1999,
the Committee noted the Company's significant strategic and financial
accomplishments. The Company positioned itself to attain a strategic advantage
by:
* Executing a portfolio strategy that emphasizes higher margins by
focusing on mortgage origination, selling and servicing rather than
mortgage securitizations and sale-leasebacks;
* Structuring a key alliance with Washington Mutual to provide a large
and more stable funding source that decreases dependence on volatile
capital markets and lowers loan warehousing risks;
* Securitizations of loans that provided the Company income growth
opportunities;
15
<PAGE>
* Portfolio diversification into convenience stores and automotive parts
and services to limit risk;
* Increasing investment activity over 1998 by almost 50% to
approximately $1.35 billion; and
* Maintaining high underwriting standards.
Funds from operations ("FFO"), which generally includes net income, plus
certain non-cash items (primarily depreciation and amortization) and excludes
any gain on the sale of property or the securitization of mortgage loans, grew
11.5% over 1998 which exceeded the pre-established target performance goal and
was the highest growth in the Net Lease REIT sector and for REITs of
like-business structure. Also, 1999 FFO growth was at about the 75th percentile
for all equity REITs in the NAREIT Equity Index. In addition, 1999 total return
to shareholders provided about an 8.5% return, outperforming all companies in
the Net Lease REIT sector and placing it at about the 80th percentile for all
equity REITs.
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 unless certain
performance, disclosure, and shareholder approval requirements are met, is
likely to be applicable to the Company in the near future. The Committee will
reconsider the implications of Section 162(m) if and when it appears that the
section may become applicable. Stock option grants under the 1995 Stock Option
and Incentive Plan are intended to qualify as "performance-based" compensation
not subject to the Section 162(m) deduction limitation. The current plans
qualify a significant portion of the executive officers' compensation for
deductibility under applicable tax laws. The Committee's intention is to
continually evaluate alternatives to ensure executive compensation is
reasonable, performance-based, and consistent with the Company's overall
compensation objectives. The Committee reserves the right to design programs
that recognize a full range of performance criteria important to the Company's
success, even where compensation payable under such programs may not be
deductible.
SALARIES
In the past, salaries for executive officers have been determined by
subjectively evaluating the responsibilities of the position held and the
experience and performance of the individual and comparing base salaries for
comparable positions in the real estate, REIT and financial services industries.
Beginning in January 2000, salaries will be determined according to the
employment agreements, effective as of January 1, 2000, which are described
under the section entitled "EXECUTIVE COMPENSATION - Employment and
Change-in-Control Arrangements" above. According to the three-year employment
agreements, on January 1 of each year base salaries will be increased by not
less than 5%. The Committee may increase salaries by more than 5% if the average
salary increase awarded to all Company employees exceeds 5% or the Committee
determines a higher increase is warranted for one or more of the executive
officers. As of January 1, 2000, the Committee increased the executive officer
group's base salaries an average of 10% over 1999 salary levels. Individual
salary adjustments varied based on the Committee's assessment of individual
performance for 1999, review of competitive compensation survey data for
comparable positions provided by outside consultants, and additional roles and
responsibilities performed by the executives.
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 FFO targets and
other objectives of the Company.
On an annual basis the Compensation Committee and the Board set targeted
FFO per Share levels ("Targeted FFO") which funds a target bonus pool. To the
extent the Targeted FFO is attained, the pool will be sufficient to pay the
executive officers, as well as other key personnel, their target bonuses.
Executive officers receive 50% of their annual base salary if Targeted FFO is
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achieved. To the extent the Targeted FFO is not achieved, then the target bonus
pool is reduced accordingly. The bonus pool begins to be funded at the point FFO
per Share reaches 95% of Targeted FFO. This minimum level is designed to assure
a threshold return to the Company shareholders before a bonus pool is funded. If
the minimum 95% of Targeted FFO is not achieved, no bonus pool is funded. There
is no cap on the size of the pool and therefore bonuses in excess of the target
may be earned if FFO exceeds the target level. The Board believes that a fixed
compensation formula may not adequately reflect all aspects of the performance
of the Company or of an individual officer. Therefore, the Committee reserves a
high degree of flexibility 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. Individual awards
are determined partly on the basis of FFO performance against the preset goal
and partly on the Committee's and the CEO's subjective assessment of individual
performance contributions. The CEO does not participate in or otherwise
influence deliberations of the Committee relating to his own incentive award.
There is no predetermined weighting between FFO financial performance and
individual performance to determine awards. The Committee subjectively assesses
FFO performance as compared to other REITs, personal contributions,
unit/department performance, acquisitions, achievement of special strategic
objectives, leadership, teamwork, and operational successes. The Committee also
considers competitive compensation levels for comparable positions within the
industry, including both REITs and financial services companies. The Committee
may determine to pay annual bonus awards in cash, restricted stock, or a
combination of the two.
The 1999 FFO actual results of 11.5% growth exceeded the target and was the
highest FFO growth performance within the Company's REIT market segment. The
Company's FFO growth was also at the 75th percentile of all equity REITs. During
1999, the Company originated $1.35 billion in new investments, an increase of
about 50% over the Company's 1998 level. In addition, the Company received a
positive effect upon its financial condition as a result of the closing of its
securitization transactions in 1999. On the basis of such performance
excellence, bonus awards to the executive officers for 1999 performance ranged
between 100% and 116% of base salary and were paid in cash.
The employment agreements for Messrs. Fleischer, Volk, Barravecchia, Ruben
and Schmitz require the Company to determine future annual bonuses in a manner
that would not be less favorable than, and substantially similar to, the methods
and timing used to calculate and pay the bonuses for fiscal year 1999.
LONG-TERM INCENTIVE COMPENSATION AWARDS
The 1995 Stock Option and Incentive Plan (the "Stock Option Plan") provides
for grants of nonqualified stock options, incentive stock options, restricted
stock, and performance awards. Grants under the Stock Option Plan are based on a
number of factors evaluated by the Committee including:
* Company performance;
* A compensation philosophy that prefers to leverage compensation
through incentives;
* The executive officer's position in the Company;
* Individual performance and responsibilities;
* Competitive long-term incentive practices for executives in similar
positions within the REIT, real estate and financial services
industries;
* Total compensation levels of comparable executives at other companies
within the REIT, real estate, and financial services industries; and
* The number of outstanding and previously granted awards to an
individual.
In addition, the size, grant frequency, and type of long-term incentives
may be made on the basis of tax consequences, accounting impact, and the number
of shares available for issuance. None of these factors are formally weighted by
the Committee.
Restricted stock grants are designed to increase senior management's stock
ownership in the Company and to operate as an executive retention mechanism for
the Company's key members of management. The grants permit employees to purchase
a specified number of restricted shares of the Company's common stock at $.01
per share. Although transfer of these shares is restricted until the shares
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vest, the restricted shares receive dividends in the same amount and manner as
the Company's Shares of common stock. The Committee grants stock options to
executive officers upon the initial recommendation of senior management. The
purposes of the grants are to motivate executives to improve long-term stock
price and dividend performance and encourage long-term dedication to the
Company. The Committee did not grant stock options or restricted stock to the
Company's executive officers in 1999 because the total compensation program was
under review by the Committee. The Committee expects to make additional grants
in 2000.
CEO COMPENSATION AND EVALUATION
The compensation for the CEO for 1999 was determined on the same general
basis as discussed above for the executive officers. The CEO is evaluated on the
basis of the Company's financial and non-financial achievements. These
unweighted performance measures include FFO performance against a
pre-established plan, total return to shareholders, portfolio stability and
diversification, financing strategies, new investment activity, and underwriting
standards. As stated earlier in the Overview of Executive Compensation Policy
and Philosophy section, the Company exceeded its 1999 FFO targets, significantly
outperformed the Net Lease REIT sector and the equity REIT market in FFO growth
and total return to shareholders, and successfully executed its critical
financing and portfolio diversification goals. Mr. Fleischer's base salary for
1999 approximates the 60th percentile of competitive practices, and his total
compensation approximates the 50th percentile of competitive practices. In
accordance with his Employment Agreement, Mr. Fleischer received a 5% salary
increase on January 1, 2000. Mr. Fleischer is eligible for a salary increase of
not less than 5% on each subsequent January 1 during the Employment Agreement
term. The Committee may increase Mr. Fleischer's salary by more than 5% if the
average salary increase awarded to all Company employees exceeds 5% or the
Committee determines a higher increase is warranted based on performance judged
by quantitative factors and qualitative factors such as the Company's FFO
performance, total return to shareholders, changes in competitive compensation
practices, compensation philosophy, and implementation of the strategic business
plan.
Mr. Fleischer received a discretionary cash bonus for 1999 of $500,000
which represents 100% of his 1999 base salary. This award is consistent with the
Company's significant performance accomplishments in 1999 and its compensation
philosophy to provide premium pay for superior financial and strategic results.
The Committee placed a heavy weighting on the FFO growth achievements against
the pre-established targets, although no specific weighting was designated. The
Committee also subjectively considered the significant increase in new
investments (up almost 50%), the completion of the strategic partnership with
Washington Mutual and two securitizations used to stabilize financing, and the
Company's redirection toward mortgage origination, selling and servicing rather
than mortgage securitizations and sale-leasebacks. The Committee also considered
as a qualitative factor the CEO's ability to develop teamwork among senior
executives of the Company. Mr. Fleischer's Employment Agreement requires the
Company to determine future annual bonuses in a manner that would not be less
favorable than and substantially similar to the methods and timing used to
calculate and pay the bonuses for fiscal year 1999.
The Committee did not award Mr. Fleischer any stock options or restricted
stock grants during 1999 because the program was under review by the Committee.
The Committee expects to make additional grants in 2000. Mr. Fleischer does not
participate in the Company's 401(k) plan and therefore does not receive matching
contributions under the plan.
Compensation Committee:
Kenneth B. Roath, Chairman
Kelvin L. Davis
Louis P. Neeb
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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 Russell 2000 Index and the NAREIT Equity Index. The
Company has substituted the Russell 2000 Index for the S&P 500 Index on the
graph used in prior years because the Company believes the companies included in
the Russell 2000 Index are more similar to the Company in size, nature of
business and operations than those included in the S&P 500 Index. In compliance
with the rules of the SEC, the Company has also included the S&P 500 Index on
this year's graph. The graph assumes $100 invested on December 31, 1994 in the
Company's Shares and each of the indices, including the reinvestment of
dividends. The stock price performance data shown on the graph below are not
necessarily indicative of future price performance.
Cumulative Total Return
----------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
100.00 138.98 183.53 192.50 183.82 199.94
100.00 137.58 169.17 225.61 290.09 351.13
100.00 115.27 155.92 187.51 154.69 147.54
100.00 128.40 149.59 183.14 181.94 183.30
Measurement Period S&P 500 NAREIT Equity Russell 2000
(Fiscal Year Covered) FFCA Index Index Index
- --------------------- ---- ----- ----- -----
12/31/94 100.00 100.00 100.00 100.00
12/31/95 138.98 137.58 115.27 128.40
12/31/96 183.53 169.17 155.92 149.59
12/31/97 192.50 225.61 187.51 183.14
12/31/98 183.82 290.09 154.69 181.94
12/31/99 199.94 351.13 147.54 183.30
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, OR THE SECURITIES EXCHANGE
ACT OF 1934, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, BY REFERENCE, 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.
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PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S
1995 STOCK OPTION AND INCENTIVE PLAN
At a meeting held on January 28, 2000, the Board unanimously approved a
resolution to amend the Company's 1995 Stock Option and Incentive Plan (the
"Stock Option Plan"), to extend the term of the plan to June 1, 2004. The Stock
Option Plan is currently set to expire on March 15, 2000. The amendment is being
recommended because the Board believes continued use of the Stock Option Plan is
needed to permit the Company to continue providing the Company's directors,
executive officers, key employees and other persons associated with the Company
with adequate incentives and performance-based compensation. The approval of the
amendment to the Stock Option Plan requires the affirmative vote of a majority
of the votes cast at the Meeting.
The following paragraphs summarize the principal features of the Stock
Option Plan. The summary is subject, in all respects, to the terms of the Stock
Option Plan. The Company will provide promptly, upon request and without charge,
a copy of the full text of the Stock Option Plan to each person to whom this
proxy statement is delivered. Requests should be directed to Dennis L. Ruben,
Executive Vice President, General Counsel and Secretary of the Company at 17207
North Perimeter Drive, Scottsdale, Arizona 85255-5402.
AWARDS UNDER THE 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.
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.
OPTION PRICE. The purchase price of each Share issued pursuant to the
exercise of an incentive stock option granted under the Stock Option Plan may
not be less than 100% of the fair market value per Share on the date of the
grant, as calculated pursuant to the Stock Option Plan. For purposes of the
Stock Option Plan, the fair market value of a Share on the date of grant is the
average of the daily market price for the ten consecutive trading days
immediately preceding the grant date. The purchase price of each Share issued
pursuant to the exercise of a non-qualified stock option granted under the Stock
Option Plan shall be determined by the Compensation Committee.
TRANSFERABILITY. Options granted under the Stock Option Plan may not be
transferred by the optionee except by will or by the laws of descent and
distribution, and any option granted under the Stock Option Plan shall be
exercisable, during the lifetime of the holder, only by such holder.
ADJUSTMENTS; MERGERS AND CONSOLIDATIONS. The Stock Option Plan provides
that in the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, combination of Shares, exchange of Shares, or other like
change in capital structure of the company, an adjustment will be made to each
outstanding option or performance awards granted under the Stock Option Plan
such that each such option shall thereafter be exercisable for such securities,
cash and/or other property as would have been received in respect of the Shares
subject to such option had the option been exercised in full immediately prior
to such change.
VESTING. The period during which the right to exercise an option in whole
or in part vests shall be set by the Compensation Committee. Generally, no
portion of an option which is unexercisable at termination of employment shall
thereafter become exercisable. While an option is generally only exercisable by
the optionee while he or she is an employee, the Compensation Committee may
allow exercise subsequent to an optionee's termination of employment, subject to
certain additional limitations.
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ACCELERATION OF VESTING PROVISIONS. The Stock Option Plan authorizes the
Compensation Committee to accelerate the vesting of an outstanding option upon
written notice to the optionholder. An acceleration of the vesting period in
accordance with such authority would not affect the expiration date of the
option.
REDUCTION OF VESTING PERIOD. The Stock Option Plan provides that
outstanding options or performance awards will become immediately exercisable in
the event of a change of control of the Company. For purposes of the Stock
Option Plan, unless otherwise defined in any applicable agreement, a change in
control would generally be deemed to have occurred when (a) any person becomes
the beneficial owner of 80% or more of the total number of Shares then
outstanding; (b) the Board or shareholders approve the sale of all or
substantially all of the assets of the Company or any merger, consolidation,
issuance of securities, the result of which would be the occurrence of an event
described in clause (a) above; or (c) as a result of, or in connection with, any
cash tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing.
CANCELLATION AND REGRANT OF OPTIONS. The Stock Option Plan allows the
Compensation Committee to modify, extend or renew outstanding options granted
under the Stock Option Plan, or accept the surrender of options outstanding
under the Stock Option Plan (to the extent not theretofore exercised), and
authorize the granting of a like number of new options under the Stock Option
Plan in substitution of the original options, regardless of whether the vesting
schedules or exercise prices are the same or different from the original options
being surrendered. The grant of new options would be subject to the terms and
conditions of and within the limitations of the Stock Option Plan, and any
modification that would alter or impair any rights or obligations of the
optionholder under an option would be prohibited in the absence of such holder's
consent.
AMENDMENTS. The Board may from time to time, insofar as permitted by law,
revise or amend the Stock Option Plan in any way, except that no amendments may
be made without the approval of the shareholders if such amendments (1) increase
the maximum number of Shares which may be issued under the Stock Option Plan
(except as otherwise provided therein), (2) change the manner of determining the
exercise price, (3) extend the maximum period during which options may be
granted or exercised, (4) materially modify the eligibility requirements for
participation in the Stock Option Plan, or (5) materially increase the benefits
accruing to participants under the Stock Option Plan.
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, the Stock Option Plan provides that 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 will be designed to comply
with the provisions of the Code and will be 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 stock 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 option shall be treated as
non-qualified options to the extent required by the Code.
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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.
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.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax laws, neither the grant nor the exercise
of an option that qualifies for treatment as an incentive stock option will
result in the recognition of income by the optionee. To qualify for the
foregoing treatment, the optionee must hold shares acquired through the exercise
of an incentive stock option for at least two years from the date of the grant
of the option and at least one year from the date of its exercise. If an
optionee satisfies the holding period requirements, the sale of the shares
acquired through the exercise of the incentive stock option will result in
long-term capital gain (or loss) to the optionee. If an optionee does not
satisfy the holding period requirements, the optionee will recognize, at the
time of the disposition of the shares, ordinary income equal to the amount by
which the lesser of (1) the fair market value of the shares on the date of the
exercise and (2) the fair market value of the shares on the date of disposition
exceeds the exercise price of the incentive stock option. Any gain realized in
excess of such ordinary income will be either long-term or short-term capital
gain depending on the optionee's holding period for the shares.
As a general matter, no deduction is permitted to the optionor as a result
of the grant or exercise of an incentive option. However, in the event an
optionee recognizes ordinary income for federal tax purposes in connection with
the disposition of shares acquired through exercise of an incentive stock option
under the circumstances discussed above, the Company will generally be entitled
to a deduction for federal income tax purposes equal to the amount of ordinary
income recognized by the optionee.
A grantee of a non-qualified stock option will not recognize taxable income
and the Company will not receive a deduction upon the grant of such option. Upon
an optionee's exercise of a non-qualified stock option: (1) the optionee will
receive ordinary income in an amount equal to the difference between the fair
market value on the exercise date and the exercise price of the shares; and (2)
if certain conditions are satisfied, the Company will be entitled to a tax
deduction in an amount equal to the amount of income realized by the optionee.
Following exercise, the optionee will realize gain or loss at disposition in an
amount equal to the difference between the disposition price and the basis of
the shares.
The federal tax law is subject to changes in the Code and the regulations
promulgated by the Internal Revenue Service, and in court and administrative
interpretation.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2
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PROPOSAL NO. 3
CHANGE OF THE COMPANY'S STATE
OF INCORPORATION FROM DELAWARE TO MARYLAND
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to re-incorporate (the "Re-Incorporation") the
Company by changing the state of incorporation of the Company from Delaware to
Maryland. The Re-Incorporation will be accomplished by merging (the "Merger")
the Company with and into FFCA Maryland Corp. (the "New Company"), a newly
organized Maryland corporation. The New Company currently has no operations and
was organized for the sole purpose of facilitating the Re-Incorporation. In the
Merger, each outstanding Share of the Company (the "Company's Common Stock")
will be converted into one share of common stock of the New Company (the "New
Company's Common Stock"). The approval of the Re-Incorporation requires the
affirmative vote of a majority of the Company's outstanding Shares. The
following describes some of the benefits, effects and consequences of the
Re-Incorporation and the Merger.
WHAT ARE THE BENEFITS OF THE RE-INCORPORATION?
The purpose of the Re-Incorporation is to change the state of incorporation
of the Company from Delaware to Maryland. The Company's state of incorporation
is being changed to Maryland because Maryland corporations are not subject to
annual franchise or similar taxes imposed by the state of Delaware on
corporations. As a result of the Re-Incorporation, the New Company will save
approximately $150,000 annually, which is the current amount of the annual
Delaware franchise tax that the Company pays.
Some additional benefits of the Re-Incorporation are:
* the New Company will be governed by the Maryland General Corporation
Law (the "MGCL"), which contains provisions conducive to the
operations of a REIT;
* currently, over 100 publicly owned REITs are believed to be organized
under the laws of the state of Maryland and the Board of Directors
believes that this fact has resulted in the development of a more
comprehensive and clearer body of law and practice relating to
Maryland REITs than is available to a REIT that is organized as a
Delaware corporation; and
* Maryland law provides greater protection from liability for directors
and officers of REITs.
WHAT ARE THE DISADVANTAGES OF THE RE-INCORPORATION?
Despite the belief of the Board of Directors that the Re-Incorporation is
in the best interests of the Company and its shareholders, Delaware and Maryland
law differ in some respects. Maryland law may not afford shareholders the same
rights as Delaware law. For a comparison of shareholders' rights and the powers
of management under Maryland and Delaware law, see "--How do the Rights of
Shareholders Compare Before and After the Re-Incorporation?" below.
WILL THE COMPANY'S BUSINESS CHANGE AFTER THE RE-INCORPORATION?
No, the Re-Incorporation will not result in any change in the Company's
name, business, directors, management, fiscal year, assets or liabilities or the
location of its principal executive offices.
Each share of the New Company's Common Stock outstanding after the
Re-Incorporation will entitle the holder thereof to voting rights (except as
provided below), dividend rights and liquidation rights equivalent to the rights
of holders of the Company's Common Stock prior to the Re-Incorporation. Shares
of the Company's Common Stock are currently listed on the New York Stock
Exchange ("NYSE") under the symbol "FFA". Following the Re-Incorporation, shares
of the New Company's Common Stock will be listed on the NYSE under the same
symbol, "FFA". The NYSE has advised the Company that it will consider delivery
of existing certificates representing the Company's Common Stock as constituting
"good delivery" of the New Company's Common Stock in transactions subsequent to
the Re-Incorporation.
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If the Re-Incorporation is approved and the Merger is completed, the
Company will take action as necessary to provide that all rights of participants
in the Company's 1995 Stock Option and Incentive Plan and the 1997 Employee
Stock Purchase Plan (collectively, the "Plans") to receive grants of stock
options and restricted stock, and the right to purchase the Company's Common
Stock, respectively, will become substantially identical rights to receive
grants of stock options and restricted stock with respect to the New Company's
Common Stock, and the right to purchase the New Company's Common Stock,
respectively. Such new rights will be on substantially identical terms and
conditions contained in the Plans. A vote to approve the Re-Incorporation will
also be deemed to be a vote to approve the necessary amendments to the Plans.
WHAT IS THE EFFECT OF THE RE-INCORPORATION?
The Re-Incorporation has been unanimously approved by the Board of
Directors. Following approval by the shareholders, the Re-Incorporation will
become effective (the "Effective Time") when the Articles of Merger are filed
with and accepted for record by the State Department of Assessments and Taxation
(the "SDAT") of Maryland. This filing is anticipated to be made as soon as
possible after the Annual Meeting. At the Effective Time:
* The Company will be merged with and into the New Company, with the New
Company being the surviving corporation in the Merger, and the New
Company will change its name to Franchise Finance Corporation of
America;
* The Company will cease to be governed by Delaware law, and the New
Company, as the Company's successor, will be governed by Maryland law;
* Following the Merger, the New Company will also be governed by the
Articles of Amendment and Restatement (the "New Charter") and Bylaws
(the "New Bylaws") included as Appendices A and B to this proxy
statement;
* All shares of the Company's Common Stock, including the preferred
share purchase rights attached thereto, will be converted into the New
Company's Common Stock, as described in the New Charter, including the
preferred share purchase rights attached thereto;
* Following the Effective Time, all share certificates that represented
shares of the Company's Common Stock immediately prior to the
Effective Time will be deemed to represent a like number of shares of
the New Company's Common Stock without any action on the part of the
holder; and
* All options, rights or warrants to purchase shares of the Company's
Common Stock immediately prior to the Effective Time will thereafter
entitle the holder to purchase a like number of shares of the New
Company's Common Stock on the same terms without any action on the
part of the holder.
The Re-Incorporation is subject to conditions, including approval by a
majority of the shareholders of the Company.
HOW DO THE RIGHTS OF SHAREHOLDERS COMPARE BEFORE AND AFTER THE RE-INCORPORATION?
The Company is organized as a corporation under the laws of the state of
Delaware. If the Re-Incorporation is approved, the Company will be merged with
the New Company, which is a corporation organized under the laws of the state of
Maryland. As a Delaware corporation, the Company is governed by:
* the General Corporation Law of the State of Delaware (the "DGCL");
* the Company's Second Amended and Restated Certificate of Incorporation
(the "Old Certificate"); and
* the Company's Third Amended and Restated Bylaws (the "Old Bylaws").
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As a Maryland corporation, following the Re-Incorporation, the New Company
will be governed by:
* the MGCL;
* the New Charter attached hereto as Appendix A, as further amended from
time to time; and
* the New Bylaws attached hereto as Appendix B, as further amended from
time to time.
The material differences between the applicable Delaware and Maryland law
and among these various documents are summarized below. The comparison of rights
of the shareholders of the Company before and after the Re-Incorporation below
is not complete and is subject to and qualified in its entirety by reference to
the DGCL, the MGCL, the New Charter and the New Bylaws (which are attached
hereto as Appendices A and B), the Company's Second Amended and Restated
Certificate of Incorporation and the Company's Third Amended and Restated
Bylaws, copies of which may be obtained from the Company by writing to Dennis L.
Ruben, Executive Vice President, General Counsel and Secretary of the Company at
Franchise Finance Corporation of America, 17207 N. Perimeter Drive, Scottsdale,
Arizona 85255-5402.
The comparison below describes the DGCL and provisions of the Old
Certificate and Old Bylaws, with respect to the rights discussed, and compares
them to the MGCL and provisions of the New Charter and New Bylaws.
CAPITALIZATION
THE COMPANY. The Company's charter authorizes a total of 210,000,000 shares
of stock consisting of 200,000,000 shares of the Company's Common Stock and
10,000,000 shares of the Company's preferred stock. A certificate of rights,
designations and preferences classifies 300,000 shares of the Company's
preferred stock as Series A Preferred Stock ("Series A Preferred Stock"). As of
March 15, 2000, 56,319,099 Shares of the Company's Common Stock were issued and
outstanding.
THE NEW COMPANY. The New Company's charter is substantially the same with
respect to authorized shares and the rights, designations and preferences of the
Series A Preferred Stock . Immediately following the Effective Time, the New
Company will have outstanding the same number of shares of the New Company's
Common Stock as the number of shares of the Company's Common Stock that is
outstanding immediately prior to the Effective Time.
AMENDMENT OF THE COMPANY'S CHARTER AND THE NEW COMPANY'S CHARTER
THE COMPANY. Under the DGCL, a corporation's certificate of incorporation
may be amended if the amendment is approved by the board of directors, by the
holders of a majority of the outstanding stock entitled to vote on the
amendment, and by the holders of a majority of the outstanding stock of each
class entitled to vote separately on the amendment. Under the DGCL, the holders
of the outstanding shares of a class are entitled to vote as a separate class on
a proposed amendment, whether or not entitled to vote thereon by the certificate
of incorporation, that would increase or decrease the aggregate number of
authorized shares of that class, increase or decrease the par value of the
shares of that class or alter or change the powers, preferences or special
rights of the shares of that class so as to affect them adversely. If any
proposed amendment would adversely affect one or more series by altering or
changing the powers, preferences or special rights of the series, but would not
so affect the entire class, then only the shares of the series so affected by
the amendment is entitled to vote as a separate class on the amendment.
THE NEW COMPANY. Under the MGCL, in order to amend the charter, the board
of directors must adopt a resolution setting forth and declaring advisable the
proposed amendment and direct that the proposed amendment be submitted to
stockholders for their consideration either at an annual or special meeting of
stockholders. The proposed amendment must then be approved by the affirmative
vote of two-thirds of all the stockholder votes entitled to be cast on the
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matter, unless a greater or lesser proportion of votes (but not less than a
majority of all votes entitled to be cast) is specified in the charter. The New
Company's charter provides that an amendment to the New Company's charter shall
generally be valid and effective if authorized by the affirmative vote of the
holders of a majority of the total number of shares entitled to vote thereon,
rather than two-thirds as otherwise provided for under the MGCL. However, if the
amendment alters the voting or liquidation rights of the New Company's Common
Stock or if any shares of the Series A Preferred Stock are outstanding and the
charter amendment adversely changes the powers, preferences or rights of the
Series A Preferred Stock, the amendment must be approved by the affirmative vote
of the holders of two-thirds of the outstanding shares of the affected class,
voting separately as a class.
AMENDMENT OF THE COMPANY'S BYLAWS AND THE NEW COMPANY'S BYLAWS
THE COMPANY. The Old Bylaws may be amended by the Company's Board of
Directors or, if proper notice is given, by the Company's shareholders at an
annual or special meeting of the shareholders.
THE NEW COMPANY. The New Bylaws may only be amended by the New Company's
Board of Directors.
STOCKHOLDER VOTING RIGHTS GENERALLY
THE COMPANY. Under the DGCL, unless otherwise provided in the certificate
of incorporation and subject to certain provisions of the DGCL, each stockholder
is entitled to one vote for each share of capital stock held by him. Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize others
to act for him by proxy, but no proxy may be voted or acted upon after three
years from its date, unless the proxy specifically provides for its
effectiveness for a longer period. The DGCL further provides that in all matters
other than the election of directors, the affirmative vote of the majority of
shares present in person or represented by proxy at a duly held meeting at which
a quorum is present is deemed to be the act of the stockholders, unless the
DGCL, the certificate of incorporation or the bylaws specify a different voting
requirement. Where a separate vote by a class or classes is required, a majority
of the outstanding shares of such class or classes, present in person or
represented by proxy, constitutes a quorum entitled to take action with respect
to that vote on that matter, and the affirmative vote of the majority of shares
of the class or classes present in person or represented by proxy at the meeting
is the act of that class. The holders of the Company's Series A Preferred Stock
are entitled to one vote per share, voting together with the holders of the
Company's Common Stock, on all matters that the holders of the Company's Common
Stock are entitled to vote on.
THE NEW COMPANY. Under the MGCL, unless the charter provides for a greater
or lesser number of votes per share or limits or denies voting rights, each
outstanding share of common stock is entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. A stockholder may vote the
stock the stockholder owns either in person or by proxy. A proxy is not valid
for more than eleven months after its date, unless it provides otherwise. Unless
the MGCL or the charter specifies a different voting requirement, a majority of
all the votes cast at a duly held meeting at which a quorum is present and
entitled to vote on the subject matter is deemed to be the act of the
stockholders. Additionally, unless the MGCL or the charter provides otherwise,
if two or more classes of stock are entitled to vote separately on any matter
for which the MGCL requires approval by two-thirds of all the votes entitled to
be cast, the matter must be approved by two-thirds of all the votes of each
class. The holders of the New Company's Series A Preferred Stock are entitled to
one vote per share, voting together with the holders of the New Company's Common
Stock on all matters that the holders of the New Company's Common Stock are
entitled to vote on. As permitted by the MGCL, the New Company's charter
provides, with some exceptions, that any action which would otherwise require a
greater proportion is valid and effective if authorized by the affirmative vote
of a majority of the holders of shares entitled to vote on the action.
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STOCKHOLDER ACTION BY WRITTEN CONSENT
THE COMPANY. Under the DGCL, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken at any annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action, is
signed by stockholders having at least that number of votes that would have been
necessary to authorize or take the action at a meeting at which all shares
entitled to vote were present and voted.
THE NEW COMPANY. Under the MGCL, any action required or permitted to be
taken at a meeting of stockholders may be taken without a meeting only if all
stockholders entitled to vote on the matter sign a written consent setting forth
the action. Thus, for a publicly-traded Maryland corporation, stockholder action
without a meeting is not practicable.
SPECIAL STOCKHOLDER MEETINGS
THE COMPANY. The Company's bylaws provide that special meetings of
stockholders may be called by the President, at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
owning at least 10% of the entire capital stock of the Company issued and
outstanding, and entitled to vote.
THE NEW COMPANY. The New Company's bylaws provide that special meetings of
stockholders may be called by the Chairman of the Board, by the Chief Executive
Officer, by the President, by a majority of the members of the Board of
Directors or at the request in writing of stockholders entitled to cast at least
10% of all the votes entitled to be cast at the meeting.
INSPECTION RIGHTS
THE COMPANY. Under the DGCL, a stockholder of a Delaware corporation may,
upon written request, inspect the stockholder list or any other corporate books
and records for any purpose reasonably related to such person's interest as a
stockholder.
THE NEW COMPANY. Under the MGCL, one or more persons who have been holders
of record for more than six months of at least 5% of the outstanding stock of
any class of stock of a Maryland corporation are entitled to inspect and copy
the corporation's books of account and stock ledger and receive a written
statement of the corporation's affairs and a verified list of stockholders.
NUMBER AND ELECTION OF DIRECTORS
THE COMPANY. The minimum number of directors of a Delaware corporation is
one. The DGCL provides that the number of directors shall be fixed by, or in the
manner provided in, the bylaws, unless the certificate of incorporation fixes
the number of directors, in which case the number of directors may be changed
only by amendment of the certificate of incorporation. In addition, the DGCL
permits, but does not require, a classified board of directors, with staggered
terms under which one-half or one-third of the directors are elected for terms
of two or three years, respectively. Directors of a Delaware corporation are
elected by a plurality vote of the shares present in person or represented by
proxy at a stockholders meeting and entitled to vote on the election of
directors. The Company's bylaws provide that the Company's board of directors
determines the number of directors comprising the board of directors, but that
there must not be less than two nor more than fifteen directors. The current
number of directors is ten.
THE NEW COMPANY. The minimum number of directors of a Maryland corporation
having three or more stockholders is three. The number of directors is provided
by the charter until changed by the bylaws. The bylaws may both alter the number
of directors set by the charter and authorize a majority of the entire board of
directors to alter, within specified limits, the number of directors set by the
charter or the bylaws, but the action may not affect the tenure of office of any
director.
In addition, the MGCL permits, but does not require, the board of directors
to be classified. If the directors are divided into classes, the term of office
may be provided in the bylaws or in the charter, except that the term of office
of a director may not be longer than five years or, except in the case of an
initial or substitute director, shorter than the period between annual meetings.
The term of office of at least one class must expire each year. Each share of
stock may be voted for as many individuals as there are directors to be elected
and for whose election the share is entitled to be voted. Unless the charter or
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bylaws provide otherwise, a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a director.
The New Company's charter provides that the number of directors shall be
ten, which number may be increased or decreased in accordance with the New
Company's bylaws, provided that the total number of directors may not be less
than the minimum number permitted by the MGCL. Under the New Company's bylaws,
the number of directors is fixed by the New Company's board of directors,
provided that there may not be more than fifteen directors. The directors of the
New Company will be the same as the Company's directors immediately prior to the
Effective Time.
VACANCIES ON THE BOARD OF DIRECTORS
THE COMPANY. As permitted by the DGCL, the Company's bylaws provide that
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. If, at
the time of filling any vacancy or newly created directorship, the directors
then in office constitute less than a majority of the whole board as constituted
immediately prior to the increase, the Delaware Court of Chancery may, upon
application of stockholders holding at least ten percent of the total number of
shares outstanding having the right to vote for such directors, order an
election to be held to fill the vacancy or newly created directorship or to
replace the director chosen by the directors then in office. Under the DGCL,
unless otherwise provided in the certificate of incorporation or bylaws, when
one or more directors resigns from the board, effective at a future date, a
majority of the directors then in office, including those who have resigned,
have the power to fill the vacancy or vacancies, with that vote to take effect
when such resignation or resignations becomes effective, and each director so
chosen shall hold office as provided in the DGCL for the filling of other
vacancies.
THE NEW COMPANY. The New Company's bylaws provide that a vacancy on the
Board of Directors, whether resulting from the increase in the number of
directors or otherwise, may be filled only by the affirmative vote of a majority
of the remaining directors in office, even if the remaining directors do not
constitute a quorum.
STANDARD OF CONDUCT
THE COMPANY. Under Delaware law, the standards of conduct for directors
have developed through written opinions of the Delaware courts in cases decided
by those courts. Generally, directors of Delaware corporations are subject to a
duty of loyalty and a duty of care. The duty of loyalty has been said to require
directors to refrain from self-dealing and the duty of care requires directors
to use that amount of care which ordinarily careful and prudent persons would
use in similar circumstances. Gross negligence has been established as the
standard for recovery of money damages for breach of the duty of care in the
process of decision-making by directors of Delaware corporations.
THE NEW COMPANY. The standards of conduct for directors of Maryland
corporations are governed by Section 2-405.1 of the MGCL, which requires that a
director of a Maryland corporation perform his duties:
* in good faith;
* in a manner he reasonably believes to be in the best interests of the
corporation; and
* with the care an ordinarily prudent person in a like position would
use under similar circumstances.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND OF NEW BUSINESS PROPOSALS
THE COMPANY. The Company's bylaws do not provide for advance notice of
director nominations or new business proposals.
THE NEW COMPANY. The New Company's bylaws provide that with respect to an
annual meeting of stockholders, nominations of persons for election to the New
Company's Board of Directors and the proposal of business to be considered by
stockholders may be made only:
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* pursuant to the New Company's notice of meeting;
* by or at the direction of the Board of Directors; or
* by a stockholder who was a stockholder of record both at the time of
giving notice provided for in the New Company's bylaws and at the time
of the annual meeting, and who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the New
Company's bylaws.
The advance notice provisions contained in the New Company's bylaws
generally require that stockholders deliver nominations and new business
proposals to the New Company's secretary not later than the close of business on
the 90th day nor earlier than the close of business on the 120th day before the
date on which the New Company first mailed its proxy materials for the prior
year's annual meeting of stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE COMPANY. Under the DGCL, directors may be indemnified for liabilities
incurred in connection with specified actions (other than any action brought by
or in the right of the corporation), if they acted in good faith and in a manner
they reasonably believed to be in and not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. The same standard of
conduct is applicable for indemnification in the case of derivative actions
brought by or in the right of the corporation, except that in such cases the
DGCL authorizes indemnification only for expenses (including attorneys, fees)
incurred in connection with the defense or settlement of such cases. Moreover,
the DGCL requires court approval before there can be any such indemnification
where the person seeking indemnification has been found liable to the
corporation in a derivative action. To the extent that a present or former
director or officer has been successful in defense of any action, suit or
proceeding, the DGCL requires indemnification for expenses (including attorneys'
fees). The DGCL states expressly that the indemnification provided by or granted
under the DGCL is not deemed exclusive of any nonstatutory indemnification
rights existing under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
The Company's bylaws provide that every director and officer of the Company
shall be indemnified, to the full extent permitted by applicable law, against
all expenses and liabilities, including counsel fees, reasonably incurred by or
imposed upon him by reason of his being or having been a director, officer or
employee of the Company.
Under the Company's charter, no director shall be liable to the Company or
its stockholders for monetary damages, for breach of fiduciary duty as a
director, except to the extent the exemption or limitation of liability is not
permitted under the DGCL.
THE NEW COMPANY. A Maryland corporation may indemnify its present and former
directors and officers, among others, against (1) judgments, (2) penalties, (3)
fines, (4) settlements, and (5) reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities.
The MGCL does not permit a corporation to indemnify its present and former
directors, officers, agents or employees if it is established that:
* the act or omission of the director, officer, employee or agent was
material to the matter giving rise to the proceeding and was committed
in bad faith or was the result of active and deliberate dishonesty;
* the director, officer, employee or agent actually received an improper
personal benefit in money, property or services; or
* in the case of any criminal proceeding, the director, officer,
employee or agent had reasonable cause to believe that the act or
omission was unlawful.
Unless a corporation's charter provides otherwise, which the New Company's
charter does not, the MGCL requires a corporation to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to advance reasonable expenses to a
director, officer, employee or agent.
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Under the MGCL, a Maryland corporation generally may not indemnify a person
for an adverse judgment in a suit by or in the right of the corporation. Also, a
Maryland corporation generally may not indemnify a person for a judgment of
liability on the basis that personal benefit was improperly received. In either
of these cases, a Maryland corporation may indemnify a person for expenses only
if a court so orders. The New Company's bylaws obligate the New Company to
indemnify its directors and officers, whether serving the New Company or, at its
request, any other entity, to the maximum extent required or permitted by the
MGCL, including the advancement of expenses under the procedures and to the
maximum extent permitted by law, and other employees and agents to such extent
as authorized by its Board of Directors and bylaws and as may be permitted by
law.
The MGCL permits a Maryland corporation to include in its charter a
provision eliminating the liability of its directors and officers to the
corporation and its stockholders for money damages. However, a Maryland
corporation may not eliminate liability resulting from actual receipt of an
improper benefit or profit in money, property or services. Also, liability
resulting from active and deliberate dishonesty may not be eliminated if a final
judgment establishes that the dishonesty is material to the cause of action. The
New Company's charter contains a provision which eliminates the liability of
directors and officers to the maximum extent permitted by the MGCL.
DIVIDENDS AND OTHER DISTRIBUTIONS
THE COMPANY. Under the DGCL, a corporation is permitted to declare and pay
dividends out of surplus (as defined in the DGCL) or, if there is no surplus,
out of net profits for the fiscal year in which the dividend is declared and/or
for the preceding fiscal year as long as the amount of capital of the
corporation following the declaration and payment of the dividend is not less
than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets. Dividends may be paid in cash, property or shares of a corporation's
capital stock. In addition, the DGCL generally provides that a corporation may
redeem or repurchase its shares only if such redemption or repurchase would not
impair the capital of the corporation.
THE NEW COMPANY. Under the MGCL, if authorized by its board of directors, a
Maryland corporation may declare and pay dividends or other distributions
subject to any restriction in its charter unless, after giving effect to the
dividend:
* the corporation would not be able to pay indebtedness of the
corporation as the indebtedness becomes due in the usual course of
business; or
* the corporation's total assets would be less than the sum of the
corporation's total liabilities plus, unless the charter permits
otherwise, the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of the stockholders whose
preferential rights on dissolution are superior to those receiving the
dividend.
APPRAISAL RIGHTS
THE COMPANY. Under the DGCL, the right to receive the fair value of
dissenting shares is made available to stockholders of a constituent corporation
in a merger or consolidation effected under the DGCL. Dissenters' rights of
appraisal are not available for the shares of any class or series of stock, if
the stock, or depository receipts in respect thereof, were at the record date
fixed to determine stockholders entitled to receive notice and vote on such
transaction, either:
* listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Security Dealers, Inc.; or
* held of record by more than 2,000 holders.
Further, no appraisal rights are available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as provided
by the DGCL. Notwithstanding the foregoing, unless limited or held of record by
more than 2,000 persons, appraisal rights under the DGCL are available for the
shares of any class or series of stock of a corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation under the
DGCL to accept for such stock anything except:
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* shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
* shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts in
respect thereof will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by more than 2,000 holders;
* cash in lieu of fractional shares; or
* any combination of the shares of stock, depository receipts and cash
in lieu of such fractional shares.
THE NEW COMPANY. Under the MGCL, a stockholder of a Maryland corporation
has the right to demand and receive payment of the fair value of the
stockholder's stock from the corporation if the corporation consolidates or
merges with another corporation, the corporation sells all of its assets or, if
not permitted by its charter, the corporation amends its charter to
substantially affect the stockholders' contract rights, unless:
* the stock is listed on a national securities exchange or is designated
as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.; or
* the stock is that of the successor in a merger, unless (1) the merger
alters the contract rights of the stock as expressly set forth in the
charter, and the charter does not reserve the right to do so, or (2)
the stock is to be changed or converted in whole or in part in the
merger into something other than either stock in the successor or
cash, scrip, or other rights or interests arising out of the
provisions for the treatment of fractional shares of stock in the
successor.
MERGER, CONSOLIDATION, SHARE EXCHANGE AND TRANSFER OF ALL OR SUBSTANTIALLY ALL
ASSETS
THE COMPANY. Under the DGCL, the principal terms of a merger or
consolidation generally require the approval of the stockholders of each of the
constituent corporations. Unless otherwise required in a corporation's
certificate of incorporation, the DGCL does not require a stockholder vote of
the surviving corporation in a merger if:
* the agreement of merger does not amend in any respect the certificate
of incorporation of the corporation;
* each share of stock of the corporation outstanding immediately prior
to the effective date of the merger is to be an identical outstanding
or treasury share of the surviving corporation after the effective
date of the merger; and
* either (1) no shares of common stock of the surviving corporation and
no shares, securities or obligations convertible into common stock are
to be issued or delivered under the merger, or (2) the number of
authorized unissued shares or the treasury shares of common stock of
the surviving corporation to be issued or delivered under the merger,
plus those initially issuable upon conversion of any other shares,
securities or obligations to be issued or delivered under the plan, do
not exceed 20% of the number of shares of common stock outstanding
immediately prior to the effective date of the merger.
The DGCL also permits a merger without stockholder vote if the merger is of a
subsidiary into a parent, provided the parent owns at least 90% of the
subsidiary.
When a stockholder vote is required under the DGCL to approve a merger or
consolidation, unless the certificate of incorporation provides otherwise (which
the Company's charter does not), the affirmative vote of a majority of the
outstanding stock entitled to vote on the merger or consolidation shall be
required to approve the merger or consolidation. If multiple classes of stock
are entitled to vote on the merger or consolidation as separate classes, then a
majority of each class entitled to vote to approve the merger or consolidation,
voting separately as a class, shall be required to approve the merger or
consolidation.
The Board of Directors or governing body of a Delaware corporation may take
action to sell, lease or exchange all or substantially all of the property and
assets of the corporation, including the corporation's goodwill and corporate
franchises, upon such terms and conditions and for such consideration, which may
consist of money or other property, including shares of stock or other
securities of any other corporation as it deems expedient and for the best
interests of the corporation, when authorized by the holders of a majority of
the outstanding stock of the corporation entitled to vote on the matter.
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THE NEW COMPANY. The MGCL generally provides that mergers, consolidations,
share exchanges or transfers of assets must first be declared advisable by a
majority of the Board of Directors and thereafter approved by stockholders by
the affirmative vote of two-thirds of all the votes entitled to be cast on the
matter, unless the charter provides for a greater or lesser stockholder vote,
but not less than a majority of the number of votes entitled to be cast on the
matter. The New Company's charter requires that any merger, consolidation, share
exchange or transfer of assets requiring stockholder approval be approved by a
majority vote of all votes entitled to be cast on the matter. However, some
mergers may be accomplished without a vote of stockholders. For example, no
stockholder vote is required for a merger of a subsidiary of a Maryland
corporation into its parent, provided the parent owns at least 90% of the
subsidiary. In addition, a merger need not be approved by stockholders of a
Maryland successor corporation if the merger does not reclassify or change the
outstanding shares or otherwise amend the charter, and the number of shares to
be issued or delivered in the merger is not more than 20% of the number of its
shares of the same class or series outstanding immediately before the merger
becomes effective. A share exchange need be approved by a Maryland successor
only by its board of directors and by any other action required by its charter.
CHANGE IN CONTROL
THE COMPANY. Section 203 of the DGCL provides that, subject to exceptions
specified therein, a corporation will not engage in any business combination
with any "interested stockholder" for a three-year period following the time
that such stockholder becomes an interested stockholder unless:
* prior to such time the board of directors of the corporation approved
either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;
* upon the closing of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding for purposes of determining
the number of shares outstanding those shares owned by persons who are
directors and also officers, and employee stock plans in which
employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or
* at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote
of at least 66 2/3% of the outstanding voting stock which is not owned
by the interested stockholder.
Except as specified in Section 203 of the DGCL, an interested stockholder
is defined to include any person, including the affiliates and associates of
such person, that:
* is the owner of 15% or more of the outstanding voting stock of the
corporation; or
* is an affiliate or associate of the corporation and was the owner of
15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on
which it is sought to be determined whether such person is an
interested stockholder.
Section 203(b)(4) of the DGCL exempts from the restrictions in Section 203
a corporation that does not have a class of voting stock that is:
* listed on a national securities exchange;
* authorized for quotation on The NASDAQ Stock Market; or
* held of record by more than 2,000 stockholders;
unless any of the foregoing results from action taken, directly or indirectly,
by an interested stockholder or from a transaction in which a person becomes an
interested stockholder.
THE NEW COMPANY. Under the MGCL, "business combinations" between a Maryland
corporation and an interested stockholder or an affiliate of an interested
stockholder are prohibited for five years after the most recent date on which
the interested stockholder becomes an interested stockholder. These business
combinations include a merger, consolidation, share exchange, or, in
circumstances specified in the statute, an asset transfer or issuance or
reclassification of equity securities. An interested stockholder generally
includes:
* any person who beneficially owns 10% or more of the voting power of
the corporation's shares; or
* an affiliate of the corporation who, at any time within the two-year
period prior to the date in question, was the beneficial owner of 10%
or more of the voting power of the then outstanding voting stock of
the corporation.
After the five-year prohibition, any business combination between the
Maryland corporation and an interested stockholder generally must be recommended
by the Board of Directors of the corporation and approved by two separate
super-majority stockholder votes, unless, among other conditions, the holders of
common stock receive a minimum price, as defined by the MGCL, for their shares
and the consideration is received in cash or in the same form as previously paid
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by the interested stockholder for its common stock. None of these provisions of
the MGCL will apply, however, (a) to business combinations that are approved or
exempted by the board of directors of the corporation prior to the time that the
interested stockholder becomes an interested stockholder, or (b) if the board of
directors approves the transaction in which the stockholder became an interested
stockholder.
Also under the MGCL, "control shares" of a Maryland corporation acquired in
a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter.
Shares of stock owned by the acquirer, by officers or by directors who are
employees of the corporation are excluded from shares entitled to vote on the
matter. "Control shares" are voting shares of stock which, if aggregated with
all other shares of stock owned by the acquirer or shares of stock for which the
acquirer is able to exercise or direct the exercise of voting power except
solely by virtue of a revocable proxy, would entitle the acquirer to exercise
voting power in electing directors within one of the following ranges of voting
power:
* one-fifth or more but less than one-third;
* one-third or more but less than a majority; or
* a majority or more of all voting power.
An acquiring person's movement from one range above to the next higher range of
voting power re-triggers the two-thirds vote requirement mentioned above.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. Except as
otherwise specified in the statute, a "control share acquisition" means the
acquisition of control shares.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction or to acquisitions approved or exempted by the charter or bylaws of
the corporation. The New Bylaws contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of shares of
stock of the New Company. There can be no assurance, however, that the New
Company's Board of Directors will not amend the bylaws in the future to provide
that the "control share acquisition" provisions of the MGCL apply to the New
Company.
WHAT ARE THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE RE-INCORPORATION?
Kutak Rock LLP will deliver its opinion to the Company that, on the basis
of facts, representations and assumptions set forth in the opinion, the
Re-Incorporation will be treated for United States federal income tax purposes
as a reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986 (the "Code"). Accordingly, (1) no gain or loss will be
recognized by the Company as a result of the Re-Incorporation; and (2) no gain
or loss will be recognized by any shareholder of the Company who receives the
New Company's Common Stock in exchange for the Company's Common Stock.
ARE THERE ANY PROVISIONS APPLICABLE TO UNFRIENDLY TAKEOVER PROPOSALS IN THE
MARYLAND GENERAL CORPORATION LAW?
Although the Re-Incorporation was neither proposed nor approved by the
Board of Directors as a takeover defense measure, following the Merger, the New
Company will be subject to provisions of the MGCL which are designed to
encourage a person seeking control of a Maryland corporation to negotiate with
its board of directors. These provisions could delay, defer, or prevent a
transaction or change in control of the New Company that might involve a premium
price for holders of the New Company's Common Stock or that is otherwise in
their best interests. In addition, other provisions of the MGCL requiring the
consent of all stockholders for stockholder action by written consent and
provisions of the New Bylaws requiring advance notice of stockholder director
nominations could increase the likelihood that incumbent directors would retain
their positions in the face of efforts by stockholders to change the New
Company's Board of Directors.
ARE THERE ANY APPRAISAL RIGHTS OFFERED IN THE RE-INCORPORATION?
Under Delaware law, shareholders will not have any right to elect to have
the fair value of their shares judicially appraised and paid to them in cash in
connection with, or as a result of, the Re-Incorporation.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3
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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, 2000. 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, 2000.
Whether the proposal is approved or defeated, the Board may reconsider its
selection.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 4
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 15, 2000,
regarding beneficial ownership of Shares by (1) each director of the Company,
(2) the CEO and each of the Named Executive Officers, (3) all directors and
executive officers of the Company as a group, and (4) all persons known to the
Company to be the beneficial owner of 5% or more of the outstanding Shares of
the Company. Unless otherwise noted in the footnotes following the table, the
persons as to whom information is given have sole voting and investment power
over the Shares beneficially owned.
Aggregate Shares Total Number
Number of Shares Acquirable of Shares
Beneficially Within Beneficially Percent
Name Owned(1) 60 Days(2) Owned(2)(3) of Class
- ---- -------- ---------- ----------- --------
Morton H. Fleischer 1,115,439 400,000 1,515,439(4) 2.7%
Willie R. Barnes 1,848 13,631 15,479 *
Kathleen H. Lucier 864 0 864 *
Dennis E. Mitchem 2,246 10,704 12,950 *
Louis P. Neeb 16,271 13,631 29,902 *
Kenneth B. Roath 7,442 13,631 21,073 *
Casey J. Sylla 9,901 13,631 23,532(5) *
Shelby Yastrow 11,585 5,335 16,920 *
Christopher H. Volk 52,524 319,875 372,399 *
John R. Barravecchia 40,200 250,000 290,200 *
Dennis L. Ruben 30,946 200,000 230,946 *
Stephen G. Schmitz 18,533 250,000 268,533 *
Kelvin L. Davis 3,794,366 1,482,243 5,276,609(6) 9.1%
Colony SB, LLC 3,794,366 1,476,908 5,271,274(7) 9.1%
European Investors Inc. 3,033,288 0 3,033,288(8) 5.4%
Directors and executive
officers as a group
(14 persons) 5,108,862 3,046,180 8,155,042 13.8%
- ----------
* Less than one percent
(1) Share amount and percentage figures are rounded to the nearest whole
number.
(2) All Shares not outstanding but which may be acquired by such shareholder
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 of the class beneficially owned by
such shareholder, but not by any other shareholder. The foregoing Share
amounts include Shares which may be acquired pursuant to stock options and
warrants exercisable within 60 days of February 15, 2000.
(3) Does not include Shares awarded to employees as the matching portion of the
Company's 401(k) plan.
(4) Includes an aggregate of 10,000 Shares held by Donna H. Fleischer, the wife
of Mr. Fleischer.
(5) Includes an aggregate of 1,200 Shares held by Dolores Sylla, the wife of
Mr. Sylla.
(6) Includes an aggregate of 3,794,336 Shares currently owned by Colony SB LLC
("Colony"), 1,476,908 Shares which Colony has the right to acquire pursuant
to an immediately exercisable warrant agreement dated March 13, 1998, and
5,335 Shares representing stock options currently exercisable by Mr. Davis.
Mr. Davis shares the power to vote and the power to dispose of Colony's
Shares with another affiliate of Colony. See footnote (7) below.
(7) These Shares consist of 3,794,336 Shares currently owned by Colony, and
1,476,908 Shares which Colony has the right to acquire pursuant to an
immediately exercisable warrant agreement dated March 13, 1998. Based upon
a Schedule 13D, dated March 23, 1998, these Shares are also deemed to be
beneficially owned by Colony GP III, Inc., Colony Capital III, L.P., Colony
Investors III, L.P., Thomas J. Barrack, Jr. and Kelvin L. Davis. The
address of these beneficial owners is 1999 Avenue of the Stars, Suite 1200,
Los Angeles, California 90067. As the sole shareholders of Colony GP III,
Inc., Mr. Barrack and Mr. Davis are deemed to share the power to vote and
dispose of, or to direct the vote or disposition of, Colony's Shares.
(8) Based upon a Schedule 13G, dated February 9, 2000, these Shares consist of
702,988 Shares beneficially owned by European Investors Inc., and 2,330,300
Shares beneficially owned by EII Realty Securities Inc., a wholly-owned
subsidiary of European Investors Inc.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADMINISTRATIVE SERVICES AGREEMENT. The Company has entered into an
administrative services agreement (the "Administrative Agreement") with the
following entities: FFCA Management Company Limited Partnership, Perimeter
Center Management Company and FFCA Funding Corporation ("FFCA Funding," and
collectively, the "Companies"). The first two 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. FFCA Funding is
affiliated with the Company due to the Company's ownership of a 99% non-voting
equity interest in FFCA Funding. 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 Agreement appoints the Company as administrator of the
Companies. As administrator, the Company supervises all administrative aspects
of the operations of such Companies, except for FFCA Funding, which is self
managed. 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 may also add a profit percentage not to exceed 20% of the sum of the
total expenses charged to each individual entity. In the 1999 fiscal year, the
above Companies paid approximately $360,000 to the Company pursuant to the
Administrative Agreement.
MORTGAGE PAYABLE TO AFFILIATE. In 1988, the Company purchased land from
Scottsdale Land Trust Limited Partnership ("SLT") for the construction of the
Company's headquarters (collectively with the land, the "FFCA Premises"). The
purchase of the land for and construction of the FFCA Premises were financed
through a mortgage loan provided to the Company by SLT. The mortgage loan on the
FFCA Premises currently has a principal balance of $8.5 million and provides for
the payment of interest only, at the rate of 10% per year, until May 2000, at
which time the entire principal amount is due. The loan also provides for the
payment of additional interest at maturity based upon the increase, if any, in
the value of the FFCA Premises. SLT's general partner is FFCA Management Company
Limited Partnership. Morton H. Fleischer, the Company's Chairman of the Board
and Chief Executive Officer, serves as a general partner of FFCA Management
Company Limited Partnership.
FFCA FUNDING CORPORATION. On January 4, 2000, FFCA Funding was organized to
originate and sell mortgage loans to Washington Mutual under the Master Loan
Purchase Agreement between Washington Mutual and FFCA Acquisition Corporation
("FFCA Acquisition"), a wholly owned subsidiary of the Company, that was
assigned by FFCA Acquisition to FFCA Funding. In connection with the
organization of FFCA Funding, and in order to comply with provisions of the
Internal Revenue Code of 1986, the Company's CEO and Named Executive Officers
each purchased 20% (20 shares each) of the common stock of FFCA Funding, which
together represents 100% (100 shares) of the outstanding common stock of FFCA
Funding and represents a 1% equity interest in FFCA Funding. The collective
purchase price for the common stock was $975,000. The CEO and Named Executive
Officers each paid $10,000 of the purchase price in cash and each executed a
full-recourse promissory note in favor of FFCA Funding for $185,000. Also in
connection with the organization of FFCA Funding, the Company received 10 shares
of FFCA Funding's preferred stock, which represents 99% of the equity interest
in FFCA Funding, in exchange for the transfer and/or license of some of the
Company's assets associated with its mortgage origination business.
RELATED EMPLOYMENT. Jeffrey Fleischer, son of Morton H. Fleischer, serves
as Vice President of the Company. In 1999, Jeffrey Fleischer received total cash
compensation in the amount of $175,270 from the Company. Shelby Yastrow, a
current director and director nominee of the Company, is "of-counsel" to the law
firm of Sonnenshein, Nath & Rosenthal. Sonnenshein provided legal services to
the Company in 1999, which services resulted in fees being paid to Sonnenshein
in an amount less than 1% of Sonnenshein's total gross revenues for 1999.
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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. 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. It is anticipated
that the cost of these reimbursements will be approximately $100,000. The
Company will pay D.F. King additional amounts if other supplementary
solicitations are made.
ANNUAL REPORT
The Company has mailed the Company's Annual Report for the 1999 fiscal year
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, 1999,
INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. Requests should be addressed to Ronald
E. Davis, Vice President of Corporate Communications of the Company, 17207 North
Perimeter Drive, Scottsdale, Arizona 85255-5402.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholders are entitled to present proposals for action at shareholders'
meetings if they comply with the requirements of the proxy rules. In connection
with this year's Meeting, no shareholder proposals were presented. Any proposals
intended to be presented at the Company's Annual Meeting of Shareholders to be
held in the year 2001 must be received at the Company's offices on or before
December 2, 2000, in order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to such meeting.
The accompanying proxy card grants the proxy holders discretionary
authority to vote on any matter raised at the Meeting. If a shareholder intends
to submit a proposal at the Company's 2001 Annual Meeting of Shareholders, which
proposal is not intended to be included in the Company's proxy statement and
form of proxy relating to such meeting, the shareholder must give proper notice
no later than February 15, 2001. If a shareholder fails to submit the proposal
by such date, the Company will not be required to provide any information about
the nature of the proposal in its proxy statement, and the proposal will not be
considered at the 2001 Annual Meeting of Shareholders.
Proposals should be sent to Dennis L. Ruben, Executive Vice President,
General Counsel and Secretary of the Company, at 17207 North Perimeter Drive,
Scottsdale, Arizona 85255-5402. If Proposal No. 3, the Re-Incorporation, is
approved, the above dates will apply to the New Company's 2001 Annual Meeting.
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.
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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
Scottsdale, Arizona Dennis L. Ruben,
March 31, 2000 SECRETARY
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APPENDIX A
FFCA MARYLAND CORP.
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST, FFCA Maryland Corp., a Maryland corporation (the "Corporation"),
desires to amend and restate its charter as currently in effect and as
hereinafter amended.
SECOND, The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR
The undersigned, James J. Hanks, Jr., whose address is c/o Ballard Spahr
Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202,
being at least 18 years of age, does hereby form a corporation under the general
laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is: Franchise Finance
Corporation of America.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of these Articles, "REIT" means a real estate
investment trust under Sections 856 through 860 of the Code.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in this State is c/o
The Corporation Trust Incorporated, 300 East Lombard Street, 14th Floor,
Baltimore, Maryland 21202. The name and address of the resident agent of the
Corporation are The Corporation Trust Incorporated, 300 East Lombard Street,
14th Floor, Baltimore, Maryland 21202. The resident agent is a Maryland
corporation.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
SECTION 5.1. NUMBER OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. The
number of directors of the Corporation initially shall be ten, which number may
be increased or decreased pursuant to the Bylaws, but shall never be less than
the minimum number required by the Maryland General Corporation Law. The names
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of the directors who shall serve until the next annual meeting of stockholders
and until their successors are duly elected and qualify are:
Morton H. Fleischer Louis P. Neeb
Willie R. Barnes Kenneth B. Roath
Kelvin L. Davis Casey J. Sylla
Kathleen H. Lucier Christopher H. Volk
Dennis E. Mitchem Shelby Yastrow
Any vacancy on the Board of Directors, whether resulting from an increase in the
number of directors or otherwise, may be filled only by the affirmative vote of
a majority of the remaining directors in office, even if the remaining directors
do not constitute a quorum. Any director elected to fill a vacancy shall serve
for the remainder of the full term of the directorship in which the vacancy
occurred.
SECTION 5.2. EXTRAORDINARY ACTIONS. Except as specifically provided in
Section 6.6.10 and Article VIII, notwithstanding any provision of law permitting
or requiring any action to be taken or approved by the affirmative vote of the
holders of shares entitled to cast a greater number of votes, any such action
shall be effective and valid if taken or approved by the affirmative vote of
holders of shares entitled to cast a majority of all the votes entitled to be
cast on the matter.
SECTION 5.3. AUTHORIZATION BY BOARD OF STOCK ISSUANCE. The Board of
Directors may authorize the issuance from time to time of shares of stock of the
Corporation of any class or series, whether now or hereafter authorized, or
securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable (or without consideration in the case of a stock
split or stock dividend), subject to such restrictions or limitations, if any,
as may be set forth in the charter or the Bylaws; provided, however, that
notwithstanding the foregoing, in the event any person acquires 20% or more of
the outstanding shares of Common Stock (as defined below) and/or Preferred Stock
(as defined below), the Board of Directors shall not authorize the issuance of
any series of Preferred Stock pursuant to the authority granted herein unless
such issuance is approved by the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock.
SECTION 5.4. PREEMPTIVE RIGHTS. Except as may be provided by the Board of
Directors in setting the terms of classified or reclassified shares of stock
pursuant to Section 6.4 or as may otherwise be provided by contract, no holder
of shares of stock of the Corporation shall, as such holder, have any preemptive
right to purchase or subscribe for any additional shares of stock of the
Corporation or any other security of the Corporation which it may issue or sell.
SECTION 5.5. INDEMNIFICATION. The Corporation shall have the power, to the
maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation or (b) any individual
who, while a director of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of such person's service in such capacity. The Corporation shall have
the power, with the approval of the Board of Directors, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
SECTION 5.6. DETERMINATIONS BY BOARD. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the charter and in the absence of actual
receipt of an improper benefit in money, property or services or active and
deliberate dishonesty established by a court, shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of its stock:
the amount of the net income of the Corporation for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
its stock or the payment of other distributions on its stock; the amount of
paid-in surplus, net assets, other surplus, annual or other net profit, net
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assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; any matters relating to the acquisition,
holding and disposition of any assets by the Corporation or any other matter
relating to the business and affairs of the Corporation.
SECTION 5.7. REIT QUALIFICATION. If the Corporation elects to qualify for
federal income tax treatment as a REIT, the Board of Directors shall use its
reasonable best efforts to take such actions as are necessary or appropriate to
preserve the status of the Corporation as a REIT; however, if the Board of
Directors determines that it is no longer in the best interests of the
Corporation to continue to be qualified as a REIT, the Board of Directors may
revoke or otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The Board of Directors also may determine that
compliance with any restriction or limitation on stock ownership and transfers
set forth in Article VII is no longer required for REIT qualification.
SECTION 5.8. REMOVAL OF DIRECTORS. Subject to the rights of holders of one
or more classes or series of Preferred Stock to elect or remove one or more
directors, any director, or the entire Board of Directors, may be removed from
office at any time, but only by the affirmative vote of the holders of a
majority of the votes entitled to be cast generally in the election of
directors.
ARTICLE VI
STOCK
SECTION 6.1. AUTHORIZED SHARES. The Corporation has authority to issue
210,000,000 shares of stock, consisting of 200,000,000 shares of Common Stock,
$.01 par value per share ("Common Stock"), 10,000,000 shares of Preferred Stock,
$.01 par value per share ("Preferred Stock"), of which Preferred Stock 300,000
shares shall consist of Series A Junior Participating Preferred Stock (the
"Series A Stock Junior Participating Preferred Stock"). The aggregate par value
of all authorized shares of stock having par value is $2,100,000. If shares of
one class of stock are classified or reclassified into shares of another class
of stock pursuant to Sections 6.2, 6.3 or 6.4 of this Article VI, the number of
authorized shares of the former class shall be automatically decreased and the
number of shares of the latter class shall be automatically increased, in each
case by the number of shares so classified or reclassified, so that the
aggregate number of shares of stock of all classes that the Corporation has
authority to issue shall not be more than the total number of shares of stock
set forth in the first sentence of this paragraph.
SECTION 6.2. COMMON STOCK. Subject to the provisions of Article VII, each
share of Common Stock shall entitle the holder thereof to one vote. The Board of
Directors may reclassify any unissued shares of Common Stock from time to time
in one or more classes or series of stock.
SECTION 6.3. PREFERRED STOCK. The Board of Directors may classify any
unissued shares of Preferred Stock and reclassify any previously classified but
unissued shares of Preferred Stock of any series from time to time, in one or
more classes or series of stock.
SECTION 6.4. CLASSIFIED OR RECLASSIFIED SHARES. Prior to issuance of
classified or reclassified shares of any class or series, the Board of Directors
by resolution shall: (a) designate that class or series to distinguish it from
all other classes and series of stock of the Corporation; (b) specify the number
of shares to be included in the class or series; (c) set or change, subject to
the provisions of Article VII and subject to the express terms of any class or
series of stock of the Corporation outstanding at the time, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms and conditions of
redemption for each class or series; and (d) cause the Corporation to file
articles supplementary with the State Department of Assessments and Taxation of
Maryland ("SDAT"). Any of the terms of any class or series of stock set or
changed pursuant to clause (c) of this Section 6.4 may be made dependent upon
facts or events ascertainable outside the charter (including determinations by
the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
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which such facts, events or variations shall operate upon the terms of such
class or series of stock is clearly and expressly set forth in the articles
supplementary or other charter document filed with the SDAT.
SECTION 6.5. CHARTER AND BYLAWS. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the charter and
the Bylaws.
SECTION 6.6. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK.
Section 6.6.1. DESIGNATION AND AMOUNT. There shall be a series of
Preferred Stock that shall be classified as "Series A Junior Participating
Preferred Stock," and the number of shares constituting such series shall
be 300,000.
Section 6.6.2. DIVIDENDS AND DISTRIBUTION.
(a) Subject to the prior and superior rights of the holders of
any shares of any class or series of stock of the Corporation ranking
prior and superior to the shares of Series A Junior Participating
Preferred Stock with respect to dividends, the holders of shares of
Series A Junior Participating Preferred Stock, in preference to the
holders of shares of any class or series of stock of the Corporation
ranking junior to the Series A Junior Participating Preferred Stock in
respect thereof, shall be entitled to receive, when, as and if
authorized by the Board of Directors out of funds legally available
for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December, in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all
cash dividends, and the Adjustment Number times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock. The "Adjustment Number" shall initially
be 1000. In the event the Corporation shall at any time after the date
these Articles of Amendment and Restatement are accepted for record by
the State Department of Assessments and Taxation of Maryland, (i)
declare and pay any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series A Junior Participating Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series A Junior Participating Preferred Stock,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
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begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
Section 6.6.3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to one vote on all matters submitted
to a vote of the stockholders of the Corporation.
(b) Except as required by Section 6.6.3(c) and by Section 6.6.10
hereof, holders of Series A Junior Participating Preferred Stock shall
have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends
(whether or not consecutive) payable on any share or shares of Series
A Junior Participating Preferred Stock are in default, the number of
directors constituting the Board of Directors of the Company shall be
increased by two. In addition to voting together with the holders of
Common Stock for the election of other directors of the Company, the
holders of record of the Series A Junior Participating Preferred
Stock, voting separately as a class to the exclusion of the holders of
Common Stock, shall be entitled at said meeting of stockholders (and
at each subsequent annual meeting of stockholders), unless all
dividends in arrears on the Series A Junior Participating Preferred
Stock have been paid or declared and set apart for payment prior
thereto, to vote for the election of two directors of the Company, the
holders of any Series A Junior Participating Preferred Stock being
entitled to cast a number of votes per share of Series A Junior
Participating Preferred Stock as is specified in paragraph (a) of this
Section 6.6.3. Until the default in payments of all dividends which
permitted the election of said directors shall cease to exist, any
director who shall have been so elected pursuant to the provisions of
this Section 6.6.3(c) may be removed at any time, without cause, only
by the affirmative vote of the holders of the shares of Series A
Junior Participating Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such
holders. If and when such default shall cease to exist, the holders of
the Series A Junior Participating Preferred Stock shall be divested of
the foregoing special voting rights, subject to revesting in the event
of each and every subsequent like default in payments of dividends.
Upon the termination of the foregoing special voting rights, the terms
of office of all persons who may have been elected directors pursuant
to said special voting rights shall forthwith terminate, and the
number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 6.6.3(c)
shall be in addition to any other voting rights granted to the holders
of the Series A Junior Participating Preferred Stock in this Section
6.6.3.
Section 6.6.4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred
Stock as provided in Section 6.6.2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or
not declared, on shares of Series A Junior Participating Preferred
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Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of Series A Junior
Participating Preferred Stock, or to such holders and holders of
any such shares ranking on a parity therewith, upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (a) of this Section 6.6.4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 6.6.5. REACQUIRED SHARES. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall become authorized but unissued
shares of Series A Junior Participating Preferred Stock available for
future issuance or reclassification by the Corporation.
Section 6.6.6. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) Upon any
liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received an amount per share (the "Series A
Liquidation Preference") equal to the greater of (i) $10.00 plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, or (ii) the Adjustment Number
times the per share amount of all cash and other property to be distributed
in respect of the Common Stock upon such liquidation, dissolution or
winding up of the Corporation.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other classes and
series of stock of the Corporation, if any, that rank on a parity with
the Series A Junior Participating Preferred Stock in respect thereof,
then the assets available for such distribution shall be distributed
ratably to the holders of the Series A Junior Participating Preferred
Stock and the holders of such parity shares in proportion to their
respective liquidation preferences.
(c) Neither the merger or consolidation of the Corporation into
or with another corporation nor the merger or consolidation of any
other corporation into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 6.6.6.
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Section 6.6.7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are exchanged
for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Junior Participating
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share equal to the Adjustment Number times the aggregate
amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged.
Section 6.6.8. NO REDEMPTION. Shares of Series A Junior Participating
Preferred Stock shall not be subject to redemption by the Corporation.
Section 6.6.9. RANKING. The Series A Junior Participating Preferred
Stock shall rank junior to all other series of the Preferred Stock as to
the payment of dividends and as to the distribution of assets upon
liquidation, dissolution or winding up, unless the terms of any such series
shall provide otherwise, and shall rank senior to the Common Stock as to
such manners.
Section 6.6.10. AMENDMENT. At any time that any shares of Series A
Junior Participating Preferred Stock are outstanding, the Charter of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a
class.
Section 6.6.11. FRACTIONAL SHARES. Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall entitle
the holder, in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Series A Junior Participating
Preferred Stock.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
SECTION 7.1. DEFINITIONS. For the purposes of this Article VII, 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, or any successor statute.
"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 DATE" means the date upon which these Articles of Amendment and
Restatement are accepted for record by the SDAT.
"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
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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
Section 7.10 of this Article VII, 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 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 and subject to the
limitations set forth in Article VII.
"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 Initial
Date 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.
"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.
SECTION 7.2. RESTRICTION ON TRANSFERS. Subject to the provisions of Section
7.9 of this Article VII:
(i) from the Initial Date 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;
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(ii) from the Initial Date 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 Initial Date 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 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 Initial Date 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.
SECTION 7.3. 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 Section 7.2 of this Article VII 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 Section 7.2 of this Article VII, 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.
SECTION 7.4. NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or
attempts to acquire Common Stock or Preferred Stock in violation of Section 7.2
of this Article VII, 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.
SECTION 7.5. OWNERS REQUIRED TO PROVIDE INFORMATION. From the Initial Date
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.
SECTION 7.6. REMEDIES NOT LIMITED. Subject to the provisions of Section
7.12 of this Article VII, nothing contained in this Article VII shall limit the
authority of the Board of Directors to take such other action as it deems
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necessary or advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as a REIT.
SECTION 7.7. AMBIGUITY. In the case of an ambiguity in the application of
any of the provisions of Section 7.1 of this Article VII, including any
definition contained in Section 7.1, the Board of Directors shall have the power
to determine the application of the provisions of this Article VII with respect
to any situation based on the facts known to it.
SECTION 7.8. MODIFICATION OF OWNERSHIP LIMIT. Subject to the limitations
provided in Section 7.9, the Board of Directors may from time to time adjust the
Ownership Limit with regard to any Person.
SECTION 7.9. 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
Section 7.8 or Section 7.10 of this Article VII, 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.
SECTION 7.10. 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 VII.
(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
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 VII.
SECTION 7.11. 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.
SECTION 7.12. NEW YORK STOCK EXCHANGE TRANSACTIONS. Nothing in this Article
VII shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange. The fact that any settlement of any
transaction occurs shall not negate the effect of any other provision of this
Article VII and any transferee in such a transaction shall be subject to all
provisions and limitations set forth in this Article VII.
SECTION 7.13. (a) LEGEND. Each certificate for Common Stock and Preferred
Stock shall bear substantially the following legend:
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"THE SHARES OF [COMMON STOCK] [PREFERRED STOCK] REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR THE PURPOSE, AMONG
OTHERS, 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 CHARTER, 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]
[PREFERRED STOCK] REPRESENTED HEREBY MAY BE AUTOMATICALLY REDEEMED."
(b) Instead of the foregoing legend, the certificate may state
that the Corporation will furnish a full statement about certain
restrictions on transferability to a stockholder on request and
without charge.
SECTION 7.14. SEVERABILITY. If any provision of this Article VII 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 VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in this charter,
of any shares of outstanding stock; except that no amendment which would change
any rights with respect to any outstanding Common Stock, 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 two-thirds of the outstanding Common Stock. All
rights and powers conferred by the charter on stockholders, directors and
officers are granted subject to this reservation.
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ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers of a corporation, no
director or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this Article
IX, nor the adoption or amendment of any other provision of the charter or
Bylaws inconsistent with this Article IX, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
THIRD, The amendment to and restatement of the charter as hereinabove set
forth have been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
FOURTH, The current address of the principal office of the Corporation in
the State of Maryland is as set forth in Article IV of the foregoing amendment
and restatement of the charter.
FIFTH, The name and address of the Corporation's current resident agent in
the State of Maryland is as set forth in Article IV of the foregoing amendment
and restatement of the charter.
SIXTH, The number of directors of the Corporation and the names of those
currently in office are as set forth in Article V of the foregoing amendment and
restatement of the charter.
SEVENTH, The total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment and restatement was 1,000
shares, $.01 par value per share, all of one class. The aggregate par value of
all shares of stock having par value was $10.00.
EIGHTH, The total number of shares of stock which the Corporation has
authority to issue pursuant to the foregoing amendment and restatement of the
charter is 210,000,000 shares of stock, consisting of 200,000,000 shares of
Common Stock, $.01 par value per share, 10,000,000 shares of Preferred Stock,
$.01 par value per share. The aggregate par value of all authorized shares of
stock having par value is $2,100,000.
NINTH, The undersigned President acknowledges these Articles of Amendment
and Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that, to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this _____ day of ____________, 2000.
FFCA MARYLAND CORP.
By (SEAL)
----------------------------------
Christopher H. Volk, President
ATTEST:
- -----------------------------------
Dennis L. Ruben, Secretary
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APPENDIX B
BYLAWS
FRANCHISE FINANCE CORPORATION OF AMERICA
(ADOPTED _____________, 2000)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation in the
State of Maryland shall be located at such place or places in the State of
Maryland as the Board of Directors may designate.
SECTION 2. ADDITIONAL OFFICES. The Corporation may have additional offices,
including a principal executive office, at such places as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE. All meetings of stockholders shall be held at the
principal executive office of the Corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May.
SECTION 3. SPECIAL MEETINGS.
(a) GENERAL. The chairman of the board, the chief executive officer,
the president or a majority of the members of the Board of Directors may
call a special meeting of the stockholders. Subject to subSection (b) of
this Section 3, a special meeting of stockholders shall also be called by
the secretary of the Corporation upon the written request of the
stockholders entitled to cast not less than 10% of all the votes entitled
to be cast at such meeting.
(b) STOCKHOLDER REQUESTED SPECIAL MEETINGS.
(i) Any stockholder of record seeking to have stockholders
request a special meeting shall, by sending written notice to the
secretary (the "Record Date Request Notice") by registered mail,
return receipt requested, request the Board of Directors to set a
record date to determine the stockholders entitled to request a
special meeting (the "Request Record Date"). The Record Date Request
Notice shall set forth the purpose of the requested special meeting
and the matters proposed to be acted on at it, shall be signed by one
or more stockholders of record as of the date of signature (or their
duly authorized proxies or other agents), shall bear the date of
signature of each such stockholder (or proxy or other agent) and shall
set forth all information relating to each such stockholder that must
be disclosed in solicitations of proxies for election of directors in
an election contest (even if an election contest at the requested
special meeting is not involved), or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder.
Upon receiving the Record Date Request Notice, the Board of Directors
may set a Request Record Date. The Request Record Date shall not
precede and shall not be more than 20 days after the close of business
on the date on which the resolution setting the Request Record Date is
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adopted by the Board of Directors. If the Board of Directors, within
20 days after the date on which a valid Record Date Request Notice is
received, fails to adopt a resolution setting the Request Record Date
and issue a public announcement of such Request Record Date, the
Request Record Date shall be the close of business on the twentieth
day after the first date on which the Record Date Request Notice is
actually received by the secretary.
(ii) In order for any stockholder to request a special meeting,
one or more written requests for a special meeting, signed by
stockholders of record (or their duly authorized proxies or other
agents) as of the Request Record Date entitled to cast not less than a
majority (the "Special Meeting Percentage") of all of the votes
entitled to be cast at such meeting (the "Special Meeting Request")
shall be delivered to the secretary. In addition, the Special Meeting
Request shall set forth the purpose of the meeting and the matters
proposed to be acted on at the meeting (which shall be limited to the
matters set forth in the Record Date Request Notice received by the
secretary of the Corporation), shall bear the date of signature of
each such stockholder (or proxy or other agent) signing the Special
Meeting Request, shall set forth the name and address of each
stockholder signing such request, as they appear in the Corporation's
stock ledger, and a current name and address, if different, (or on
whose behalf the Special Meeting Request is signed) and the class and
number of shares of stock of the Corporation which are owned of record
and beneficially by each such stockholder, shall be sent to the
secretary by registered mail, return receipt requested, and shall be
received by the secretary within 60 days after the Request Record
Date. Any requesting stockholder may revoke his, her or its request
for a special meeting at any time by written revocation delivered to
the secretary.
(iii) The secretary shall inform the requesting stockholders of
the reasonably estimated cost of preparing and mailing the notice of
the special meeting (including the Corporation's proxy materials). The
secretary shall not be required to call a special meeting upon
stockholder request and such meeting shall not be held unless, in
addition to the documents required by paragraph (ii) of this Section
3(b), the secretary receives payment of such reasonably estimated cost
prior to the mailing of any notice of the meeting.
(iv) Except as provided in the next sentence, any special meeting
shall be held at such place, date and time as may be designated by the
chairman of the board, the chief executive officer, the president or
the Board of Directors, whoever has called the meeting. In the case of
any special meeting called by the secretary upon the request of
stockholders (a "Stockholder Requested Meeting"), if the Board of
Directors fails to set a record date for such meeting (the "Meeting
Record Date") that is a date within 30 days after the date that a
valid Special Meeting Request is actually received by the secretary
(the "Delivery Date"), then the close of business on the thirtieth day
after the Delivery Date shall be the Meeting Record Date. In the case
of any Stockholder Requested Meeting, such meeting shall be held at
such place, date and time as may be designated by the Board of
Directors; provided, however, that the date of any Stockholder
Requested Meeting shall be not more than 90 days after the Meeting
Record Date; and provided further that if the Board of Directors fails
to designate, within 10 days after the Delivery Date, a date and time
for a Stockholder Requested Meeting, then such meeting shall be held
at 2:00 p.m. local time on the ninetieth day after the Meeting Record
Date or, if such ninetieth day is not a Business Day (as defined
below), on the immediately preceding Business Day; and provided
further that in the event that the Board of Directors fails to
designate a place for a Stockholder Requested Meeting within 10 days
after the Delivery Date, then such meeting shall be held at the
principal executive offices of the Corporation. In setting a date for
any special meeting, the chairman of the board, the chief executive
officer, the president or the Board of Directors may consider such
factors as he, she or it deems relevant within the good faith exercise
of business judgment, including, without limitation, the nature of the
matters to be considered, the facts and circumstances surrounding any
request for a meeting and any plan of the Board of Directors to call
an annual meeting or a special meeting.
(v) If at any time as a result of written revocations of requests
for a special meeting, stockholders of record (or their duly
authorized proxies or other agents) as of the Request Record Date for
the meeting entitled to cast less than the applicable Special Meeting
Request Percentage shall have delivered and not revoked requests for
the special meeting, the secretary may refrain from mailing the notice
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of the meeting or, if the notice of the meeting has been mailed, the
secretary may revoke the notice of the meeting at any time before 10
days prior to the meeting if the secretary has first sent to all other
requesting stockholders written notice of such revocation and of the
intention to revoke the notice of the meeting. Any request for a
special meeting received after a revocation by the secretary of a
notice of a meeting shall be considered a request for a new special
meeting.
(vi) The chairman of the board, the chief executive officer, the
president or Board of Directors may appoint one or more independent
inspectors of elections to act as the agent of the Corporation for the
purpose of promptly performing a ministerial review of the validity of
any purported Special Meeting Request received by the secretary. For
the purpose of permitting the inspectors to perform such review, no
such purported request shall be deemed to have been received by the
secretary until the earlier of (A) five Business Days after actual
receipt by the secretary of such purported request and (B) such date
as the inspectors certify to the Corporation that the valid requests
received by the secretary represent at least a majority of the issued
and outstanding shares of stock that would be entitled to vote at such
meeting. Nothing contained in this paragraph (vi) shall in any way be
construed to suggest or imply that the Corporation or any stockholder
shall not be entitled to contest the validity of any request, whether
during or after such five Business Day period, or to take any other
action (including, without limitation, the commencement, prosecution
or defense of any litigation with respect thereto, and the seeking of
injunctive relief in such litigation).
(vii) For purposes of these Bylaws, "Business Day" shall mean any
day other than a Saturday, a Sunday or a day on which banking
institutions in the State of Maryland are authorized or obligated by
law or executive order to close.
SECTION 4. NOTICE. Not less than 10 nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail, by presenting it to such stockholder personally, by leaving it at his
residence or usual place of business or by any other means authorized by
Maryland law. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the stockholder at his or her post office
address as it appears on the records of the Corporation, with postage thereon
prepaid. Notwithstanding the foregoing provision for notice, a waiver of notice
in writing, signed by the person or persons entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such persons.
SECTION 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
SECTION 6. ORGANIZATION. Every meeting of stockholders shall be conducted
by an individual appointed by the Board of Directors for that purpose or, in the
absence of such appointment, by the chairman of the board or in the case of
vacancy in office or absence of the chairman of the board, by one of the
following officers present at the meeting in the order stated: the chief
executive officer, the chief operating officer, the president, the vice
presidents in their order of rank and seniority, or in the absence of such
officers, a chairman chosen by the stockholders by the vote of a majority of the
votes cast by stockholders present in person or by proxy. The secretary, or, in
the secretary's absence, an assistant secretary, or in the absence of both the
secretary and assistant secretaries, a person appointed by the Board of
Directors or, in the absence of such appointment, by the chairman shall act as
secretary. The Board of Directors of the Corporation may adopt by resolution
such rules and regulations for the conduct of the meeting of stockholders as it
shall deem appropriate. Except to the extent inconsistent with the rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all acts as, in the discretion of the
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or the
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chairman of the meeting, may include, without limitation, the following: (a)
restrictions on admissions to the meeting after the time fixed for the
commencement thereof; (b) limitations on attendance at or participation in the
meeting to stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman may determine; (c)
limitations on participation at the meeting on any matter to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman may determine; (d) limitations on the time
allotted to questions or comments by participants; (e) establishment of an
agenda or order of business for the meeting; (f) rules and procedures for
maintaining order at the meeting and the safety of those present; and (g)
recessing or adjourning the meeting to a later date and time and place announced
at the meeting. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with the rules of parliamentary procedure.
SECTION 7. QUORUM. At any meeting of stockholders, the presence in person
or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this Section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting of the stockholders, the
chairman of the meeting or the stockholders entitled to vote at such meeting,
present in person or by proxy, shall have the power to adjourn the meeting from
time to time to a date not more than 120 days after the original record date
without notice other than announcement at the meeting. At such adjourned meeting
at which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally notified.
The stockholders present either in person or by proxy, at a meeting which
has been duly called and convened, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted, without cumulation, for as many
individuals as there are directors to be elected and for whose election the
share is entitled to be voted. A majority of the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
approve any other matter which may properly come before the meeting, unless more
than a majority of the votes cast is required by statute or by the charter of
the Corporation. Unless otherwise provided in the charter, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders.
SECTION 9. PROXIES. A stockholder may cast the votes entitled to be cast by
the shares of the stock owned of record by the stockholder either in person or
by proxy, by the stockholder or by the stockholder's duly authorized agent in
any manner authorized by law. Such proxy or evidence of authorization of such
proxy shall be filed with the secretary of the Corporation before or at the
meeting, for so long as the polls are open. No proxy is valid more than eleven
months after the date of its execution, unless otherwise provided in the proxy.
SECTION 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
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certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the charter of the Corporation or
these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article
of the Annotated Code of Maryland (or any successor statute) shall not apply to
any acquisition by any person of shares of stock of the Corporation. This
Section may be repealed, in whole or in part, at any time, whether before or
after an acquisition of control shares and, upon such repeal, may, to the extent
provided by any successor bylaw, apply to any prior or subsequent control share
acquisition.
SECTION 11. INSPECTORS. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors. If no such inspector is
appointed by the Board of Directors, at any meeting of stockholders, the
chairman of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
SECTION 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS.
(i) Nominations of persons for election to the Board of Directors
and the proposal of business to be considered by the stockholders may
be made at an annual meeting of stockholders (A) pursuant to the
Corporation's notice of meeting, (B) by or at the direction of the
Board of Directors or (C) by any stockholder of the Corporation who
was a stockholder of record both at the time of giving of notice
provided for in this Section 12(a) and at the time of the annual
meeting, who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 12(a).
(ii) For nominations for election to the Board of Directors or
other business to be properly brought before an annual meeting by a
stockholder pursuant to clause (C) of paragraph (a)(i) of this Section
12, the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely,
a stockholder's notice must be delivered to the secretary at the
principal executive offices of the Corporation by not later than the
close of business on the ninetieth day prior to the first anniversary
of the date of mailing of the notice for the preceding year's annual
meeting nor earlier than the close of business on the 120th day prior
to the first anniversary of the date of mailing of the notice for the
preceding year's annual meeting (except, however, that notice of
nominations for election to the Board of Directors or other business
to be brought before the 2001 annual meeting must be delivered not
later than February 15, 2001 nor earlier than December 1, 2000);
provided, however, that in the event that the date of the mailing of
the notice for the annual meeting is advanced or delayed by more than
30 days from the anniversary date of the mailing of the notice for the
preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on
the 120th day prior to the date of mailing of the notice for such
annual meeting and not later than the close of business on the later
of the ninetieth day prior to the date of mailing of the notice for
such annual meeting or the tenth day following the day on which public
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announcement of the date of mailing of the notice for such meeting is
first made by the Corporation. In no event shall the public
announcement of a postponement of the mailing of the notice for such
annual meeting or of an adjournment or postponement of an annual
meeting to a later date or time commence a new time period for the
giving of a stockholder's notice as described above. A stockholder's
notice to be proper must set forth (A) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director (1) the name, age, business address and residence address of
such person, (2) the class and number of shares of stock of the
Corporation that are beneficially owned or owned of record by such
person, and (3) all other information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A (or any successor provision) under the
Securities Exchange Act (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the
stockholder proposes to bring before the meeting, a description of the
business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in
such business of such stockholder (including any anticipated benefit
to the stockholder therefrom) and of each beneficial owner, if any, on
whose behalf the proposal is made; and (C) as to the stockholder
giving the notice and each beneficial owner, if any, on whose behalf
the nomination or proposal is made, (1) the name and address of such
stockholder, as they appear on the Corporation's stock ledger and
current name and address, if different, and of such beneficial owner,
and (2) the class and number of shares of stock of the Corporation
which are owned beneficially and of record by such stockholder and
such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
paragraph (a)(ii) of this Section 12 to the contrary, in the event
that the number of directors to be elected to the Board of Directors
is increased and there is no public announcement by the Corporation of
such action or specifying the size of the increased Board of Directors
at least 100 days prior to the first anniversary of the date of
mailing of the notice for the preceding year's annual meeting, a
stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if the notice is delivered to the
secretary at the principal executive offices of the Corporation not
later than the close of business on the tenth day immediately
following the day on which such public announcement is first made by
the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made
at a special meeting of stockholders at which directors are to be elected
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) provided that the Board of
Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of
record both at the time of giving of notice provided for in this Section
12(b) and at the time of the special meeting, who is entitled to vote at
the meeting, and who complied with the notice procedures set forth in this
Section 12(b). In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a person or persons (as the
case may be) for election to such position as specified in the
Corporation's notice of meeting, if the stockholder's notice containing the
information required by paragraph (a)(ii) of this Section 12 shall have
been delivered to the secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 120th day prior
to such special meeting and not later than the close of business on the
later of the ninetieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of
the special meeting and the nominees proposed by the Board of Directors to
be elected at such meeting. In no event shall the public announcement of a
postponement or adjournment of a special meeting to a later date or time
commence a new time period for the giving of a stockholder's notice as
described above.
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(c) GENERAL.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as
directors, and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 12. The
chairman of the meeting shall have the power and duty to determine
whether a nomination or any other business proposed to be brought
before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 12 and, if
any proposed nomination or other business is not in compliance with
this Section 12, to declare that such nomination or proposal shall be
disregarded.
(ii) For purposes of this Section 12, (A) the "date of mailing of
the notice" shall mean the date of the proxy statement for the
solicitation of proxies for election of directors and (B) "public
announcement" shall mean disclosure (1) in a press release either
transmitted to the principal securities exchange on which shares of
the Corporation's common stock are traded or reported by a recognized
news service or (2) in a document publicly filed by the Corporation
with the United States Securities and Exchange Commission.
(iii) Notwithstanding the foregoing provisions of this Section
12, a stockholder shall also comply with all applicable requirements
of state law and of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 12.
Nothing in this Section 12 shall be deemed to affect any right of a
stockholder to request inclusion of a proposal in, nor the right of
the Corporation to omit a proposal from, the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 13. VOTING BY BALLOT. Voting on any question or in any election may
be VIVA VOCE unless the presiding officer shall order or any stockholder shall
demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at
any special meeting called for that purpose, a majority of the entire Board of
Directors may establish, increase or decrease the number of directors, provided
that the number thereof shall never be less than the minimum number required by
the Maryland General Corporation Law, nor more than 15, and further provided
that the tenure of office of a director shall not be affected by any decrease in
the number of directors. A director need not be a stockholder in the
corporation.
SECTION 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. In the
event such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the chairman of the board, the chief executive
officer, the president or by any two of the directors then in office. The person
or persons authorized to call special meetings of the Board of Directors may fix
any place as the place for holding any special meeting of the Board of Directors
called by them. The Board of Directors may provide, by resolution, the time and
place for the holding of special meetings of the Board of Directors without
other notice than such resolution.
SECTION 5. NOTICE. Notice of any special meeting of the Board of Directors
shall be delivered personally or by telephone, electronic mail, facsimile
transmission, United States mail or courier to each director at his business,
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electronic mail or residence address. Notice by personal delivery, telephone,
electronic mail, facsimile transmission or courier shall be given at least 48
hours prior to the meeting. Notice by United States mail shall be given at least
five business days prior to the meeting and shall be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. Telephone notice shall be deemed to be given when the director or the
director's agent is personally given such notice in a telephone call to which
the director or the director's agent is a party. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the message
to the number given to the Corporation by the director and receipt of a
completed answer-back indicating receipt. Electronic mail shall be deemed to be
given upon transmission of the message to the electronic mail address given to
the Corporation by the director. Notice by courier shall be deemed to be given
upon delivery to the address given to the Corporation by the director and
receipt by such courier of a signature evidencing delivery thereat. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.
SECTION 6. QUORUM. A majority of the directors shall constitute a quorum
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the charter of
the Corporation or these Bylaws, the vote of a majority of a particular group of
directors is required for action, a quorum must also include a majority of such
group.
The directors present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
SECTION 7. VOTING. The action of the majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute. If enough directors have withdrawn from a meeting
to leave less than a quorum but the meeting is not adjourned, the action of the
majority of the directors still present at such meeting shall be the action of
the Board of Directors, unless the concurrence of a greater proportion is
required for such action by applicable law.
SECTION 8. ORGANIZATION. At each meeting of the Board of Directors, the
chairman of the board or, in the absence of the chairman, the vice chairman of
the board, if any, shall act as Chairman. In the absence of both the chairman
and vice chairman of the board, the chief executive officer or in the absence of
the chief executive officer, the president or in the absence of the president, a
director chosen by a majority of the directors present, shall act as Chairman.
The secretary or, in his or her absence, an assistant secretary of the
Corporation, or in the absence of the secretary and all assistant secretaries, a
person appointed by the Chairman, shall act as Secretary of the meeting.
SECTION 9. TELEPHONE MEETINGS. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
SECTION 10. INFORMAL ACTION BY DIRECTORS. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by each director and
such written consent is filed with the minutes of proceedings of the Board of
Directors.
SECTION 11. VACANCIES. If for any reason any or all the directors cease to
be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors, whether
resulting from an increase in the number of directors or otherwise, may be
filled only may be filled only by a majority of the remaining directors, even if
the remaining directors do not constitute a quorum. Any director elected to fill
a vacancy shall serve for the remainder of the full term of the directorship in
which the vacancy occurred and until a successor is duly elected and qualifies.
Any director of the Corporation may resign at any time by giving written
notice of his resignation to the Board of Directors, the chairman of the board,
the president or the secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a resignation
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shall not be necessary to make it effective unless otherwise stated in the
resignation.
SECTION 12. COMPENSATION. Directors shall receive compensation for their
service as directors as may be determined by the Board of Directors; provided,
however, that no officer of the Corporation shall receive any compensation for
serving as a director of the Corporation. Directors may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting of
the Board of Directors or of any committee thereof and for their expenses, if
any, in connection with each property visit and any other service or activity
they performed or engaged in as directors; but nothing herein contained shall be
construed to preclude any directors from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 13. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
SECTION 14. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
SECTION 15. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the advisers, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
SECTION 16. CERTAIN RIGHTS OF DIRECTORS. The directors shall have no
responsibility to devote their full time to the affairs of the Corporation.
ARTICLE IV
COMMITTEES
SECTION 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee, a Nominating and Governance Committee and other
committees, composed of one or more directors, to serve at the pleasure of the
Board of Directors.
SECTION 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
SECTION 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or a
majority of the members of any committee (if there are two or more members) may
fix the time and place of its meeting unless the Board shall otherwise provide.
In the absence of any member of any such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint another
director to act in the place of such absent member. Each committee shall keep
minutes of its proceedings.
SECTION 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
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SECTION 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
SECTION 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a president, a
secretary and a treasurer and may include a chief executive officer, a chairman
of the board, a chief operating officer, a vice chairman of the board, one or
more vice presidents and such other officers, including one or more assistant
treasurers and assistant secretaries, with such powers and duties as the Board
of Directors shall deem necessary or desirable. Any two or more offices may be
held by the same person, except those of chairman and vice chairman or president
and vice president, respectively, may not be held concurrently by the same
person. The Board of Directors may establish and elect one or more officers of
the Board of Directors, which officers of the Board of Directors shall not be
deemed to be officers of the Corporation.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors after each annual meeting of stockholders, except that the chairman
of the board or the chief executive officer may appoint one or more vice
presidents, assistant secretaries and assistant treasurers. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Election or appointment of an officer shall not
of itself create contract rights between the Corporation and such officer.
The Board of Directors may from time to time authorize any officer or
officers to appoint and remove officers, agents and employees and to prescribe
their powers and duties. Such officers, agents and employees shall have such
authority and perform such duties as the Board of Directors or the officer or
officers appointing the same may from time to time prescribe. Unless otherwise
set forth in a written agreement between an officer and the Corporation or
otherwise prescribed by the Board of Directors or the officer or officers
appointing the same, officers shall hold their respective office until the next
annual election of officers and until a successor shall have been duly elected
and qualified, or until the death, resignation or removal in the manner
hereinafter provided of any such officer.
SECTION 3. DUTIES. The respective officers of the Corporation shall have
such authority, responsibilities and duties as may be prescribed therefor from
time to time by resolution of the Board of Directors or by a written agreement
between any such officer and the Corporation or as the officer or officers
appointing the same may prescribe.
SECTION 4. REMOVAL. Any officer may be removed, either with or without
cause, by the vote of a majority of the Board of Directors if the Board of
Directors in its judgment finds that the best interests of the Corporation will
be served or, except in the case of any officer elected or appointed by the
Board of Directors, by any superior officer, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
SECTION 5. RESIGNATIONS. Subject to the terms of a written agreement
between an officer and the Corporation, any officer may resign at any time by
giving written notice to the Board of Directors or to the president or to the
secretary of the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon receipt; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Such resignation shall be without prejudice to the rights, if any, of
the Corporation.
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SECTION 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these Bylaws for
regular election or appointment to such office.
SECTION 7. SALARIES. The salaries of the senior executive officers shall be
fixed from time to time by the Board of Directors or a committee thereof and may
be evidenced by a written agreement executed from time to time between the
Corporation and any of such officers. The salaries of all other officers and
employees of the Corporation shall be fixed by the senior executive officers in
accordance with the policies of the Corporation. No officer shall be prevented
from receiving such salary by reason of the fact that such officer is also a
director of the Corporation or a member of any committee.
SECTION 8. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the chairman or the vice chairman
of the board, the chief executive officer, the president or any officer of the
Corporation authorized by the chairman of the board, the chief executive officer
or the president shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation in which the
Corporation may hold securities and otherwise to exercise any and all rights and
powers which the Corporation may possess by reason of its ownership or
securities in such other corporation.
SECTION 9. CHAIRMAN OF THE BOARD. The chairman of the board shall perform
such functions and duties as from time to time may be assigned to him or her by
the Board of Directors. The chairman of the board, if present, shall preside at
all meetings of the stockholders and all meetings of the Board of Directors. The
chairman of the board shall in addition be the chief executive officer of the
Corporation and shall have the powers and duties of such office.
SECTION 10. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board, if
any, shall perform such functions and duties as from time to time may be
assigned to him or her by the Board of Directors. The vice chairman of the
Board, if present, shall preside in the absence of the chairman of the board at
all meetings of the stockholders and all meetings of the Board of Directors.
SECTION 11. CHIEF EXECUTIVE OFFICER. The chief executive officer of the
Corporation shall, subject to the direction of the Board of Directors, have
general responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business and
affairs of the Corporation.
SECTION 12. CHIEF OPERATING OFFICER. The chief operating officer of the
Corporation shall have the responsibilities and duties as set forth by the Board
of Directors and the chief executive officer.
SECTION 13. PRESIDENT. The president of the Corporation shall perform such
functions and duties as from time to time may be assigned to him or her by the
Board of Directors or the Chief Executive Officer. In the absence or disability
of the chief operating officer, the president shall be the chief operating
officer and shall perform the duties and exercise the powers of the chief
operating officer. In the absence of the chief executive officer, or if there be
none, the president shall be the chief executive officer and shall perform the
duties and exercise the powers of the chief executive officer.
SECTION 14. VICE PRESIDENTS. In the absence or disability of the president,
the vice president, if any (or in the event there is more than one, the vice
presidents in the order designated or, in the absence of any designation, then
in the order of their election), shall perform the duties and exercise the
powers of the president. The vice president(s) also generally shall assist the
president, the chief executive officer and the chief operating officer and shall
perform such other duties and have such other powers as from time to time may be
prescribed by the Board of Directors.
SECTION 15. SECRETARY. The secretary shall attend all meetings of the Board
of Directors and of the stockholders and shall record all votes and the
proceedings of all meetings in a book to be kept for such purposes. The
secretary also shall perform like duties for the committees, if required by any
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such committee. The secretary shall give (or cause to be given) notice of all
meetings of stockholders and all special meetings of the Board and shall perform
such other duties as from time to time may be prescribed by the Board of
Directors, the chairman or vice chairman of the board or the president. The
secretary shall have custody of the seal of the Corporation, shall have
authority (as shall any assistant secretary) to affix the same to any instrument
requiring it, and to attest the seal by his or her signature. The Board of
Directors may give general authority to officers other than the secretary or any
assistant secretary to affix the seal of the Corporation and to attest the
affixing thereof by his or her signature.
SECTION 16. ASSISTANT SECRETARY. The assistant secretary, if any (or in the
event there is more than one, the assistant secretaries in the order designated,
or in the absence of any designation, in the order of their election), in the
absence or disability of the secretary, shall perform the duties and exercise
the powers of the secretary. The assistant secretary(ies) shall perform such
other duties and have such other powers as from time to time may be prescribed
by the Board of Directors.
SECTION 17. TREASURER. The treasurer shall be the chief financial officer
of the Corporation and shall monitor the custody of the corporate funds,
securities, other similar valuable effects, and evidences of indebtedness, shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and payroll matters and shall cause to be deposited all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as from time to time may be designated by the
Board of Directors. The treasurer shall cause to be disbursed the funds of the
Corporation in such manner as may be ordered by the Board of Directors from time
to time and shall render to the chairman or vice chairman of the board, the
president and the Board, at regular meetings of the Board or whenever any of
them may so require, an account of all transactions and of the financial
condition of the Corporation.
SECTION 18. ASSISTANT TREASURER. The assistant treasurer, if any (or in the
event there is more than one, the assistant treasurers in the order designated,
or in the absence of any designation, in the order of their election), in the
absence or disability of the treasurer, shall perform the duties and exercise
the powers of the treasurer. The assistant treasurer(s) shall perform such other
duties and have such other powers as from time to time may be prescribed by the
Board of Directors.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
agent to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of the Corporation and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.
SECTION 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officers or agents of the Corporation in
such manner as shall from time to time be determined by the Board of Directors.
SECTION 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE VII
STOCK
SECTION 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chairman of the board, the vice chairman of the board,
the president or a vice president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer and may be sealed
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with the seal, if any, of the Corporation. The signatures may be either manual
or facsimile. Certificates shall be consecutively numbered; and if the
Corporation shall, from time to time, issue several classes of stock, each class
may have its own number series. A certificate is valid and may be issued whether
or not an officer who signed it is still an officer when it is issued. Each
certificate representing shares which are restricted as to their transferability
or voting powers, which are preferred or limited as to their dividends or as to
their allocable portion of the assets upon liquidation or which are redeemable
at the option of the Corporation, shall have a statement of such restriction,
limitation, preference or redemption provision, or a summary thereof, plainly
stated on the certificate. If the Corporation has authority to issue stock of
more than one class, the certificate shall contain on the face or back a full
statement or summary of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
SECTION 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of the
terms and conditions contained therein.
SECTION 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of
Directors may direct a new certificate to be issued in place of any certificate
previously issued by the Corporation alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing the issuance
of a new certificate, an officer designated by the Board of Directors may, in
his discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or the owner's legal
representative to advertise the same in such manner as he shall require and/or
to give bond, with sufficient surety, to the Corporation to indemnify it against
any loss or claim which may arise as a result of the issuance of a new
certificate.
SECTION 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of
Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
determining stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer than
20 days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the thirtieth day before the meeting, whichever is the closer date to the
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meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired in which case a new record date shall be determined as set forth
herein.
SECTION 5. STOCK LEDGER. The Corporation shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate stock ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
SECTION 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may
issue fractional stock or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
SECTION 1. AUTHORIZATION. Dividends and other distributions upon the stock
of the Corporation may be authorized by the Board of Directors, subject to the
provisions of law and the charter of the Corporation. Dividends and other
distributions may be paid in cash, property or stock of the Corporation, subject
to the provisions of law and the charter.
SECTION 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
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ARTICLE XI
SEAL
SECTION 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the words "Incorporated Maryland." The Board of Directors may authorize one or
more duplicate seals and provide for the custody thereof.
SECTION 2. AFFIXING SEAL. Whenever the Corporation is permitted or required
to affix its seal to a document, it shall be sufficient to meet the requirements
of any law, rule or regulation relating to a seal to place the word "[SEAL]"
adjacent to the signature of the person authorized to execute the document on
behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES; INSURANCE
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served as a director,
officer, partner or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. The Corporation may, with
the approval of its Board of Directors, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person to the fullest extent permitted by Section 2-418(k) of the
Maryland General Corporation Law, or any successor statute. The rights to
indemnification set forth in the charter or in these Bylaws are in addition to
all rights which any such indemnitee may be entitled as a matter of law and
shall inure to the benefit of the heirs and personal representatives of each
such indemnitee.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
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ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
<PAGE>
PROXY/VOTING INSTRUCTION CARD
FRANCHISE FINANCE CORPORATION OF AMERICA
c/o Gemisys Transfer Agents, P.O. Box 3287, Englewood, CO 80155-3287
ANNUAL MEETING DATE: MAY 10, 2000
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 John R.
Barravecchia and Dennis L. Ruben, 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 15, 2000, 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 Fairmont Scottsdale Princess, 7575
East Princess Drive, Scottsdale, Arizona on Wednesday, May 10, 2000 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.
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote all nominees listed
below) below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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Morton H. Fleischer, Willie R. Barnes, Kelvin L. Davis, Kathleen H. Lucier,
Dennis E. Mitchem, Louis P. Neeb, Kenneth B. Roath, Casey J. Sylla, Christopher
H. Volk and Shelby Yastrow
2. Proposal to amend the Company's 1995 Stock Option and Incentive Plan (the
"Stock Option Plan") to extend the term of the Stock Option Plan to June 1,
2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to change the state of incorporation of the Company from Delaware
to Maryland.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
[ ] 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.
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, dated March 31, 2000 and the Proxy Statement furnished therewith.
Dated 2000
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Authorized Signature
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Title
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Authorized Signature
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Title
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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.
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 10, 2000.
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