<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
PACIFIC GULF PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PACIFIC GULF PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
PACIFIC GULF PROPERTIES INC.
363 SAN MIGUEL DRIVE
NEWPORT BEACH, CALIFORNIA 92660
------------------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1997
To the shareholders:
The 1997 annual meeting of shareholders of Pacific Gulf Properties Inc.
(the "Company") will be held Wednesday, May 7, 1997, at the Four Seasons Hotel,
690 Newport Center Drive, Newport Beach, California, at 10:00 a.m. (Los Angeles
time), for the following purposes:
1. To elect three Class III Directors for a term of three years and
until their successors are duly elected and qualified;
2. To approve an amendment to the Company's 1993 Share Option Plan
that would (i) increase the aggregate number of Common Shares authorized
for issuance under such plan by 350,000 shares (105,000 of which will be
reserved for issuance to non-employee directors) to 1,050,000 shares; (ii)
increase the size of the stock option awarded to non-employee directors
upon their initial election or appointment to the Board from an option to
purchase 2,500 shares of the Company's Common Stock to an option to
purchase 5,000 shares of the Company's Common Stock; (iii) increase the
size of the automatic stock option annually awarded to each non-employee
director from an option to purchase 500 shares of the Company's Common
Stock to an option to purchase 4,000 shares of the Company's Common Stock;
and (iv) grant incumbent directors a one time option to purchase 2,500
shares of the Company's Common Stock.
3. To transact such other business as properly may come before the
meeting and any adjournment thereof.
Further information regarding the business to be transacted at the meeting
is given in the accompanying Proxy Statement.
Shareholders of record at the close of business on April 1, 1997 are
entitled to notice of, and to vote at, the meeting.
Please help the Company by promptly marking, dating, signing and returning
the enclosed Proxy Card in the envelope provided for your convenience. If you
attend the meeting and decide to vote in person, you may revoke your Proxy.
By Order of the Board of Directors
DONALD G. HERRMAN
Secretary
April 7, 1997
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 3
PACIFIC GULF PROPERTIES INC.
363 SAN MIGUEL DRIVE
NEWPORT BEACH, CALIFORNIA 92660
------------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1997
------------------------
GENERAL INFORMATION
The Board of Directors of Pacific Gulf Properties Inc. ("PAG" or the
"Company") is soliciting the accompanying Proxy for use at the 1997 annual
meeting of shareholders (the "Annual Meeting") to be held Wednesday, May 7,
1997, and at any and all adjournments or postponements thereof. Any shareholder
giving a Proxy has the right to revoke it at any time before it is voted by
giving written notice to the Secretary of PAG, by delivering to the Secretary of
PAG a duly executed proxy bearing a later date, or by attending and voting in
person at the Annual Meeting. At the Annual Meeting, the designated proxy
holders will vote the shares of common stock, $0.01 par value per share (the
"Common Shares"), represented by a Proxy which is received and not revoked.
Where the shareholder specifies a choice on the Proxy Card with respect to any
matter to be acted upon, the Common Shares will be voted in accordance with the
choice specified. Where no choice is specified, the shares represented by a
signed Proxy Card will be voted in favor of the proposals set forth in the
Notice attached hereto.
Shareholders are invited to attend the Annual Meeting. Whether or not you
expect to attend, you are urged to sign, date, and promptly return the enclosed
Proxy Card in the enclosed postage prepaid envelope. If your shares are held of
record by a broker, bank or other nominee and you wish to attend and vote your
shares at the Annual Meeting you must obtain a letter from the broker, bank or
nominee confirming your beneficial ownership of the shares and a written Proxy
from the holder issued in your name, and bring it to the Annual Meeting.
This Proxy Statement and the accompanying Proxy Card are first being mailed
to shareholders on or about April 7, 1997.
The cost of soliciting proxies will be borne by PAG. In addition to
solicitation by mail, and without additional compensation for such services,
proxies may be solicited personally, or by telephone or telegraph, by officers
or employees of PAG. PAG will also request banking institutions, brokerage
firms, custodians, trustees, nominees, fiduciaries and other like parties to
forward the solicitation materials to the beneficial owners of Common Shares
held of record by such persons, and PAG will upon request of such record holders
reimburse forwarding charges and expenses.
SHARES OUTSTANDING AND VOTE REQUIRED
At the close of business on April 1, 1997, the record date for
determination of shareholders entitled to notice of, and to vote at, the Annual
Meeting, approximately 12,058,273 Common Shares of PAG were outstanding. Each
whole Common Share is entitled to one vote. There is no right to cumulative
voting. A majority of the outstanding Common Shares represented in person or by
proxy will constitute a quorum at the Annual Meeting.
<PAGE> 4
Assuming the existence of a quorum, the three nominees for election as
directors who receive the highest number of votes therefor at the Annual Meeting
will be elected as directors under Proposal 1. Approval of the Amendment to the
1993 Share Option Plan under Proposal 2 requires the affirmative vote of a
majority of the shares of Common Stock at the Annual Meeting.
Representatives of PAG's transfer agent will assist PAG in the tabulation
of the votes. Abstentions and broker non-votes are counted as Common Shares
represented at the Annual Meeting for purposes of determining a quorum. An
abstention has the effect of a vote "withheld" with respect to the election of
directors under Proposal 1. Broker non-votes are not entitled to vote because
they indicate the withholding of power to vote on a specific matter and
therefore have no effect on the outcome of a proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Shares of the Company as of December 31, 1996 by each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the Company's outstanding common shares, each director of the Company,
the officers of the Company, and by all directors and officers as a group. To
the Company's knowledge, each person named in the table has sole voting and
investment power with respect to all shares shown as beneficially owned by such
person, and the address of each person named is the same as the Company's unless
otherwise indicated in the accompanying notes.
<TABLE>
<CAPTION>
COMMON SHARES BENEFICIALLY OWNED
-------------------------------------
BENEFICIAL OWNER(1) AMOUNT PERCENT OF CLASS(2)
------------------------------------------- ------- -------------------
<S> <C> <C>
Morgan Stanley Group Inc................... 635,900(3) 6.5%
Investment Counselors of Maryland.......... 409,900(4) 4.2
Capital Growth Management, L.P............. 401,800(5) 4.1
FMR Corporation............................ 380,100(6) 3.8
Glenn L. Carpenter......................... 130,177(7) 1.3
Donald G. Herrman.......................... 73,376(8) *
Lonnie P. Nadal............................ 48,016(9) *
Robert A. Dewey............................ 22,198(10) *
Angela M. Wixted........................... 13,740(11) *
Kimberly G. Brown.......................... 11,424(12) *
Royce B. McKinley.......................... 17,000(13) *
Robert E. Morgan........................... 30,654(13) *
Stewart W. Bowie........................... 44,800(13)(14) *
Peter L. Eppinga........................... 15,296(13) *
John F. Kooken............................. 12,300(13) *
Keith W. Renken............................ 7,500(13) *
All officers and directors as a group (12
persons) 426,481 4.3
</TABLE>
- ---------------
* Less than 1%.
(1) On December 31, 1996, the Company entered into an agreement to issue an
aggregate of 1,351,351 shares of the Company's Class A Senior Cumulative
Convertible Preferred Stock (the "Preferred Shares") over the course of
1997 to Five Arrows Realty Securities L.L.C. ("Five Arrows"). Subsequent to
December 31, 1997, the Board issued to Five Arrows an installment of
270,270 Preferred Shares. As holder of 100% of the outstanding shares of
preferred, Five Arrows maintains the contractual right to elect one
preferred director to the Board, and Five Arrows elected Mr. James Quigley,
3rd to such position. Although the Preferred Shares are immediately
convertible into Common Shares, Five Arrows has no voting rights at the
annual meeting because the Preferred Shares were issued subsequent to the
record date.
2
<PAGE> 5
(2) Except as otherwise stated in the notes below, all percentages shown are
without assuming conversion of any of the Company's Convertible
Subordinated Debentures into Common Shares.
(3) Morgan Stanley Group Inc.'s ("Morgan Stanley") address is 1585 Broadway,
New York, New York 10036. Information regarding ownership of common shares
by Morgan Stanley is included herein in reliance upon information set forth
in an Amended Schedule 13G filed by Morgan Stanley on February 14, 1997.
Morgan Stanley has indicated in such Schedule 13G that all shares are owned
by various investment advisory clients of Morgan Stanley and that Morgan
Stanley is deemed to be the beneficial owner pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(4) Investment Counselors of Maryland, Inc.'s ("ICM") address is 803 Cathedral
Street, Baltimore, Maryland 21201. Information regarding ownership of
common shares by ICM is included herein in reliance upon information set
forth in an Amended Schedule 13G filed by ICM on February 14, 1997. ICM has
indicated in such Schedule 13G that all shares are owned by various
investment advisory clients of ICM and that ICM is deemed to be the
beneficial owner pursuant to Rule 13d-3 of the Exchange Act.
(5) Capital Growth Management Limited Partnership's ("CGM") address is One
International Place, Boston, Massachusetts 02110. Information regarding
ownership of common shares by CGM is included herein in reliance upon
information set forth in a Schedule 13G filed by CGM on February 11, 1997.
CGM has indicated in such Schedule 13G that all shares are owned by various
investment advisory clients of CGM and that CGM is deemed to be the
beneficial owner pursuant to Rule 13d-3 of the Exchange Act.
(6) FMR Corporation's ("FMR") address is 82 Devonshire Street, Boston,
Massachusetts 02109. Information regarding ownership of common shares by
FMR is included herein in reliance upon information set forth in a Schedule
13G filed by FMR on February 14, 1997. FMR has indicated in such Schedule
13G that all shares are owned by various investment advisory clients of FMR
and that FMR is deemed to be the beneficial owner pursuant to Rule 13d-3 of
the Exchange Act.
(7) Includes 78,000 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan, 46,363 shares of restricted stock
granted under the Company's 1993 Share Option Plan, and 3,537 shares
allocated to Mr. Carpenter in the Company's Thrift Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan" and "Thrift Plan.")
(8) Includes 52,500 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan, 18,818 shares of restricted stock
granted under the Company's 1993 Share Option Plan, and 2,058 shares
allocated to Mr. Herrman in the Company's Thrift Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan" and "Thrift Plan.")
(9) Includes 37,000 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan, 10,025 shares of restricted stock
granted under the Company's 1993 Share Option Plan, and 491 shares
allocated to Mr. Nadal in the Company's Thrift Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan" and "Thrift Plan.")
(10) Includes 16,000 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan, 5,863 shares of restricted stock
granted under the Company's 1993 Share Option Plan, and 335 shares
allocated to Mr. Dewey in the Company's Thrift Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan" and "Thrift Plan.")
(11) Includes 11,000 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan and 2,527 shares of restricted stock
granted under the Company's 1993 Share Option Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan.")
(12) Includes 10,250 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan and 1,000 shares of restricted stock
granted under the Company's 1993 Share Option Plan. (See "EXECUTIVE
COMPENSATION -- Share Option Plan.")
(13) Includes 3,500 shares purchasable upon exercise of options granted under
the Company's 1993 Share Option Plan. (See "EXECUTIVE COMPENSATION -- Share
Option Plan.")
(14) Excludes 2,000 shares of common stock owned by Mr. Bowie's adult
step-daughter; Mr. Bowie disclaims beneficial ownership of such. Also
excludes 2,000 shares of common stock owned by Mr. Bowie's adult step-son;
Mr. Bowie disclaims beneficial ownership of such.
3
<PAGE> 6
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
PAG's Board of Directors (the "Board") consists of eight members, divided
into three classes which are designated Class I, Class II, and Class III.
Currently, there are two Class I directors, three Class II directors (one of
which was elected by, and will stand for re-election at the expiration of his
term at the direction of the holder of the Preferred Stock), and three Class III
directors.
At the Annual Meeting, the Class III directors are to be elected for a term
of three years (expiring 2000) and until the election and qualification of their
successors. Management proposes re-election of Messrs. Peter L. Eppinga, John F.
Kooken and Robert E. Morgan as Class III directors of PAG. Each nominee has
consented to being named in this Proxy Statement and to serve if elected.
The Common Shares represented by the accompanying Proxy will be voted to
elect the three nominees named herein. Should any of the three nominees named
herein become unavailable for election, which is not anticipated, the Common
Shares represented by the accompanying Proxy will be voted for the election of
another person recommended by PAG. Messrs. Eppinga, Kooken and Morgan are at
present the Class III directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF THE NAMED
NOMINEES AS DIRECTORS OF PAG.
The following table sets forth certain information as to the nominees, as
well as other members of the Board whose terms do not expire in 1997, including
their ages, principal business experience during the past five years, the year
they each first became a director, Board Committee membership and other
directorships currently held in companies with a class of securities registered
pursuant to Section 12 of the Exchange Act or subject to the requirements of
Section 15(d) of that Act or any company registered as an investment company
under the Investment Company Act of 1940. (An asterisk in the chart denotes
ownership of less than 1% of the outstanding common stock.)
NOMINEES FOR ELECTION AS DIRECTORS -- CLASS III
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS EXPERIENCE BENEFICIAL PERCENT OF
DURING PAST 5 YEARS DIRECTOR OWNERSHIP OF OUTSTANDING
DIRECTOR AND ALL POSITIONS WITH PAG AGE SINCE COMMON STOCK COMMON STOCK
- --------------------- ---------------------------------- --- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Peter L. Eppinga Practicing attorney specializing 55 1994 15,296 *
in corporate securities and real
estate; former President of Laguna
Hills Properties, 1991 to 1994;
former Senior Vice President of
Sears Savings Bank; director,
Alzheimer's Association, San
Francisco
John F. Kooken Retired; former Vice Chairman and 65 1994 12,300 *
Chief Financial Officer of
Security Pacific Corporation, 1987
to 1992; director, U.S. Facilities
Corporation, Glendale Federal
Bank, Southern California
Healthcare Systems, and Huntington
Memorial Hospital
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS EXPERIENCE BENEFICIAL PERCENT OF
DURING PAST 5 YEARS DIRECTOR OWNERSHIP OF OUTSTANDING
DIRECTOR AND ALL POSITIONS WITH PAG AGE SINCE COMMON STOCK COMMON STOCK
- --------------------- ---------------------------------- --- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert E. Morgan Retired; former President, 77 1993 30,654 *
Coldwell Banker First Newport
Corporation; former President,
Coldwell Banker Real Estate
Finance Services; director, Bixby
Ranch Company, Meridian Point
Realty Trust 83; former director
of Santa Anita Realty Enterprises
and Operating Company, 1975 to
1995
</TABLE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1998 -- CLASS I
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS EXPERIENCE BENEFICIAL PERCENT OF
DURING PAST 5 YEARS DIRECTOR OWNERSHIP OF OUTSTANDING
DIRECTOR AND ALL POSITIONS WITH PAG AGE SINCE COMMON STOCK COMMON STOCK
- --------------------- ---------------------------------- --- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Glenn L. Carpenter Chairman of the Board since Janu- 54 1993 130,177 1.3%
ary 1, 1996, President and Chief
Executive Officer since inception
of PAG; Chief Executive Officer,
Santa Anita Realty Enterprises,
Inc., February 1992 to February
1994; President of Santa Anita
Realty Enterprises, Inc., December
1989 to February 1994
Keith W. Renken Retired; formerly Managing Partner 61 1994 7,500 *
of Los Angeles office of Deloitte
& Touche; director, Coast Federal
Bank; "Executive in Residence"
teaching program at University of
Southern California's School of
Accounting
</TABLE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1999 -- CLASS II
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS EXPERIENCE BENEFICIAL PERCENT OF
DURING PAST 5 YEARS DIRECTOR OWNERSHIP OF OUTSTANDING
DIRECTOR AND ALL POSITIONS WITH PAG AGE SINCE COMMON STOCK COMMON STOCK
- --------------------- ---------------------------------- --- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Royce B. McKinley Chairman of the Board of Directors 76 1994 17,000 *
of PAG March 1994 through Decem-
ber 31, 1995; retired; formerly
Chairman of the Board and Chief
Executive Officer, Santa Anita
Realty Enterprises, Inc.;
director, Santa Anita Realty
Enterprises and Operating Company,
1979 to 1993
Stewart W. Bowie Retired; former Chief Executive 72 1994 44,800 *
Officer of SDC, Inc.; past
Chairman of the California
Business Properties Association;
director, Oak Grove Oil Company;
former director, Santa Anita
Realty Enterprises and Operating
Company
James E. Quigley, 3rd Sr. Vice President and Treasurer 40 1997 None(1) *
of Rothschild Realty since 1990;
director, Charter Oak, a
subsidiary of Rothschild Realty
since 1989
</TABLE>
5
<PAGE> 8
- ---------------
(1) At December 31, 1996, Mr. Quigley was not a Director and did not have any
beneficial ownership in the Common Stock of the Company.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has created and delegated certain authority to its
Executive Committee, Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee as follows:
Executive Committee. The Executive Committee consists of Messrs. McKinley,
Eppinga, Bowie, Quigley and Kooken. The Executive Committee has the authority to
perform all functions of the full Board, subject to certain limitations
prescribed by the Board and by Maryland law, including approval of all real
estate investments. The Executive Committee held six meetings during the year
ended December 31, 1996.
Audit Committee. The Audit Committee consists of Messrs. Renken, Kooken and
Morgan. The Audit Committee performs numerous functions, including review of the
annual financial statements with both management and the independent auditors.
The Audit Committee also recommends the engagement of the independent accounting
firm and meets with the independent accountants regarding the scope and conduct
of the annual audit. In addition, the Committee may inquire about and discuss
policies and procedures with respect to principles of business conduct,
financial and accounting controls, compliance with the Foreign Corrupt Practices
Act of 1977, areas of special concern and other related matters. The Audit
Committee met three times during the year ended December 31, 1996.
Compensation Committee. The Compensation Committee consists of Messrs.
Morgan, McKinley and Renken. The Compensation Committee reviews the performance
and effectiveness of the Chief Executive Officer and recommends an annual
compensation level for the Chief Executive Officer to the Board of Directors.
The Committee also sets the compensation level of all other officers, approves
all grants of stock options and restricted stock and administers the Company's
stock option and other employee benefit programs and plans. The Compensation
Committee met two times during the year ended December 31, 1996.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee consists of Messrs. Bowie, Eppinga, Quigley and Morgan. The
Nominating and Corporate Governance Committee reviews governance issues and
makes recommendations to the Board for committee assignments and chairmanships
of the committees. The Nominating Committee also considers candidates for
appointment to the Board and other such duties delegated to it. The Nominating
Committee met two times during the year ended December 31, 1996.
During the year ended December 31, 1996, all directors attended at least
75%, in the aggregate, of the meetings of the Board and Committees of which they
were members during the periods they were members. During the past year, the
Board of Directors met eight times.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not officers of the Company fees for
their services as directors. Directors receive annual compensation of $12,000
plus a fee of $750 ($1,000 for the Chairman of each meeting) for attendance (in
person or by telephone) at each meeting of the Board of Directors and committee
meetings. Directors of the Company who are also employees or officers are not
paid director fees.
Each director of the Company who is not otherwise an employee of the
Company or any of its subsidiaries or affiliates, on each December 31,
commencing December 31, 1995, automatically receives an annual grant of options
to purchase 500 shares of common stock at an exercise price equal to 100% of the
fair market value of the Common Shares on the date of grant of such option.
Non-employee directors received at the closing of the Company's initial public
offering options to purchase 2,500 common shares at an exercise price equal to
the fair market value of the common shares on the date of grant. Mr. Stewart
Bowie, upon joining the Board of Directors in June 1994, received an initial
grant of options to purchase 2,500 common shares at an exercise price equal to
100% of the fair market value of the common shares as of the date he joined the
Board.
6
<PAGE> 9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent (10%) of a
registered class of its equity securities, to file with the Securities and
Exchange Commission and the New York Stock Exchange initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company. Such officers, directors and beneficial owners are also required
by Securities and Exchange Commission rules and regulations to furnish the
Company with copies of all Section 16(a) forms they file.
The Company is aware that the following directors tendered late reports
required by Section 16(a): Mr. Stewart Bowie filed three delinquent Form 4
reports regarding three transactions; Mr. Peter Eppinga filed one delinquent
Form 4 report regarding two transactions; Mr. Royce McKinley filed one
delinquent Form 4 report regarding two transactions; Mr. Robert Morgan filed one
delinquent Form 4 report regarding one transaction; and Mr. Keith Renken filed
two delinquent Form 4 reports regarding two transactions. All delinquencies were
subsequently reported on a Form 5 report, submitted for the year ended December
31, 1996.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE
1993 SHARE OPTION PLAN
On March 12, 1997, the Board of Directors unanimously adopted, subject to
shareholder approval, an amendment to the Company's 1993 Share Option Plan
("Share Option Plan") to increase the number of shares reserved for issuance
thereunder from 700,000 shares (45,000 of which have been reserved for awards to
non-employee directors) to 1,050,000 shares (150,000 of which will be reserved
for awards to non-employee directors) (the "Increased Share Amendment"). The
Board adopted the Increased Share Amendment to ensure that the Company can
continue to grant stock options to employees at levels determined appropriate by
the Board and the Compensation Committee.
On March 12, 1997, the Board of Directors unanimously adopted, subject to
shareholder approval, an amendment to the 1993 Share Option Plan that would (i)
increase the size of the stock option awarded to non-employee directors upon
their initial election or appointment to the board from an option to purchase
2,500 shares of the Company's Common Stock to an option to purchase 5,000 shares
of the Company's Common Stock; (ii) increase the size of the automatic stock
option annually awarded to each non-employee director from an option to purchase
500 shares of the Company's Common Stock to an option to purchase 4,000 shares
of the Company's Common Stock; and (iii) grant incumbent directors a one time
option to purchase 2,500 shares of the Company's Common Stock (the "Non-Employee
Director Amendment", and, together with the Increase Share Amendment, the
"Amendment").
Presently, each director of the Company who is not otherwise an employee of
the Company or any of its subsidiaries of affiliates receives, upon initial
election to the Board, a nonqualified stock option to purchase 2,500 shares of
Common Stock at an exercise price equal to 100% of the fair market value of the
Common Stock as of such date of grant. Thereafter, on each December 31, such
director automatically receives an annual grant of a nonqualified stock option
to purchase 500 additional shares of Common Stock at an exercise price equal to
100% of the fair market value of the Common Stock on such date of grant.
Pursuant to the Amendment, Section 7.2 of the Share Option Plan would be amended
to provide that each newly appointed or elected director would receive a
nonqualified stock option to purchase 5,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock as of
such date of grant and that directors presently incumbent would receive a one
time grant of a nonqualified stock option to purchase 2,500 shares of Common
Stock at an exercise price equal to 100% of the fair market value of the Common
Stock on the date such proposal is approved. Moreover, the Amendment provides
that on each December 31, each director would automatically receive a
nonqualified stock option to purchase 4,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock on
such date of grant. The Board has adopted this Amendment to provide incentives
to attract and retain directors to serve on the Board.
7
<PAGE> 10
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE COMPANY'S
1993 SHARE OPTION PLAN.
Approval of the Amendment to the Share Option Plan requires the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on this
proposal. The following is a description of the material provisions of the Share
Option Plan. A copy of the proposed Amendment to the Share Option Plan is set
forth in Appendix A to the Proxy Statement.
The Share Option Plan provides for grants of options to purchase a
specified number of Common Shares ("Options"), awards of restricted Common
Shares ("Restricted Stock") and grants of stock appreciation rights ("SARS").
Under the Share Option Plan, the total number of shares available to be granted
prior to the Amendment proposed herein was 700,000 Common Shares (45,000 of
which have been reserved for awards to non-employee directors). As of December
31, 1996, options and awards of Restricted Stock covering an aggregate of
326,196 shares of the Company's Common Shares had been granted under the 1993
Share Option Plan and 373,804 shares remained available for future grants under
the Plan. In the event of certain extraordinary events, the Board of Directors
or the Compensation Committee may make such adjustments in the aggregate number
and kind of shares reserved for issuance, the number of shares and kind covered
by outstanding awards and the exercise prices specified therein as may be
determined to be appropriate.
Participants in the Share Option Plan, who may be officers or any other
employees of the Company, are selected by the Compensation Committee. Directors
of the Company are also eligible to participate, but, in the case of directors
who are not also employees, only pursuant to automatic grants under a specified
formula set forth in the Share Option Plan. No employees may receive a grant of
options for more than 100,000 Common Shares in any calendar year.
The Share Option Plan authorizes the Compensation Committee to grant
Options at an exercise price determined by the Compensation Committee, but not
less than 100% of the fair market value of the Common Shares on the date on
which the Option is granted. The exercise price is generally payable in cash or,
in certain circumstances, by the surrender, at the fair market value on the date
on which the Option is exercised, of Common Shares or by requesting that the
Company withhold a number of Common Shares with a fair market value equal to the
aggregate option exercise price. The vesting provisions, if any, of the Options
and Restricted Stock will be determined by the Compensation Committee. The
Committee may accelerate or extend the exercisability or vesting of any Options
or Restricted Stock or extend the term of any Option. However, all Options must
expire no later than ten years after the date of grant. Generally, the right of
any participant to exercise an Option may not be transferred in any way other
than by will or the laws of descent and distribution.
The Company may loan to an Option holder funds sufficient to exercise all
or a portion of any Options, such loans to be made at the absolute discretion of
the Company's Board of Directors. Each such loan shall be evidenced by a
promissory note of the Option holder bearing interest equal to the then prime
rate of interest charge by Bank of America NT&SA, which rate shall be adjusted
annually. The note shall be unsecured with full recourse against the Option
holder. The note shall be repaid over a period of time not to exceed five years,
with 10% minimum annual installments and the unpaid principal shall be payable
at the end of the fifth year; provided that the Company may demand payment, in
addition to such installments, as may be required for it to remain in compliance
with any applicable state or federal regulation.
The Share Option Plan permits the Compensation Committee to grant shares of
Restricted Stock to a participant subject to the terms and conditions imposed by
the Compensation committee. These terms include a restriction period (the
"Restriction Period") during which the shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered. Except for such
restrictions on transfer and such other restrictions as the Compensation
Committee may impose, the participants have all the rights of a holder of Common
Shares as to such Restricted Stock including the right to vote the shares and
the right to receive any cash distributions. If so determined by the
Compensation Committee in the applicable Restricted Stock agreement, the
Compensation Committee may require the payment of cash distributions to be
deferred and reinvested in additional Restricted Stock. Except as provided by
the Compensation Committee at the time of
8
<PAGE> 11
grant or otherwise, upon a termination of employment for any reason during the
Restriction Period, all shares still subject to restriction will be forfeited by
the participant.
The Share Option Plan also permits the Compensation Committee to grant
SARS. SARS will typically be granted in tandem with Options and entitle the
holder to surrender all or a portion of an Option in exchange for an amount
equal to the difference between the fair market value of a Common Share on the
date of exercise and the exercise price of the Option. Amounts may be payable,
at the option of the Compensation Committee, either in cash or in Common Shares.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options", as defined in Section 422 of the Internal Revenue Code (the "Code"),
or nonstatutory options.
The following discussion of the federal income tax consequences relating to
the exercise of any option or any disposition of stock acquired under the Plan
pursuant to an option exercise is based on present federal tax laws and
regulations and does not purport to be a complete description of the federal
income tax laws. Participants may also be subject to certain state and local
taxes which are not described below. Accordingly, each Participant should
consult his or her own tax adviser with respect to the application of the
general principles discussed below to his or her particular situation, the
advisability of making the elections described below, and the impact of state
and local taxes.
NONQUALIFIED STOCK OPTIONS
The grant of a nonqualified stock option under the Plan will not result in
taxable income to the recipient at the time of the grant. When the holder
exercises the nonqualified stock option, however, he or she will generally
recognize ordinary income equal to the difference between the option price and
the fair market value of the shares at the time of exercise. The Company is
generally entitled to a corresponding deduction at the same time and in the same
amounts as the income recognized by the Option holder.
If a holder of a nonqualified stock option pays the option exercise price
solely in cash, his or her basis in the shares acquired is equal to the fair
market value of the Common Stock on the date ordinary income is recognized and,
upon subsequent disposition, any further gain or loss is taxable either as a
short-term or long-term capital gain or loss, depending on how long the shares
of Common Stock are held. The holding period for such shares commences as of the
date ordinary income is recognized.
If a holder of a nonqualified stock option pays the exercise price, in full
or in part, with previously acquired shares of Common Stock, he or she will
recognize ordinary income in an amount equal to the excess of the fair market
value of the Common Stock received over the exercise price. Based on rulings
issued by the Internal Revenue Service, no additional gain or loss is recognized
as a result of the disposition of previously acquired shares of Common Stock.
The shares of Common Stock received by the holder equal in number to the
previously acquired shares exchanged therefore, will have the same basis and
holding period as such previously acquired shares. The shares of Common Stock
received by the holder in excess of the number of previously acquired shares
will have a basis equal to the fair market value of such additional shares as of
the date ordinary income is recognized. The holding period for such additional
shares will commence as of the date ordinary income is recognized.
INCENTIVE STOCK OPTIONS
An employee who is granted an incentive stock option under the Share Option
Plan does not recognize taxable income either on the date of grant or on the
date of its timely exercise. Upon disposition of the Common Stock acquired upon
exercise of an incentive stock option, long-term capital gain or loss will be
recognized in an amount equal to the difference between the sales price and the
option exercise price, provided that the employee has not disposed of the Common
Stock within two years of the date of grant or within one year from the date of
exercise. If the employee disposes of the Common Stock without satisfying both
holding period requirements (a "Disqualifying Disposition"), he or she will
generally recognize ordinary income at the
9
<PAGE> 12
time of such Disqualifying Disposition equal to the difference between the
exercise price and the fair market value of the Common Stock on the date the
incentive stock option is exercised. In no event, however, shall the ordinary
income exceed the difference between the adjusted basis of the Common Stock and
the amount realized on such Disqualifying Disposition. Any remaining gain or net
loss is treated as a short-term or long-term capital gain or loss, depending
upon how long the Common Stock is held. Unlike the case in which a nonqualified
stock option is exercised, the Company is not entitled to a tax deduction upon
either the timely exercise of an incentive stock option or upon disposition of
the Common Stock acquired pursuant to such exercise, except to the extent that
the employee recognizes ordinary income in a Disqualifying Disposition.
In addition to the regular income tax, an employee may be subject to the
federal alternative minimum tax if his or her alternative minimum taxable income
("AMTI") exceeds certain amounts. The excess of the fair market value of the
Common Stock received upon exercise of an incentive stock option over the option
exercise price is includable in the employee's AMTI. If a Disqualifying
Disposition occurs at a loss in the same taxable year that the excess was
includable in AMTI, the includable amount is limited to the excess of the amount
realized on the Disqualifying Disposition over the exercise price. For the
purpose of the AMTI, the gain or loss on sale of the Common Stock is calculated
by including a basis adjustment for the amount included in AMTI upon exercise.
If the holder of an incentive stock option pays the exercise price, in full
or in part, with previously acquired shares of Common Stock, the exchange will
not affect the incentive stock option tax treatment of the exercise. Upon such
exchange, and except as otherwise described herein, no gain or loss is
recognized upon the delivery of the previously acquired shares of Common Stock
to the Company, and the shares of Common Stock received by the option holder,
equal in number to the previously acquired shares exchanged therefore, will have
the same basis and holding period for long-term capital gain purposes as the
previously acquired shares. The option holder, however, will not be able to
utilize the old holding period for the purpose of satisfying the incentive stock
option statutory holding period requirements. Shares of Common Stock received by
the option holder in excess of the number of previously acquired shares will
have a basis of zero and a holding period which commences as of the date the
shares of Common Stock are issued to the Option holder upon exercise of the
incentive stock option. The exchange of previously acquired shares of Common
Stock will be considered a disposition of such shares for the purpose of
determining whether a Disqualifying Disposition has occurred.
STOCK APPRECIATION RIGHTS
The recipient of a stock appreciation right is not taxed upon the grant of
the stock appreciation right. Upon the exercise of a stock appreciation right,
the recipient generally will be taxed at ordinary income tax rates on the amount
of cash received and the fair market value of any Common Stock received. The
amount of ordinary income recognized by the recipient is deductible by the
Company in the year that the income is recognized. The recipient's basis in any
shares acquired is equal to the amount of ordinary income recognized with
respect to such shares, and, upon subsequent disposition, any further gain or
loss is taxable either as short-term capital gain or loss, depending on how long
the shares are held. The holding period for such shares commences as of the date
ordinary income is recognized.
RESTRICTED STOCK AWARDS
In general, no income is recognized by the recipient upon the grant of a
Restricted Stock award. Unless the recipient makes an election described below,
the recipient will recognize ordinary income when the restrictions lapse equal
to the excess of the fair market value of the restricted stock at the time the
restrictions lapse over the amount which the recipient paid for the Restricted
Stock, if any. The Company may deduct an amount equal to the income recognized
by the recipient at the time the recipient recognizes the income.
The recipient may elect, within 30 days after the date of receipt of the
award, to recognize income arising from the Award as of the award date. If such
election is made, the recipient will recognize ordinary income in an amount
equal to the excess of the fair market value of the stock over the amount paid,
if any, at the time of
10
<PAGE> 13
receipt. If, however, such election is made and for any reason the restrictions
imposed on the Common Stock cause the Common Stock to be forfeited, the
individual will not be entitled to a deduction.
Upon a sale of Restricted Stock after the restrictions lapse, short-term or
long-term capital gain or loss will generally be recognized depending on how
long the shares have been held after the restrictions lapse. If a recipient made
an election to include the value of the stock in income when awarded, however,
short-term or long-term capital gain or loss will be recognized depending on how
long the shares have been held after the award date.
LIMITATIONS ON DEDUCTIBILITY
If, as a result of certain changes in control of the Company, a recipient's
Options or stock appreciation rights become immediately exercisable, or
restrictions immediately lapse on Restricted Stock, the additional economic
value, if any, attributable to the acceleration may be deemed a "parachute
payment." This amount will be deemed a parachute payment if such value, when
combined with the value of other payments which are deemed to result from the
change in control, equals or exceeds a threshold amount equal to 300% of the
recipient's average annual taxable compensation over the five calendar years
preceding the year in which the change in control occurs. In such case, the
excess of the total parachute payments over such recipient's average annual
taxable compensation will be subject to a 20% nondeductible excise tax in
addition to any income tax payable. The excess subject to the excise tax may be
reduced, however, if the recipient establishes by clear and convincing evidence
that payments include reasonable compensation for personal services rendered
before the date of change in control; the amount of the reduction will be
limited to the amount by which such reasonable compensation exceeds the
recipient's average annual compensation. The Company will not be entitled to a
deduction for that portion of any parachute payment which is subject to the
excise tax.
The amount which may be deducted by the Company with respect to
compensation paid to the Chief Executive Officer and four other most highly
compensated executives is generally limited to $1 million per tax year for each
individual. Certain awards under the Plan may be exempt from the $1 million
limit because of a "performance-based" exception.
WITHHOLDING TERMS
Upon the exercise of an Option by an employee, the Company may require such
person to pay any federal, state or local tax required to be withheld. The
required withholding may be paid by cash or check payable to the Company, or, to
the extent permitted by the Compensation Committee and pursuant to such rules as
the Compensation Committee may establish, an employee may elect to have the
Company reduce the number of shares issued upon exercise or surrender a number
of previously issued shares which have a then fair market value which is
sufficient to satisfy the withholding obligation.
If the recipient delivers previously owned shares of Common Stock to pay
withholding taxes, the delivery of shares will be treated as a sale of stock and
the employee will recognize long-term or short-term capital gain or loss
depending upon the fair market value, basis and holding period of the previously
owned shares so used.
If the recipient elects to have the Company reduce the number of shares of
Common Stock otherwise issuable, the recipient should generally recognize no
gain or loss as a result of the reduction in the net number of shares received.
however, if a recipient uses previously owned shares of Common Stock to pay the
exercise price of a nonqualified stock option and the tax withholding
requirements are satisfied by the withholding of shares otherwise issuable, the
recipient's award will consist of two sets of shares. A number of shares
awarded, equal to the number of previously owned shares exchanged to exercise
the Option, will have the same basis and holding period as the previously owned
shares. Shares awarded in excess of this number will have a basis equal to their
fair market value at the time of taxation and a holding period beginning on the
same date. If such excess shares have sufficient fair market value to satisfy
the withholding obligation, the recipient will recognize no gain or loss as a
result of the reduction in the number of shares of Common Stock received.
However, if such excess shares do not have sufficient value to satisfy the
withholding obligation, the employee will recognize gain or loss as described in
the preceding paragraphs for tendering previously owned shares to satisfy the
tax withholding obligation.
11
<PAGE> 14
OFFICERS AND KEY EMPLOYEES
The executive officers and key employees of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
Glenn L. Carpenter 54 Chairman of the Board, President, Chief Executive Officer and Director
Donald G. Herrman 40 Executive Vice President, Chief Financial Officer and Secretary
Lonnie P. Nadal 41 Senior Vice President of Acquisitions
Robert A. Dewey 37 Vice President of Industrial Operations
Kimberly G. Brown 41 Vice President of Apartment Operations
Angela M. Wixted 42 Treasurer/Controller
</TABLE>
The following is a biographical summary of experience for the executive
officers, and key employees of the Company:
GLENN L. CARPENTER has been Chairman of the Board since 1996 and President,
Chief Executive Officer and a director of the Company since its formation in
1993. Mr. Carpenter served as Chief Executive Officer of Santa Anita Realty
Enterprises, Inc. ("Realty") from January 1992 until February 1994, and as
President of Realty from December 1989 until February 1994. He was Chief
Operating Officer of Realty from 1989 until 1991, and was Executive Vice
President of Realty from 1988 until 1989. From 1986 until 1988, Mr. Carpenter
served as Senior Vice President-Operations of Realty, and has held a number of
other positions with Realty since 1979. Mr. Carpenter has been a member of the
National Association of Real Estate Investment Trusts ("NAREIT") since 1980, has
served on NAREIT's board of governors and is a member of the Urban Land
Institute serving on various committees.
DONALD G. HERRMAN has been Executive Vice President of the Company since
May 1995, Senior Vice President, Secretary, and Chief Financial Officer of the
Company since its formation in 1993, and served as Treasurer of the Company from
February 1994 to October 1994. Mr. Herrman served as Vice President-Finance and
Secretary of Realty from January 1992 until February 1994, and as Realty's
Treasurer from 1989 until February 1994. From 1985 until 1990, Mr. Herrman
served as Controller of Realty. Mr. Herrman is a certified public accountant in
California.
LONNIE P. NADAL has been Senior Vice President of Acquisitions since 1996
and Vice President of Acquisitions since the Company's formation in 1993. Mr.
Nadal served as Vice President-Acquisitions of Realty from January 1992 to
February 1994, and as a Director of Operations from August 1991 until February
1994. From 1983 until 1991, Mr. Nadal was a partner of Lincoln Property Company,
a development and property management company.
ROBERT A. DEWEY has served as Vice President of Industrial Operations since
January 1995, and Vice President of Operations of the Company since its
formation in 1993. Mr. Dewey served as Director of Asset Management for Realty
from 1992 until February 1994. From 1991 to 1992, he was oversight manager of
the Newport Beach office of the Resolution Trust Corporation. From 1988 to 1990,
Mr. Dewey was a Commercial Manager for a development company.
KIMBERLY G. BROWN has served as Vice President of Apartment Operations
since January 1996. Ms. Brown served as Director of Apartment Operations and
Regional Manager for the Pacific Northwest apartment communities owned by the
Company from August 1993 to December 1995. From 1991 to August of 1993, Ms.
Brown served as a district manager for Lexford Properties in Irving, Texas.
ANGELA M. WIXTED has served as Treasurer and Controller since October 1994.
Ms. Wixted served as a financial consultant for various clients from 1993 to
1994. From 1992 to 1993, Ms. Wixted was Controller for O'Donnell Property
Services. From 1986 to 1992, Ms. Wixted served as CFO/Controller of SDC
Investments, Inc. Ms. Wixted is a certified public accountant in California.
12
<PAGE> 15
COMPENSATION
The following table sets forth the annualized base salary the Company paid
for 1996 to its Chief Executive Officer and to each of the other most highly
compensated officers and key employees of the Company (whose cash compensation
exceeded $100,000 on an annualized basis during the year ending December 31,
1996). Prior to February 18, 1994, the Company did not pay any compensation to
its officers.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------------
ANNUALIZED(1) RESTRICTED
-------------------------- AWARDS/OPTIONS STOCK ALL OTHER
NAME CAPACITIES YEAR SALARY BONUS GRANTED GRANTED COMPENSATION
- ------------------ ------------------------- ---- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Glenn L. Carpenter Chairman of the Board, 1996 $300,000 $120,000 3,000(2) $117,000(3) $6,930(4)
Chief Executive Officer 1995 300,000 86,250 10,000(2) 613,000 5,085(4)
and President 1994 280,000 49,000 65,000(5) 6,750(4)
Donald G. Herrman Executive Vice President, 1996 156,000 46,800 2,500(2) 84,000(3) 4,350(4)
Chief Financial Officer 1995 150,000 37,250 5,000(2) 215,000 5,085(4)
and Secretary 1994 145,000 18,125 45,000(5) 6,308(4)
Lonnie P. Nadal Senior Vice President 1996 135,200 42,000 2,000(2) 67,000(3) 4,056(4)
of Acquisitions 1995 130,000 29,750 5,000(2) 93,000 4,407(4)
1994 125,000 14,100 30,000(5) 5,505(4)
Robert A. Dewey Vice President of 1996 114,500 33,000 1,000(2) 33,000(3) 3,432(4)
Industrial Operations 1995 110,000 17,250 5,000(2) 59,000 3,729(4)
1994 95,000 11,875 10,000(5) 4,314(4)
Kimberly G. Brown Vice President of 1996 95,000 28,000 1,000(2) 17,000(3) 2,850(4)
Apartment Operations 1995 76,275 19,750 7,500(2) -- --
1994 50,000 12,500 1,750(2) -- --
</TABLE>
- ---------------
(1) The Company provides automobiles and club memberships to certain key
employees, including certain officers listed above, the value of which is
not included in the table above and which in any case did not exceed the
lesser of $50,000 or 10% of the annual salary and bonus of any individual
for the applicable year.
(2) The amount shown represents the number of shares purchasable upon exercise
of an option granted under the Company's 1993 Share Option Plan. The options
granted in 1996 were granted effective July 1, 1996 with an exercise price
of $16.75 with vesting occurring in equal installments on each of the first
five anniversaries of the date of grant. The options granted effective
December 5, 1995 with an exercise price of $15.00 with vesting occurring in
equal installments on each of the first five anniversaries of the date of
grant.
(3) Restricted Common Stock. The following table sets forth information
regarding the restricted common stock issued during 1996 to each of the
named officers and key employees (all of which grants were made under the
Share Option Plan).
RESTRICTED COMMON STOCK. The following table sets forth information
regarding the restricted common stock issued during 1995 to each of the
named officers and key employees (all of which grants were made under the
Share Option Plan).
RESTRICTED COMMON STOCK GRANTS
IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
DATE NUMBER OF
SHARES SHARES
NAME GRANTED GRANTED VESTING PERIOD
------------------------------ ------- --------- --------------------------
<S> <C> <C> <C>
Glenn L. Carpenter 6/96 7,000 Equally over 7 year period
Donald G. Herrman 6/96 5,000 Equally over 7 year period
Lonnie P. Nadal 6/96 4,000 Equally over 7 year period
Robert A. Dewey 6/96 2,000 Equally over 7 year period
Kimberly G. Brown 6/96 1,000 Equally over 7 year period
</TABLE>
The shares granted in June of 1996 were issued as performance-based
compensation. Distributions will be paid on the shares of restricted
common stock issued.
13
<PAGE> 16
(4) The amounts shown are those expensed for financial reporting purposes under
the Company's Thrift Plan. See "Thrift Plan" below for a description of such
Plan.
(5) The amount shown represents the number of shares purchasable upon exercise
of an option granted in 1994 under the Company's 1993 Share Option Plan. The
options were granted effective immediately prior to the effectiveness of the
Company's registration under the Securities Exchange Act of 1934 with an
exercise price equal to the initial public offering price of $18.25, with
vesting occurring, in the case of Messrs. Carpenter and Herrman, on the date
of grant, and in the case of Messrs. Nadal and Dewey, in equal installments
on each of the first five anniversaries of the date of grant.
SHARE OPTION PLAN
The Company adopted the 1993 Share Option Plan (the "Share Option Plan") to
provide incentives to attract and retain officers and employees. The Company
amended the Share Option Plan to increase the number of shares for which options
may be granted from 350,000 shares to 700,000 shares in 1996. As described under
"Proposal 2" the Company is proposing to amend the Share Option Plan to increase
the number of shares for which options may be granted from 700,00 shares to
1,050,000 shares. The Share Option Plan provides for grants of options to
purchase a specified number of shares of common stock, awards of restricted
common stock, and grants of stock appreciation rights. Under the Share Option
Plan the total number of shares available to be granted is 700,000 Common Shares
(1,050,000 shares if Amendment is approved), 45,000 (150,000 shares if Amendment
is approved) of which have been reserved for awards to non-employee directors.
Participants in the Share Option Plan who are officers or any other employees of
the Company are selected by the Compensation Committee. Directors of the Company
are also eligible to participate, but, in the case of directors who are not also
employees, only pursuant to automatic grants under a specified formula set forth
in the Share Option Plan. As described under "Proposal 2", the Company is
proposing to amend the Share Option Plan as it relates to shares to be granted
to Directors. No employee may receive a grant of options for more than 100,000
shares of Common Stock in any calendar year.
STOCK OPTIONS. The following table sets forth (i) all individual grants of
stock options made by the Company during 1996 to each of the named officers and
key employees (all of which grants were made under the Share Option Plan), (ii)
the ratio that the number of options granted to each individual bears to the
total number of options granted to all employees of the Company, (iii) the
exercise price and expiration date of these options, and (iv) the estimated
potential realizable values assuming either a 5% or 10% annualized rate of
appreciation from the relevant date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF # OF TOTAL STOCK
COMMON OPTIONS PRICE APPRECIATION
SHARES GRANTED TO FOR
UNDERLYING EMPLOYEES IN OPTION TERM(1)
OPTIONS FISCAL EXERCISE EXPIRATION -------------------
NAME GRANTED(2) YEAR PRICE ($/SH) DATE 5% 10%
- ------------------------ ---------- ------------ ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Glenn L. Carpenter 3,000 29% $16.75 7/1/06 $31,700 $79,900
Donald G. Herrman 2,500 24% 16.75 7/1/06 26,400 66,600
Lonnie P. Nadal 2,000 20% 16.75 7/1/06 21,100 53,300
Robert A. Dewey 1,000 9% 16.75 7/1/06 10,550 26,600
Kimberly G. Brown 1,000 9% 16.75 7/1/06 10,550 26,600
</TABLE>
- ---------------
(1) The amounts shown in these columns are based upon assumed rates of
appreciation over the option term which are prescribed by applicable SEC
regulations. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Company's common stock, overall market
conditions and the option holder's continued employment through the
applicable vesting periods.
(2) In each case, the amounts shown relate to option grants made July 1, 1996.
14
<PAGE> 17
AGGREGATED OPTIONS EXERCISED IN FISCAL 1996
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth the total number of all outstanding
unexercised options held by the named officers and key employees as of the end
of 1996. None of the named officers exercised any options during 1996. On
December 31, 1996, the fair market value per share of common stock was $19.50.
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(A)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Glenn L. Carpenter 67,000 11,000 90,300 $44,300
Donald G. Herrman 46,000 6,500 60,800 24,900
Lonnie P. Nadal 13,000 24,000 19,500 46,000
Robert A. Dewey 5,000 11,000 9,500 28,300
Kimberly G. Brown 2,200 8,050 7,600 31,100
</TABLE>
- ---------------
(a) Market value of underlying securities at December 31, 1996, minus the
exercise price of "in-the-money" options.
DEFERRED COMPENSATION PLAN
Mr. Carpenter received credit under the Deferred Compensation Plan for
years of service with Realty. The Company assumed the obligations of Realty and
Mr. Carpenter is fully vested. Annualized examples of the benefits, commencing
at age 65, are set forth below. The examples assume retirement as of December
31, 1996 after assumed years of service.
YEARS OF SERVICE
<TABLE>
<CAPTION>
SALARY 5 10 15 20 25 30
- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $20,448 $15,896 $11,345 $ 6,793 $ 2,241 $ 2,241
125,000 25,448 19,646 13,845 8,043 2,241 2,241
150,000 30,448 23,396 16,345 9,293 2,241 2,241
175,000 36,698 29,646 22,595 15,543 8,491 9,741
200,000 42,948 35,896 28,845 21,793 14,741 17,241
225,000 49,198 42,146 35,095 28,043 20,991 24,741
250,000 55,448 48,396 41,345 34,293 27,241 32,241
275,000 61,698 54,646 47,595 40,543 33,491 39,741
300,000 67,948 60,896 53,845 46,793 39,741 47,241
325,000 74,198 67,146 60,095 53,043 45,991 54,741
350,000 80,448 73,396 66,345 59,293 52,241 62,241
</TABLE>
RETIREMENT INCOME PLAN
The Company has established a defined benefit retirement income plan (the
"Retirement Income Plan") that is noncontributory. Benefits are determined
regardless of position under a formula applied uniformly to all employees of the
Company (except as otherwise required under the Code's "top-heavy" rules
relating to "key" employees), and depend upon the employee's length of service,
and the employee's highest consecutive five year average earnings up to $150,000
less certain social security benefits.
Employees are eligible to participate in the plan after attaining age 21
and completing one year of service. The plan currently provides for 100% vesting
of an employee's interest after five years of service, except to the extent
faster vesting is required under the Code's "top-heavy" rules.
15
<PAGE> 18
The following table illustrates the estimated annual retirement benefit
payable under the Retirement Income Plan at age 65, after reduction for certain
social security benefits, for participants with compensation and credited years
of service shown. The benefits shown assume retirement at age 65 as of December
31, 1996, subject to the maximum annual benefit of $120,000 shown below. This
maximum annual amount is actuarially increased to participants who retire after
age 65.
YEARS OF SERVICE
<TABLE>
<CAPTION>
SALARY 5 10 15 20 25 30
- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 9,104 $18,208 $27,311 $36,415 $45,519 $55,519
125,000 11,604 23,208 34,811 46,415 58,019 70,519
150,000 14,104 28,208 42,311 56,415 70,519 85,519
175,000 14,104 28,208 42,311 56,415 70,519 85,519
200,000 14,104 28,208 42,311 56,415 70,519 85,519
225,000 14,104 28,208 42,311 56,415 70,519 85,519
250,000 14,104 28,208 42,311 56,415 70,519 85,519
275,000 14,104 28,208 42,311 56,415 70,519 85,519
300,000 14,104 28,208 42,311 56,415 70,519 85,519
325,000 14,104 28,208 42,311 56,415 70,519 85,519
350,000 14,104 28,208 42,311 56,415 70,519 85,519
-------- ------- ------- ------- ------- -------
</TABLE>
Participants will receive credit under the Retirement Income Plan for
employment by Realty. The officers and their salaries covered under these plans
and their years of service for purposes of these plans are as follows:
<TABLE>
<CAPTION>
DEFERRED
ANNUAL YEARS OF RETIREMENT COMPENSATION
NAME SALARY SERVICE(1) INCOME PLAN AGREEMENT
---------------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Mr. Carpenter $300,000 25 Yes Yes
Mr. Herrman 156,000 12 Yes No
Mr. Nadal 135,200 6 Yes No
</TABLE>
- ---------------
(1) Includes years of service at Realty.
THRIFT PLAN
The Company has established a thrift plan under which employees may elect
to contribute up to 21% of their annual compensation on a combination
before-and-after tax basis, excluding bonuses. Contributions by the employee are
matched by the Company at a 75% rate with total matching contributions not
exceeding a maximum of 4 1/2% of the contributing employee's annual
compensation. Matching contributions are in the form of cash, which is used by
the trustee to purchase common shares of the Company. Employee contributions are
invested in a fixed income fund, various growth funds, or a combination thereof,
according to the employee's choice. The Plan provides for 20% vesting of
contributions by the Company for each full year of service, increasing to 100%
vesting after five years of service. (See "Compensation" above for the amounts
contributed by the Company during 1995 for the benefit of its officers.)
EMPLOYMENT CONTRACTS
Each of Messrs. Carpenter, Herrman, Nadal and Dewey has an employment
contract with the Company for a term of two years (four years in the case of Mr.
Carpenter) commencing February of 1995. The contracts provide for annual base
compensation, subject to any increases in base compensation approved by the
Compensation Committee and in Mr. Carpenter's case, recommended by the
Compensation Committee and approved by the Board of Directors. Messrs.
Carpenter, Herrman, Nadal and Dewey, and the other officers of the Company will
also receive incentive compensation in accordance with criteria to be
established by the Compensation Committee and approved by the Board of
Directors, which the Company expects will be determined primarily on the basis
of Funds from Operations growth per common share and in some cases on
16
<PAGE> 19
the basis of division or other performance goals. Each of the employment
contracts provides for certain severance payments in the event of death or
disability or upon termination by the Company without good cause and provides
for certain payments (twice the sum of current annual salary plus prior year
bonus in the case of Mr. Carpenter and no time the sum of current annual salary
plus prior year bonus in all other cases) in the event that employment is
terminated following a change in control.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors (the "Committee")
administers the company's executive compensation program. The Committee is
composed entirely of outside directors. The Compensation Committee was appointed
following the closing of the Company's initial public offering on February 17,
1994 and the appointment of the Company's independent directors. Accordingly,
the Compensation Committee did not participate in the determination of
compensation for the Company's officers and managerial employees at the outset,
or in the negotiation of the employment contracts with any of the Company's
officers or in the award of stock options to any such persons in connection with
the Company's initial public offering.
The objective of the Company's executive compensation program is to develop
and maintain reward programs which contribute to the enhancement of shareholder
value, while attracting, motivating and retaining key personnel who are
essential to the long-term success of the Company. As discussed in detail below,
the Company's executive compensation program consists of both fixed (base
salary) and variable (incentive) compensation elements. Variable compensation
consists of annual cash incentives, restricted share grants and stock option
grants, and may be in the form of short term and long term arrangements. These
elements are designed to operate on an integrated basis and together comprise
total compensation value.
The Compensation Committee believes that competitive base salaries are
necessary to retain and attract talented officers and managerial employees.
Subject to minimal levels specified in employment contracts, the Compensation
Committee intends that the base salaries paid to officers and managerial
employees of the Company will continue to be comparable to base salaries
received by employees occupying positions of similar responsibility in
comparable companies in the same industry. To ensure comparability, the
Compensation Committee has in the past retained, and expects in the future to
retain, the services of one or more independent compensation consultants.
The Committee reviewed executive compensation in light of the Company's
performance during 1996 and compensation data relating to companies that were
considered comparable. In this regard, the Committee considered a variety of
factors, including the achievement of operational and financial goals during
1996.
It is the Compensation Committee's belief that none of the Company's
officers or key employees will be affected by the provisions of Section 162(m)
of the Internal Revenue Code (the "Code"), which limits the deductibility of
certain executive compensation during 1995. Therefore, the Committee has not
adopted a policy as to compliance with the requirements of Section 162(m).
BASE SALARY
Base salary levels for the Company's officers are determined through annual
employment evaluations, submitted to the Committee by the Chief Executive
Officer ("CEO"), along with comparisons of companies in the real estate
industry. Salary information about comparable companies is surveyed by reference
to public disclosures made by companies in the real estate industry. In
addition, the Committee from time to time obtains information about comparable
salary levels from an outside compensation consultant. The base salary level for
the CEO is determined by the Board of Directors based upon an annual evaluation
of the performance of the CEO and recommendation from the Compensation
Committee.
17
<PAGE> 20
ANNUAL CASH INCENTIVES
The annual cash incentive is designed to provide a short-term (one-year)
incentive to officers and key employees based on a percentage of the
individual's base salary. Incentive awards are based on the achievement of
predetermined corporate and individual performance goals. For the CEO, the
relative weights of the corporate and individual performance measures are 90% to
the Company's goals and 10% to the individual's goals. For the Executive Vice
President, the relative weights are 75% to the Company's goals and 25% to the
individual's goals, and for Vice Presidents and other officers who participate
in the bonus program, the relative weights are 75% Company goals and 25%
individual goals. Specific individual goals for each individual are established
at the beginning of the year (by the Committee in the case of the CEO and by the
CEO in all other cases) and are tied to the functional responsibilities of each
individual. Individual goals may include objective and subjective factors, such
as improving the performance of assets managed by the individual, successful
acquisitions or sales, development of leadership skills and personal training
and education. The Company's goals are based on operating performance, as
measured by a predetermined increase in funds from operations. Other than the
allocation between individual and Company goals, no specific weights are
assigned to the individual goals. In addition, no bonus awards are made if a
minimum level of funds from operations is not met.
In 1996, the Company exceeded its performance objectives and the individual
officers' performance targets were met. $294,800 in cash bonuses were awarded to
the officers for 1996, including the CEO.
STOCK OPTIONS AND RESTRICTED SHARES
Stock options are designed to provide long-term (up to ten year) incentives
and rewards tied to the price of the Company's Common Shares. Given the
fluctuations of the stock market, stock price performance and financial
performance are not always consistent. The Committee believes that stock
options, which provide value to participants only when the Company's
shareholders benefit from stock price appreciation, are an important component
of the Company's annual executive compensation program. The number of options or
shares currently held by an officer is not a factor in determining individual
grants, and the Committee has not established any target level of ownership of
Company stock by the Company's officers. However, accumulation and retention of
shares of Company stock by officers is encouraged.
Stock options may be awarded annually. The Company does not adhere to
firmly established formulas for the issuance of options. During fiscal 1996,
each officer received stock option grants. The Summary Compensation Table shows
the options granted to the named officers for the past three years, including
the CEO. In determining the size of the grants to the CEO and the other named
officers, the Committee assessed relative levels of responsibility and the
long-term incentive practices of other comparable companies.
In accordance with the provisions of PAG's 1993 Share Option Plan, the
exercise price of all options granted was equal to the market value of the
underlying Common Shares on the date of grant. Accordingly, the value of these
grants to the officers was dependent solely upon the future growth and share
value of the Company's Common Shares.
The Committee also awards restricted shares as a compensation vehicle and
to retain key individuals. Currently each of the officers hold awards. The
number of restricted shares covered by each award is determined by the Committee
in its discretion and generally reflects the extent of the officer's success in
achieving the Company's goals during the preceding year and the level of the
officer's responsibility. The Summary Compensation Table shows restricted share
awards made to the named officers since PAG's inception, including the CEO.
18
<PAGE> 21
All awards of restricted shares provide for vesting over three years or
longer, subject to certain events of forfeiture. Since the holder of restricted
shares would generally forfeit them if he or she were to leave PAG prior to
vesting, the Committee believes these awards are a significant factor in the
retention of key employees and support a long-term view among the officers.
The foregoing report is given by the members of the Compensation Committee,
namely:
Robert E. Morgan
Royce B. McKinley
Keith W. Renken
19
<PAGE> 22
COMPARATIVE STOCK PERFORMANCE
The line graph below compares the cumulative total shareholder return on
Common Stock of the Company since February 10, 1994, the date of PAG's initial
public offering, with the cumulative total return on the S&P 500 Index and the
NAREIT Equity REIT Total Return Index over the same period. This comparison
assumes that the value of the investment in the Company's Common Shares and in
each index was $100 in February of 1994 and that all dividends were reinvested.
PACIFIC GULF PROPERTIES, INC.
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PACIFIC GULF NAREIT EQUITY
(FISCAL YEAR COVERED) PROPERTIES, INC. S&P 500 INDEX
<S> <C> <C> <C>
2/9/94 100.00 100.00 100.00
6/30/94 92.20 95.04 101.01
9/30/94 92.96 99.69 98.95
12/31/94 85.87 99.67 98.96
3/31/95 93.11 109.36 98.80
6/30/95 89.41 119.82 104.61
9/30/95 100.17 129.34 109.53
12/31/95 105.14 137.12 114.07
3/31/96 122.29 144.48 116.67
6/30/96 113.36 150.95 121.86
9/30/96 128.76 155.63 129.83
12/31/96 137.66 168.47 154.30
</TABLE>
- ---------------
(1) Indicates appreciation of $100 invested in February of 1994 in PAG Common
Shares, S&P 500 and NAREIT Equity REIT Total Return Index assuming
reinvestment of dividends.
ANNUAL REPORT
The Annual Report of PAG for the year ended December 31, 1996, including
financial statements audited by Ernst & Young, LLP, independent auditors, and
their report thereon, is being mailed to all shareholders with this Proxy
Statement. The Annual Report does not constitute a part of the proxy
solicitation material. In addition, a copy of PAG's Annual Report on Form 10-K
for the year ended December 31, 1996, as filed with the SEC, will be sent to any
shareholder without charge upon written request to PAG, 363 San Miguel Drive,
Newport Beach, California 92660.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder of PAG intended to be presented at the 1998
Annual meeting of shareholders must be received by PAG at its principal
executive offices not later than December 1, 1997 for inclusion in PAG's proxy
statement and form of proxy relating to that meeting.
20
<PAGE> 23
OTHER MATTERS
PAG is not aware of any business or matter other than those indicated above
which may properly be presented at the Annual Meeting. If, however, any other
matter properly comes before the Annual Meeting, the proxy holders will, in
their discretion, vote thereon in accordance with their best judgment.
By Order of the Board of Directors,
DONALD G. HERRMAN
Secretary
April 7, 1997
21
<PAGE> 24
APPENDIX A
AMENDMENT TO THE
PACIFIC GULF PROPERTIES INC.
1993 SHARE OPTION PLAN
This Amendment to the Pacific Gulf Properties Inc. 1993 Share Option Plan
(the "Amendment") is adopted by Pacific Gulf Properties Inc., a Maryland
corporation (the "Company"), effective as of May 7, 1997.
RECITALS
A. The Company's 1993 Share Option Plan (the "Plan") was adopted by the
Board of Directors on October 27, 1993 and approved by the shareholders of the
Company on October 28, 1993.
B. The Plan was amended by the Board of Directors and such amendment was
approved by the shareholders of the Company on May 8, 1996.
C. Section 5.6 of the Plan provides that the Board may amend the Plan,
subject in certain circumstances to receipt of approval of the shareholders of
the Company.
D. On March 12, 1997, the Board of Directors of the Company unanimously
adopted an Amendment to the Plan to (i) increase the number of shares of Common
Stock reserved for issuance under the Plan from 700,000 to 1,050,000, subject to
approval of the shareholders, (ii) increase the size of the stock option awarded
to non-employee directors upon their initial election or appointment to the
Board from an option to purchase 2,500 shares of the Company's Common Stock to
an option to purchase 5,000 shares of the Company's Common Stock, (iii) increase
the size of the automatic stock option annually awarded to each non-employee
director from an option to purchase 500 shares of Company's Common Stock to an
option to purchase 4,000 shares of the Company's Common Stock, and (iv) grant
incumbent non-employee directors a one time option to purchase 2,500 shares of
the Company's Common Stock.
E. The Amendment to the Plan was presented to the shareholders for approval
at the 1997 Annual Meeting held on the 7th day of May, 1997.
AMENDMENT
1. Paragraph (a) of Section 1.4 is hereby amended to read in its entirety
as follows:
"(a) Number of Shares. The maximum number of shares of Common Stock
that may be delivered pursuant to Awards granted to Eligible Employees
under this Plan shall not exceed 900,000 shares, and the maximum number of
shares of Common Stock that may be delivered under the provisions of
Article VII shall not exceed 150,000 shares, in each case subject to
adjustments contemplated by Section 5.2. The maximum number of shares
subject to options which may be granted to an Eligible Employee during any
one-year period shall not exceed 100,000, subject to adjustment as
contemplated in Section 5.2."
2. Paragraph (a) of Section 7.2 is hereby amended to read in its entirety
as follows:
"(a) Initial Options. Persons who are Non-Employee Directors at the
time this Plan is first approved by the shareholders of the Corporation
shall be granted without further action an Option to purchase 2,500 shares
of Common Stock (the Award Date of which shall be the date of the
shareholder approval of this Plan.) After approval of this Plan by the
shareholders of the Corporation, if any person who is not then an officer
or employee of the Corporation shall become a Director of the Corporation,
there shall be granted automatically to such person (without any action by
the Board or Committee) a Nonqualified Stock Option (the Award Date of
which shall be the date such person becomes a Non-Employee Director) to
purchase 5,000 shares of Common Stock."
<PAGE> 25
3. Paragraph (b) of Section 7.2 is hereby amended to read in its entirety
as follows:
"(b) Subsequent Options. On each December 31 occurring during the term
of this plan, commencing December 31, 1997, there shall be granted
automatically (without any action by the Committee or the Board) a
Nonqualified Stock Option to each Non-Employee Director then in office to
purchase 4,000 shares of Common Stock."
4. The Board and the shareholders of the Company hereby approve the grant
to incumbent non-employee directors of a one-time option to purchase 2,500
shares of the Company's Common Stock.
The undersigned, Donald G. Herrman, Secretary of the Company, hereby
certifies that the Board and the shareholders of the Company adopted the
foregoing Amendment to the Plan on March 12, 1997 and May 7, 1997, respectively.
Executed at Newport Beach, California this __ day of May 1997.
<PAGE> 26
PROXY PROXY
PACIFIC GULF PROPERTIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1997 ANNUAL MEETING OF SHAREHOLDERS -- MAY 7, 1997
Glenn L. Carpenter and Donald G. Herrman, and each of them, are hereby
appointed proxies, with full power of substitution, and are hereby authorized
to represent and vote all shares of common stock of the undersigned at the
Annual Meeting of Shareholders of Pacific Gulf Properties Inc. to be held at
the Four Seasons Hotel, Newport Beach, California, on May 7, 1997, and at any
postponements or adjournments thereof, in the manner indicated below, and in
their discretion on any other matter which may properly come before the Meeting.
This Proxy will be voted in accordance with the instructions given. In
this absence of instructions, the Proxy will be voted "FOR" Proposal No. 1 and
Proposal No. 2 and in the discretion of the persons hereby appointed as proxies
with respect to any other matters that may properly come before the Meeting or
any postponements or adjournments thereof.
SHAREHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE IF MAILED WITHIN
THE UNITED STATES.
<PAGE> 27
PACIFIC GULF PROPERTIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1 AND PROPOSAL NO. 2
1. Election of three Class III Directors: For Withheld For All
All All Except
Nominees: Peter L. Eppinga, John F. Kooken
and Robert E. Morgan [ ] [ ] [ ]
(Instruction: to withhold authority to vote for any one or more
nominee(s), write the name(s) of such nominee(s) in the space provided
below.)
-----------------------------------------------------------------------
2. To approve an amendment to the Company's For Against Abstain
1993 Share Option Plan that would (i)
increase the aggregate number of Common [ ] [ ] [ ]
Shares authorized for issuance under such
plan by 350,000 shares (105,000 of which
will be reserved for issuance to non-employee directors) to 1,050,000
shares; (ii) increase the size of the stock option awarded to
non-employee directors upon their initial election or appointment to
the Board from an option to purchase 2,500 shares of the Company's
Common Stock to an option to purchase 5,000 shares of the Company's
Common Stock; (iii) increase the size of the automatic stock option
annually awarded to each non-employee director from an option to
purchase 500 shares of the Company's Common Stock to an option to
purchase 4,000 shares of the Company's Common Stock; and(iv) grant
incumbent directors a one time option to purchase 2,500 shares of the
Company's Common Stock.
3. In their discretion, upon such other matter or matters which may
properly come before the meeting or any
postponements or adjournments thereof.
The undersigned hereby revokes any proxy
heretofore given to vote at the Annual Meeting
and acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement
dated April 7, 1997, and the Company's 1996
Annual Report to Shareholders.
, 1997
--------------------------------------
---------------------------------------------
Signature of Shareholder(s)
Please sign exactly as the name or names appear
hereon. A proxy executed by a corporation
should be signed in its name by its authorized
officers. Executors, administrators and
trustees should so indicate when signing.
