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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Meridian Industrial Trust, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Anne C. Ravetti
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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MERIDIAN INDUSTRIAL TRUST, INC.
NOTICE OF ANNUAL MEETING,
PROXY STATEMENT, AND PROXY CARD
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1997
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
April 14, 1997
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Meridian Industrial Trust, Inc. (the "Company") to be held on May 16, 1997, at
8:30 a.m., local time, at the Hyatt Regency Hotel, 5 Embarcadero Center, San
Francisco, California. Enclosed are a notice to stockholders, a proxy statement
describing the business to be transacted at the meeting, and a proxy card for
use in voting at the meeting.
At the annual meeting, you will be asked (i) to elect seven directors of
the Company, (ii) to ratify the selection of Arthur Andersen LLP as the
independent auditors for the Company for 1997, (iii) to approve an amendment to
the Company's incentive stock plan, and (iv) to act on such other business as
may properly come before the meeting or any adjournment thereof.
We hope that you will be able to attend the annual meeting, and we urge you
to read the enclosed Proxy Statement before you decide to vote. Even if you do
not plan to attend, please complete, date, sign, and promptly return the
enclosed proxy card. It is important that your shares be represented at the
meeting.
Very truly yours,
/s/ ALLEN J. ANDERSON
- -------------------------------------
Allen J. Anderson
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING AND WISH TO
WITHDRAW YOUR PROXY, YOU MAY VOTE IN PERSON, AND YOUR PROXY
WILL BE WITHDRAWN.
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
NOTICE TO STOCKHOLDERS OF ANNUAL MEETING
TO BE HELD ON MAY 16, 1997
PLEASE TAKE NOTICE that the 1997 annual meeting of stockholders (the
"Annual Meeting") of Meridian Industrial Trust, Inc., a Maryland corporation
(the "Company"), will be held on May 16, 1997, at 8:30 a.m., local time, at the
Hyatt Regency Hotel, 5 Embarcadero Center, San Francisco, California, to
consider and vote on the following matters:
1. Election of seven directors of the Company to serve until the next
annual meeting of the Company's stockholders and until their
respective successors are duly elected and qualify;
2. Ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 1997;
3. Approval of an amendment to the Company's Amended and Restated
Employee and Director Incentive Stock Plan that would increase the
number of shares of the Company's stock that may be subject to awards
thereunder; and
4. Such other business as may properly come before the Annual Meeting or
any postponements or adjournments thereof.
These matters are fully discussed in the attached Proxy Statement. The
Company's 1996 Annual Report accompanies this notice and the Proxy Statement.
Only stockholders of record at the close of business on March 17, 1997, the
record date for the Annual Meeting, will be entitled to notice of, and to vote
at, the Annual Meeting or any postponements or adjournments thereof. The
presence in person or by proxy of stockholders entitled to cast a majority of
all the votes entitled to be cast at the Annual Meeting shall constitute a
quorum. Whether or not you plan to attend, please complete, date, sign, and
return the enclosed proxy card.
You may revoke your proxy at any time before the shares to which it relates
are voted by filing with the Company a written revocation or a subsequently-
dated proxy. If you are present at the Annual Meeting and vote in person, your
proxy will not be exercised.
We look forward to seeing you at the Annual Meeting.
BY ORDER OF THE DIRECTORS,
/s/ ROBERT A. DOBBIN
- ------------------------------------
Robert A. Dobbin, SECRETARY
San Francisco, California
April 14, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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TABLE OF CONTENTS
PAGE
INFORMATION CONCERNING SOLICITATION AND VOTING . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Voting Rights and Outstanding Shares. . . . . . . . . . . . . . . . . . . 1
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 2
GENERAL COMPANY INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board and Committee Meetings. . . . . . . . . . . . . . . . . . . . . . . 4
Executive Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . 7
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Severance Agreements with Predecessor REITs' Executives . . . . . . . . .13
Stockholdings of Principal Stockholders, Directors, and Management. . . .13
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . .15
The USAA Option and Warrant . . . . . . . . . . . . . . . . . . . . . . .15
The Hunt Consulting Agreement . . . . . . . . . . . . . . . . . . . . . .16
Loans to Executive Officers . . . . . . . . . . . . . . . . . . . . . . .16
Purchase of Residential Property. . . . . . . . . . . . . . . . . . . . .16
PROPOSAL ONE - ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . .17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Nominees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
PROPOSAL TWO - RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
PROPOSAL THREE - APPROVAL OF AN AMENDMENT TO THE COMPANY'S EMPLOYEE AND DIRECTOR
INCENTIVE STOCK PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
STOCKHOLDER PROPOSALS AND NOMINATIONS. . . . . . . . . . . . . . . . . . . . .27
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
1996 ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ATTACHMENT A
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MERIDIAN INDUSTRIAL TRUST, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy card (the "Proxy") is being solicited from the
stockholders of Meridian Industrial Trust, Inc., a Maryland corporation, (the
"Company") on behalf of the Company's board of directors (the "Board"). The
Proxy will be used for the purposes set forth herein at the annual meeting of
the Company's stockholders to be held at the Hyatt Regency Hotel, 5
Embarcadero Center, San Francisco, California, at 8:30 a.m., local time, on
May 16, 1997, and at any postponements or adjournments thereof (the "Annual
Meeting"). The Company's principal executive offices are located at 455
Market Street, 17th Floor, San Francisco, California 94105.
The Company has mailed this Proxy Statement, the accompanying Notice to
Stockholders of Annual Meeting, and the Proxy on or about April 14, 1997, to
all stockholders entitled to notice of, and to vote at, the Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record at the close of business on March 17, 1997,
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the close of business on the Record Date, there were issued and
outstanding and entitled to vote 13,596,370 shares of the Company's common
stock, par value $.001 per share ("Common Stock"), and 2,272,727 shares of
the Company's Series B Convertible Preferred Stock, par value $.001 per share
("Series B Preferred Stock"). (These shares of Preferred and Common Stock
are sometimes collectively referred to below as "Shares.")
The presence at the Annual Meeting in person or by proxy of stockholders
entitled to cast a majority of all the votes entitled to be cast at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business. Each outstanding Share is entitled to one vote on each matter to be
voted upon at the Annual Meeting.
For each matter presented for approval, each stockholder is entitled to
one vote for each Share held. If there are insufficient Shares present to
constitute a quorum or insufficient affirmative votes to approve any matter
presented for approval, the Annual Meeting may be postponed or adjourned one
or more times to permit further solicitation of proxies. The Annual Meeting
could be so postponed or adjourned without further notice to stockholders to
a date that is up to 120 days from the Record Date.
Shares represented by properly executed and returned Proxies that have
not been revoked will be voted at the Annual Meeting in accordance with the
instructions on those Proxies. If a
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properly executed and returned Proxy contains no instructions, it will be
voted: (i) for the election as directors of the nominees specified on the
Proxy; (ii) for the ratification of the selection of Arthur Andersen LLP as
the Company's independent auditors for the year ending December 31, 1997;
(iii) for the approval of the proposed amendment to the Company's Amended and
Restated Employee and Director Incentive Stock Plan (the "Stock Plan")
increasing the number of shares of the Company's stock subject to awards
thereunder, and (iv) in the discretion of the proxy holders as to any other
matter that may properly come before the Annual Meeting. The Company's
directors do not know of any matter that will be presented for consideration
at the Annual Meeting other than the proposals described in this Proxy
Statement.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation has the power
to revoke that Proxy at any time before the Shares to which it relates are voted
either (i) by filing with the Company, at its principal executive offices,
written notice of revocation or a duly executed Proxy bearing a later date, or
(ii) by attending the Annual Meeting, withdrawing the Proxy, and voting in
person.
GENERAL COMPANY INFORMATION
MANAGEMENT
The Board, which currently consists of the eight individuals listed below,
directs the management of the Company's business and affairs. All the current
directors other than Mr. Anderson are Independent Directors (I.E., are not
officers, full-time employees, or members of the immediate family of officers or
full-time employees).
The Company's current directors (the "Directors") and executive officers
and their respective positions are as follows:
Name Position
---- --------
DIRECTORS
Allen J. Anderson .................... Chairman of the Board, Chief Executive
Officer, and Director
C.E. Cornutt ......................... Director
T. Patrick Duncan .................... Director
Peter O. Hanson ...................... Director
John S. Moody ........................ Director
James M. Pollak ...................... Director
Kenneth N. Stensby ................... Director
Lee W. Wilson ........................ Director
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Name Position
---- --------
OFFICERS
Allen J. Anderson .................... Chief Executive Officer
Milton K. Reeder ..................... President and Chief Financial Officer
Dennis D. Higgs ...................... Executive Vice President
Gregory D. Skirving .................. Senior Vice President
Peter B. Harmon ...................... Vice President - Asset Management
Timothy B. Keith ..................... Vice President - Portfolio Management
Jaime Suarez ......................... Vice President - Finance, Treasurer, and
Controller
Celeste Woo .......................... Vice President - Asset Management
Robert A. Dobbin ..................... General Counsel and Secretary
BOARD COMMITTEES
As is discussed below, the Board has four standing committees: an Audit
Committee, a Board Affairs Committee, a Compensation Committee, and an
Investment Committee.
AUDIT COMMITTEE. The Audit Committee makes recommendations concerning
the annual appointment of the Company's public accountants and reviews the
arrangements for and the scope of the audit conducted by those accountants.
This committee (i) reviews the Company's accounting functions and operations,
(ii) considers the adequacy and effectiveness of the system of accounting
controls, including any proposed corrective actions, (iii) reviews and
monitors the Company's policies regarding business ethics and conflicts of
interest, (iv) discusses with management and the independent accountants the
Company's draft annual financial statements and key accounting and reporting
matters, (v) reviews the Company's insurance program and makes
recommendations to the Board concerning that program, and (vi) reviews the
activities and recommendation of the Company's audit staff. The Audit
Committee is composed entirely of Independent Directors. The Company's
independent accountants have unrestricted access to the Audit Committee. The
Audit Committee consists of Messrs. Hanson, Moody, and Wilson.
BOARD AFFAIRS COMMITTEE. The Board Affairs Committee serves as a
nominating committee for the full Board and reviews and makes recommendations
to the Board regarding the composition of board committees. This committee
also makes recommendations to the full Board on organization and succession
matters and is responsible for evaluating the effectiveness of the Board, its
committees, and individual board members. This committee proposes to the
full Board a slate of directors for election at the Company's annual
stockholders meeting and identifies and proposes to the full Board candidates
to fill any Board vacancies. This committee also assesses and makes
recommendations to the Board with respect to corporate governance matters.
The Board Affairs Committee consists of Messrs. Cornutt, Pollak, and Duncan.
COMPENSATION COMMITTEE. The Compensation Committee reviews and makes
recommendations to the Board regarding the Company's employee and management
compensation and benefit policies, including salaries and incentive, stock,
and retirement plans. This committee
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also (i) reviews and approves the amount and form of compensation and
benefits for the Company's Chief Executive Officer and other executive
officers and (ii) administers the Stock Plan. The Compensation Committee
consists of Messrs. Moody, Pollak, and Stensby.
INVESTMENT COMMITTEE. The Investment Committee is responsible for
reviewing, evaluating, and making recommendations to the full Board with
respect to (i) growth strategies, (ii) proposed transactions involving the
Company's acquisition or disposition of any material asset or material groups
of assets, a financing or refinancing of any such assets, an unsecured
financing, or an issuance of equity or debt securities, (iii) the financial
implications of matters involving financial policies, plans, and procedures,
and (iv) the financial implications of other proposed Company actions. In
addition, this committee has authority to approve any capital transaction
involving up to $25 million that is consistent with the Company's business
plan and any other criteria established by the Board. The Investment
Committee consists of Messrs. Anderson, Duncan, Hanson, and Stensby.
BOARD AND COMMITTEE MEETINGS
During 1996, the Board held eleven meetings, the Board Affairs Committee
held four meetings, the Audit Committee held one meeting, the Investment
Committee held ten meetings, and the Compensation Committee held two
meetings. Each Director except Mr. Moody attended at least 75% of the
aggregate of (i) the 1996 Board meetings held during the period he was a
Director and (ii) the 1996 meetings held by Board committees on which he
served during the period he so served.
EXECUTIVE OFFICERS
The business experience of each of the Company's executive officers is
set forth below.
ALLEN J. ANDERSON, age 45, has served as the Chairman of the Board and
Chief Executive Officer of the Company since its formation in May 1995. From
February 1994 until July 1995, Mr. Anderson served as Executive Vice
President of Hunt Realty Corporation, a private real estate investment
corporation. Before joining Hunt Realty Corporation, Mr. Anderson was a
partner and National Director of Institutional Investment Services for Arthur
Andersen Real Estate Services Group from August 1992 until February 1994. In
1987, Mr. Anderson founded and served as President of Anderson Capital
Advisors, a firm which represented investors in real estate transactions of
all types. Prior to founding Anderson Capital Advisors, Mr. Anderson was
President and Chief Executive Officer of Mercantile Realty Services, a
subsidiary of a Texas bank holding company that was responsible for real
estate held by the bank in a fiduciary capacity. Mr. Anderson graduated from
the University of Wisconsin in 1973 with a B.A. degree in Real Estate Finance.
MILTON K. REEDER, age 40, has served as the President of the Company
since its formation in May 1995 and was appointed Chief Financial Officer in
March 1996. From early 1991 to February 1996, Mr. Reeder served as President
and Chief Executive Officer of each of Meridian Point Realty
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Trust IV Co., Meridian Point Realty Trust VI Co., and Meridian Point Realty
Trust VII Co. (collectively, the "Merged REITs") and Meridian Point Realty
Trust '83 ("Trust '83" and, collectively with the Merged REITs, the
"Predecessor REITs"). Since early 1991, Mr. Reeder has served as President
and Chief Executive Officer of Sierra Capital Realty Trust '84 Co. ("Trust
84"). From early 1991 through December 1995, Mr. Reeder served as President
and Chief Executive Officer of Meridian Point Realty Trust VIII Co. ("Trust
VIII") (together with Trust '84 and the Predecessor REITs, the "Six REITs").
He also served as the Chief Financial Officer and Treasurer of the Six REITs
from 1984 to 1991, Acting Chief Financial Officer of the Six REITs from July
1994 to January 1995, and Executive Vice President of the Six REITs from 1989
until 1991. From 1991 to 1993, Mr. Reeder was a director of Meridian Point
Properties, Inc. ("MPP"), an employee leasing company that allowed the Six
REITs to share employee costs. From 1981 to 1991, he held various offices
with Sierra Capital Companies and its affiliates, the former managers of the
Six REITs. Mr. Reeder was with the accounting firm of Deloitte Haskins &
Sells (now Deloitte & Touche) as a tax specialist from 1979 to 1981. He is a
certified public accountant. Mr. Reeder is a member of the Financial
Executives Institute, the Urban Land Institute and the National Association
of Real Estate Investment Trusts. He graduated from the School of Business
Administration at the University of Michigan in 1979 with a Bachelor of
Business Administration degree.
DENNIS D. HIGGS, age 41, has served as Senior Vice President of the
Company since February 1997 and served as Executive Vice President of the
Company from its formation in May 1995 until February 1997. Mr. Higgs's
responsibilities encompass the management of all real estate activities of
the Company, including acquisitions, dispositions, development transactions,
leasing, and asset and property management. From 1991 to 1995, Mr. Higgs was
Senior Vice President of MPP. From 1986 to 1991, Mr. Higgs held various
offices with Sierra Capital Companies and its affiliates, the former managers
of the Six REITs. From 1983 to 1986, Mr. Higgs was a developer in Los
Angeles, California, with Ratkovich, Bowers & Perez, a firm specializing in
commercial, mixed use development projects. He has been active in real
estate asset management, acquisition, development, and disposition for the
past eighteen years. Mr. Higgs is a member of the Urban Land Institute and
the National Association of Industrial and Office Parks and is a licensed
real estate broker. He graduated from the University of Oregon in 1978 with
a B.A. degree in Business Administration.
GREGORY D. SKIRVING, age 50, has served as Senior Vice President of the
Company since February 1997. His responsibilities in this position include
the development and implementation of a marketing plan designed to attract
large corporate clients for the Company. From 1990 through February 1997,
Mr. Skirving was a Managing Director of the Trammel Crow Company, where he
was responsible for sourcing and managing comprehensive real estate service
agreements with major U.S. corporations. From 1982 to 1990, Mr. Skirving was
Partner and Chief Operating Officer of Reynolds Properties, Inc., a
development, leasing, and property management company based in Denver,
Colorado. Before 1982, he was engaged in real estate brokerage with Iliff
Thorn & Co., a regional real estate brokerage company headquartered in
Phoenix, Arizona, and with LaSalle Partners in Denver. Mr. Skirving
graduated from Arizona State University in 1973 with a B.S. degree in
Economics.
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PETER B. HARMON, age 36, has served as Vice President - Asset Management
of the Company since February 1996. For approximately one-half of the
Company's portfolio, Mr. Harmon is responsible for oversight of property
management duties performed by the Company's regional operators, leasing,
supervision of national management programs, risk management, and tenant
relations. Mr. Harmon has been active in commercial real estate for over
thirteen years, approximately three years with Kemper Real Estate Management
Company (July 1992 to January 1996) and ten years with Jaymont Properties
(June 1982 to June 1992). Mr. Harmon attended the University of North Dakota
and is a member of the National Association of Industrial and Office Parks.
CELESTE K. WOO, age 40, has served as Vice President - Asset Management
of the Company since March 1996. For approximately one-half of the Company's
portfolio, Ms. Woo is responsible for oversight of property management duties
performed by the Company's regional operators, leasing, supervision of
national management programs, risk management and tenant relations. From
1991 until February 1996, Ms. Woo served as Assistant Vice President of MPP.
From 1984 to 1991, Ms. Woo was Assistant Vice President with Sierra Capital
Companies, the former manager of the Six REITs. Ms. Woo has been involved
with commercial real estate for 12 years, is a CPM candidate, and is a member
of the Institute of Real Estate Management. Ms. Woo graduated from the
California College of Arts with a Bachelor of Fine Arts degree in
Environmental Design in 1976.
TIMOTHY B. KEITH, age 31, has been employed by the Company since
February 1996 and has served as Vice President - Portfolio Management since
April 1996. From July 1994 until February 1996, Mr. Keith served as
Investment Manager of Hunt Realty Corporation, a private real estate
investment corporation. From 1989 to 1994, Mr. Keith was a Real Estate
Consultant with the Arthur Andersen Real Estate Services Group and the Arthur
Andersen Real Estate Valuation Services Group in Dallas and New York City.
From 1988 to 1989, Mr. Keith served a Director of Marketing Research for
Iliff, Thorn, & Co., a regional real estate brokerage company headquartered
in Phoenix, Arizona. From 1987 to 1988, Mr. Keith was an associate with
Estes Development Co., Commercial Division, a community shopping center
development company. Mr. Keith graduated from Westmont College in 1987 with
a B.A. degree in Economics and Business.
JAIME SUAREZ, age 39, has served as Vice President - Finance of the
Company since February 1997 and as Controller and Treasurer of the Company
since its formation in May 1995. From August 1994 until February 1995, he
served as Finance Manager of MPP. From 1991 through July 1994, Mr. Suarez was
a consultant to MPP, Pacific Gas and Electric, and Pacific Telesis Group,
and, from 1984 to 1991, he was Controller of PacTel Properties, a subsidiary
of Pacific Telesis Group. He served as a Financial Analyst with Crocker
National Bank from 1982 to 1983 and was with the public accounting firm of
Ernst & Whinney (now Ernst & Young) as an advanced staff accountant from 1980
to 1981. He is a certified public accountant. Mr. Suarez graduated from the
University of San Francisco with a B.S. degree in 1979 and with a Masters in
Business Administration in 1991.
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ROBERT A. DOBBIN, age 50, has served as General Counsel and Secretary of
the Company since May 1995. He served as Secretary of the Six REITs from
1984 until February 1996 and as Vice President of the Six REITs and Vice
President and Secretary of MPP from 1991 until February 1996. From 1984 to
1991, he held various positions with Sierra Capital Companies and its
affiliates, the former managers of the Six REITs. Mr. Dobbin is an attorney
and before 1984 was engaged in the practice of law in both the private and
public sectors. He served as an officer in the U.S. Marine Corps from 1968
to 1972, graduated from Dartmouth College with a B.A. degree in 1967, from
Willamette University with a J.D. degree in 1975, and from Georgetown
University with a LL.M. degree in taxation in 1978.
COMPENSATION OF DIRECTORS
Each Independent Director receives an annual retainer of $18,000, a
$1,000 fee for each Board meeting attended, a $500 fee for each committee
meeting attended ($1,000 if the committee meeting is not held in conjunction
with a Board meeting), $1,000 for each day spent in engaging in site visits
or attending to other Company business at the request of management, and
reimbursement of expenses incurred in attending those meetings and engaging
in those activities. Independent Directors are entitled to elect to receive
all or any portion of their annual retainer in shares of the Company's Common
Stock. In the alternative, they may choose to receive their annual retainer
exclusively in cash. Mr. Anderson, who is both a director and an officer of
the Company, receives no director fees. Each Independent Director has
received an initial one-time grant of a non-statutory option to purchase
5,000 shares of Common Stock and receives periodic grants of additional
non-statutory options. See "The Stock Plan."
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's primary objectives in determining executive officer
compensation are (i) to enable the Company to attract and retain quality
executives by providing compensation packages that are competitive with
opportunities available to Company executives in the marketplace and (ii) to
align those executives' incentives with stockholder interests. In
establishing its executive compensation program, the Board retained an
independent compensation consultant familiar with the real estate investment
trust ("REIT") industry. Among other things, that consultant advised the
Board as to (i) compensation structures that would assist the Board in
achieving its goals, (ii) ranges of executive officer base salaries and total
annual cash compensation in place at comparable REITs, and (iii) comparisons
between stock option arrangements being considered for the Company and stock
option arrangements in place elsewhere in the REIT industry.
To achieve its goals, the Board has designed the Company's executive
compensation program to include the following:
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(a) Base salaries at or below the midpoint of base salary ranges
for similar positions at comparable REITs,
(b) Annual cash incentive opportunities that (i) together with base
salaries, will produce levels of total annual cash compensation that are at
the median of industry ranges of total annual cash compensation if target
performance levels are met and at the upper quartile of those ranges if
maximum performance levels are met, and (ii) will compensate executives for
achieving goals that have been designed to enhance long-term stockholder
value, and
(c) Long-term incentives that relate directly to the enhancement of
stockholder value.
BASE SALARIES
With input from its independent consultant, the Board considered a base
salary structure that takes into account competitive practices of (i) other
industrial REITs and (ii) REITs with market capitalizations similar to that
of the Company. This salary structure includes ranges of base salaries for
Company executive officer positions. Base salaries for Company executive
officers have generally been set at or below the midpoint of those ranges.
ANNUAL INCENTIVES
The Company's annual cash incentive awards program contains three
elements. The first of these elements consists of awards based on the
Company's corporate performance. This portion of the program relies on two
benchmarks: (i) the level of the Company's Funds from Operations in
comparison to levels targeted by the Board, and (ii) the Company's total
return to stockholders in comparison to total returns for 110 equity REITs as
set forth in the Wilshire REIT Index. The second of these elements consists
of awards based on the level and quality of the Company's real estate
acquisitions. The third consists of awards based on the Board's
discretionary assessment of individual executive officers. The weighting
given to these three elements varies among the officers depending on their
responsibilities.
LONG-TERM INCENTIVES
The Company's long-term incentive program has been designed to provide
executive officers with long-term incentives that are aligned with the
benefits to be derived by stockholders from long-term increases in share
value. This program contains two elements: options issued under the Stock
Plan ("Stock Plan Options") and options issued to executive officers before
the Company's February 1996 merger with three other real estate investment
trusts (the "Merger") (those options are referred to below as the "Pre-Merger
Options").
STOCK PLAN OPTIONS. The Company's Compensation Committee administers
the Stock Plan. The exercise price for each option granted under the Stock
Plan may not be less than the fair market value of the Company shares covered
by that option on the date of the option grant.
8
<PAGE>
Option terms cannot exceed ten years, and options vest pursuant to standards
established by the Compensation Committee. The Stock Plan permits the
issuance of both incentive stock options and non-statutory options. See
"Executive Compensation: Option Grants in Last Fiscal Year" and "Proposal
Three: Approval of an Amendment to the Company's Employee and Director
Incentive Stock Plan."
PRE-MERGER OPTIONS. The Pre-Merger Options were non-statutory options
that were granted outside the Stock Plan and provided for an exercise price
of $12 per share. All these options were exercised in February and March
1996. In exercising their Pre-Merger Options, all but one of the officers
made use of financing that had been made available with assistance from the
Company. See "Executive Compensation: Option Grants in Last Fiscal Year" and
"Proposal Three: Approval of an Amendment to the Company's Employee and
Director Incentive Stock Plan."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Anderson's 1996 compensation package consisted of salary of
$214,482, a cash bonus of $162,500, a housing allowance of $32,500, 100,000
Pre-Merger Options (which he exercised for a total purchase price that on the
date of exercise was $12,000 less than the value of the shares purchased),
280,000 Stock Plan Options, and a $500 matching contribution to his account
under the Company's 401(k) plan.
The Board established Mr. Anderson's annual salary at $250,000, a level
that consistent with the principles discussed above, is below the midpoint of
the salary range for comparable positions in the REIT industry as determined
by the Company's independent compensation consultant. The amount of Mr.
Anderson's cash bonus was based on (i) the Company's 1996 performance
relative to (a) total 1996 REIT stockholder returns as set forth in the
Wilshire REIT Index and (b) targeted levels of Company Funds from Operations
for 1996, and (ii) the successful completion of the Merger, the success of
the Company's capital-raising efforts, and the overall success of the Company
and its share price development. The amount of the housing allowance was
determined by reference to the differential in housing prices between San
Francisco and Dallas and was designed to permit re-location on a cost-neutral
basis The amounts of Mr. Anderson's Pre-Merger and Stock Plan Option awards
were based on the consultant's recommendations.
Compensation Committee
John S. Moody
James M. Pollak
Kenneth N. Stensby
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
During 1996, the Compensation Committee was composed of Messrs. Moody,
Pollak, and Stensby. No member of that committee is or was formerly an
officer of the Company or any of its subsidiaries.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
chief executive officer and its four other most highly compensated executive
officers (collectively, the "Named Executive Officers") during 1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ------------
SECURITIES ALL
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)
- -------------------------- ---- --------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Allen J. Anderson 1996 $214,482 $162,500 $44,500 (3) 380,000 $500 (4)
Chief Executive Officer (1)(2)
Milton K. Reeder 1996 $161,738 $ 61,750 $ 2,400 (5) 168,000 --
President and Chief Financial
Officer
Dennis D. Higgs
Executive Vice President 1996 $114,919 $169,625 $ 5,400 (5) 144,000 --
Robert A. Dobbin
General Counsel and Secretary 1996 $100,631 $40,000 $ 5,775 (5) 51,000 --
Timothy B. Keith 1996 $ 77,356 $46,600 $ 1,800 (5) 50,000 --
Vice President (2)
</TABLE>
(1) See "Certain Relationships and Related Party Transactions: Purchase of
Residence" for a discussion of the Company's purchase of Mr. Anderson's
former residence in Dallas, Texas.
(2) Effective June 1, 1995, the Company and Hunt Realty Corporation ("HRC")
entered into a consulting agreement under which the Company agreed to
reimburse HRC for the services of Mr. Anderson and two other employees
through the effective date of the Merger. $24,839 of the amount paid by the
Company under this agreement was attributable to services rendered by Mr.
Anderson in 1996, and $7,524 of that amount was attributable to services
rendered by Mr. Keith in 1996. See "Certain Relationships and Related Party
Transactions: The Hunt Consulting Agreement."
(3) $12,000 of this amount represents the excess of (i) the value of the
shares purchased by Mr. Anderson on the exercise of his Pre-Merger Options
over (ii) the amount that he paid for those shares. The balance of this
amount, $32,500, represents the amount of the housing allowance paid to Mr.
Anderson in the last fiscal year to compensate him for increased housing
costs associated with his move to the San Francisco area; the Company has
agreed to maintain this allowance for so long as the Company's principal
executive offices are located in that area.
(4) Represents the Company's annual matching contribution to Mr. Anderson's
account under the Company's 401(k) plan. The Company made matching
contributions (up to a maximum of $500) on behalf of all employees who
participated in that plan during 1996.
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<PAGE>
(5) These amounts represent the excess of (i) the value of the shares purchased
by each of these individuals on the exercise of his Pre-Merger Options over (ii)
the amount that he paid for those shares.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for the Named Executive Officers
relating to stock options granted during 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS (1) APPRECIATION FOR OPTION TERM
- ----------------------------------------------------------------------------------- ----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------- ------------- -------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Allen Anderson
Pre-Merger Options 100,000 11.8% $12.00 2/28/96
Stock Plan Options 280,000 33.1% $15.125 2/23/06 $2,663,369 $6,749,499
Milton K. Reeder
Pre-Merger Options 20,000 2.4% $12.00 2/28/96
Stock Plan Options 148,000 17.5% $15.125 2/23/06 $1,407,781 $3,567,592
Dennis D. Higgs
Pre-Merger Options 45,000 5.3% $12.00 2/28/96
Stock Plan Options 99,000 11.7% $15.125 2/23/06 $ 941,691 $2,386,430
Robert A. Dobbin
Pre-Merger Options 1,400 0.2% $12.00 3/31/96
Stock Plan Options 51,000 6.0% $15.125 2/23/06 $ 485,114 $1,229,373
Timothy B. Keith
Pre-Merger Options 15,000 1.8% $12.00 2/28/96
Stock Plan Options 35,000 4.1% $15.125 2/23/06 $ 332,921 $ 843,687
</TABLE>
(1) The Company awarded the Pre-Merger Options to executive officers on January
26, 1996. Under the option agreements, the option holders could purchase shares
of Common Stock for $12 per share at any time until the earlier of the date that
was five days after the closing of the Merger or March 31, 1996. All the
officers but Mr. Dobbin purchased their shares in February 1996; Mr. Dobbin's
option was extended until March 31, 1996, and he purchased his shares for cash
in March 1996. All the other option holders (i) paid $2 per share of their
purchase prices in the form of promissory notes that have since been paid in
full (see "Certain Relationships and Related Party Transactions: Loans to
Executive Officers") and (ii) signed individual promissory notes evidencing
their obligations to repay bank loans obtained to finance the $10 per share
balance. The bank financing arrangements provide that in the event of a default
under a promissory note (including a payment default, the death of an officer, a
merger of the Company in which the Company is not the surviving entity, the
termination of the officer's employment by the Company, the failure of the
Common Stock to be listed on the New York Stock Exchange, and certain other
events), the lender can require the Company to repurchase the note, together
with any interest accrued thereon, pursuant to a note purchase agreement between
the Company and the lender. In connection with this repurchase obligation, the
Company has deposited $1.9 million in an account with the lender and granted the
lender a security interest in that account. If an option holder's note is
purchased by the Company, pursuant to a stock purchase agreement entered into
between the Company and these individuals, the option holder has agreed to sell
to the Company, and the Company has agreed to purchase, the option holder's
shares at a price of $10 per share to satisfy that individual's obligations
under the note; any officer who sells his shares to the Company under this
arrangement would forfeit his original $2 per share investment in those
11
<PAGE>
shares. The Pre-Merger Options were not issued under the Stock Plan and thus
were not charged against the shares reserved for issuance under that plan.
In February 1996, the Company granted Stock Plan Options to the Named
Executive Officers as indicated in this table. Stock Plan Options consist of
both incentive stock options and non-statutory stock options. The exercise
price of these options is $15.125 per share (I.E., the closing price on the
first trading day on which Common Stock was quoted on the New York Exchange).
All the options will have a ten-year term unless they terminate earlier in
accordance with the provisions of the Stock Plan. Some of the options vest
in increments over a five-year period beginning with the grant date. These
options will become fully-vested in the event of (i) the death or disability
of the executive or (ii) a termination of employment that is either (a)
initiated by the Company without "cause" or (ii) initiated by the executive
for "good reason" (in each case as defined in the stock option agreement).
The balance of the options will vest if the Company achieves a long-term
performance goal based on the level of return to its stockholders, an event
that could occur at the earliest on the third anniversary of the options'
issuance; however, if the officer is still employed by the Company after five
years, these options will vest even if that performance goal has not been
achieved.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth information for the Named Executive
Officers relating to (i) their exercise of stock options in 1996 and (ii) the
valuation of unexercised stock options held by them.
<TABLE>
<CAPTION>
SHARES VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($) (#) ($)
----------- --------- ----------- ------------- ------------ -------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ----------- --------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Allen Anderson 100,000 $12,000 -- 280,000 $ -- $1,645,000
Milton K. Reeder 20,000 $ 2,400 -- 148,000 -- $ 869,500
Dennis D. Higgs 45,000 $ 5,400 -- 99,000 -- $ 581,625
Robert A. Dobbin 1,400 $ 5,775 -- 51,000 -- $ 299,625
Timothy B. Keith 15,000 $ 1,800 -- 35,000 -- $ 205,625
</TABLE>
PERFORMANCE GRAPH
The following graph and table compare the cumulative total shareholder
returns on Common Stock for the period from February 23, 1996, through
December 31, 1996, with the cumulative total returns for the same period
under the Standard & Poor's 500 Stock Index and the NAREIT Equity REIT Total
Return Index maintained by the National Association of Real Estate Investment
Trusts, Inc. Total return values for Common Stock and for those two indexes
represent cumulative total returns assuming (i) the investment of $100 in
Common Stock and in the securities covered by those indexes on February 23,
1996 and (ii) the reinvestment of dividends. Company dividends paid in
January 1997 for the fourth quarter of 1996 are not included in the
calculations. The shareholder returns on Common Stock shown in the following
graph and table are not necessarily indicative of future performance.
12
<PAGE>
[GRAPH]
<TABLE>
<CAPTION>
2/96 3/96 4/96 5/96 6/96 7/96 8/96 9/96 10/96 11/96 12/96
------- ------- ------- ------- ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Meridian Industrial Trust $100.00 $104.84 $104.81 $108.86 $119.42 $118.05 $116.40 $115.58 $117.46 $125.02 $140.96
S&P 500 $100.00 $100.96 $102.45 $105.49 $105.49 $100.83 $102.96 $108.75 $111.73 $120.21 $117.85
NAREIT Equity REIT $100.00 $99.45 $99.96 $102.54 $103.88 $104.66 $108.78 $110.68 $113.96 $119.15 $131.54
</TABLE>
SEVERANCE AGREEMENTS WITH PREDECESSOR REITS' EXECUTIVES
Effective May 31, 1995, the Predecessor REITs and the Company entered
into severance agreements with six members of those companies' senior
management (the "REIT Executives"). The severance agreements provided that if
a REIT Executive's employment with those companies were to be terminated
"without cause" (as defined under the severance agreements), that executive
would be entitled to specified severance benefits. The employment of three
REIT Executives was so terminated. In accordance with the Severance
Agreements, the Company paid to those three individuals $249,346, an amount
that represents the Merged REITs' share of the severance payments owing to
those individuals.
STOCKHOLDINGS OF PRINCIPAL STOCKHOLDERS, DIRECTORS, AND MANAGEMENT
The following table sets forth information as of April 1, 1997,
regarding the beneficial ownership of shares of Common Stock by (i) each
person that owns more than 5% of such shares, (ii) each Director, (iii) each
Named Executive Officer, and (iv) all Directors and executive officers as a
group. This table is based on assumptions that are set forth in its
footnotes.
13
<PAGE>
NUMBER OF SHARES PERCENT
NAME (1) BENEFICIALLY OWNED (2) OF CLASS (2)
- --------------------------- ---------------------- -------------
Ameritech Pension Trust (3) 1,623,376 10.67%
USAA Real Estate Company (4) 1,148,430 8.45%
Cohen & Steers Capital Management, Inc. (5) 1,040,400 7.65%
Hunt Acquisitions Partners, Ltd. (6) 1,027,581 7.56%
Morgan Stanley Group Inc. (7) 988,736 7.27%
OTR - Nominee for The State Teachers
Retirement Board of Ohio (8) 949,351 6.53%
Heitman/PRA Securities Advisors, Inc. (9) 728,900 5.36%
Allen J. Anderson (10) (11) 153,367 1.12%
C.E. Cornutt (10) 19,629 (12)
Robert A. Dobbin (10) (11) 10,155 (12)
T. Patrick Duncan (10) 9,529 (12)
Peter O. Hanson (10) 15,487 (12)
Dennis D. Higgs (10) (11) 64,505 (12)
Timothy B. Keith (10) (11) 21,172 (12)
John S. Moody (10) 13,129 (12)
James M. Pollak (10)(13) 9,144 (12)
Milton K. Reeder (10) (11) 46,911 (12)
Kenneth N. Stensby (10) 8,672 (12)
Lee W. Wilson (10) 11,814 (12)
All the directors and executive
officers as a group (16 persons) 400,941 2.91%
(1) Unless otherwise indicated in these footnotes, the persons and entities
listed in this table have sole voting and investment power over shares
attributable to them, subject to community property laws where applicable.
(2) Assumes that the person, entity, or group in question has purchased or
otherwise acquired all the shares of Common Stock that he or it is entitled to
purchase by May 31, 1997 and that no other person or entity purchases or
otherwise acquires any shares. For example, the entries for Ameritech Pension
Trust and OTR - Nominee for The State Teachers Retirement Board of Ohio assume
that those stockholders convert all their shares of Series B Preferred Stock
into shares of Common Stock on a one-share-for-one-share basis (the initial
conversion rate).
(3) The address of Ameritech Pension Trust is 225 West Randolf Street, HQ13A,
Chicago, Illinois 60605.
(4) The address of USAA Real Estate Company is 8000 Robert F. McDermott Freeway,
Suite 600, San Antonio, Texas 78230.
(5) The address of Cohen & Steers Capital Management, Inc. is 757 Third Avenue,
New York, New York 10017.
14
<PAGE>
(6) The address of Hunt Acquisitions Partners, Ltd. is Fountain Place, 20th
Floor, 1445 Ross at Field, Dallas, Texas 75202. Ray L. Hunt and RLH
Investments, Inc. also reported beneficial ownership of the same shares. Their
address is the same as that of Hunt Acquisitions Partners, Ltd.
(7) The address of Morgan Stanley Group Inc. is 1585 Broadway, New York, New
York 10036. Morgan Stanley Asset Management Inc. has reported beneficial
ownership of 818,236 of the same shares. Morgan Stanley Asset Management Inc.'s
address is 1221 Avenue of the Americas, New York, New York 10020.
(8) The address of OTR - Nominee for The State Teachers Retirement Board of Ohio
is 275 East Broad Street, Columbus, Ohio 43215.
(9) The address of Heitman/PRA Securities Advisors, Inc. is 180 North LaSalle
Street, Suite 3600, Chicago, Illinois 60601.
(10) Excludes shares that these directors and officers may purchase in the
future under options granted under the Stock Plan other than any such shares
included pursuant to note 2. See "Proposal Three: Approval of an Amendment to
The Employee and Director Incentive Stock Plan."
(11) Includes shares purchased pursuant to the exercise of Pre-Merger Options
(see "Executive Compensation: Long Term Incentives").
(12) Less than 1%.
(13) Includes 305 shares of Common Stock held by Mr. Pollak's wife.
Mr. Hanson did not timely file one Form 4, which related to one 1996
transaction in which he purchased 2,000 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
THE USAA OPTION AND WARRANT
On November 21, 1995, USAA Real Estate Company ("USAA") granted to the
Company (i) an option to purchase a 291,564 square-foot industrial property
located in Lakeland, Florida, and (ii) a right of first refusal with respect
to five bulk warehouse facilities comprising approximately 1.1 million square
feet located in West Chicago, Illinois.
As consideration for that option and right of first refusal, the Company
on February 23, 1996, issued to USAA a warrant to purchase shares of Common
Stock (the "Option Warrant"). Pursuant to the agreement between the Company
and USAA, (i) the exercise price for the shares purchasable under the Option
Warrant is a per share amount that is 10% less than the exercise price for
the warrants issued to the holders of shares of Trust VI common stock and
Trust VII common stock in the merger of the Merged REITs into the Company
(the "Merger Warrants"), and (ii) the number of shares of Common Stock for
which the Option Warrant is exercisable is based on a formula under which the
total discount from the exercise price of the Merger Warrants equals
$300,000. Because the exercise price of the Merger Warrants is $16.23 per
share, the Option Warrant has an exercise price of $14.60 per share and
covers 184,900 shares of Common Stock. USAA has transferred the Option
Warrant to a fund managed by Morgan Stanley Asset Management Inc. for an
aggregate purchase price of $300,000.
The Option Warrant was issued pursuant to an exemption from the
registration requirements of the federal securities laws and, as a result, is
subject to significant restrictions on transfer. Other than these
restrictions and the discounted exercise price, the Option Warrant contains
substantially the same provisions as the Merger Warrants. The Option Warrant
is
15
<PAGE>
exercisable at any time and from time to time, in whole or in part, from May
23, 1997 to February 23, 1999.
The Company ultimately decided not to exercise its option to purchase
the Lakeland property, and that option and the right of first refusal expired
in February 1997.
THE HUNT CONSULTING AGREEMENT
Effective June 1, 1995, the Company and Hunt Realty Corporation ("HRC")
entered into a Consulting Agreement under which HRC agreed to provide to the
Company the services of Mr. Anderson, Mr. Keith, and an administrative
assistant from June 1, 1995 through the closing of the Merger. The Merged
REITs were also parties to that agreement. Under that agreement, the Company
agreed to pay HRC its compensation costs with respect to the services of
those three individuals based on the amount of those individuals' time
dedicated to the operations of the Company on a monthly basis. The total
amount incurred by the Company under this agreement was $276,334. The
Company and the Merged REITs also agreed to indemnify HRC, any affiliates of
HRC, and the three individuals against any losses, claims, damages, or
expenses that arose out of or were related to the services provided under
that agreement.
LOANS TO EXECUTIVE OFFICERS
As part of the purchase price paid to the Company in the exercise of
their Pre-Merger Options, Messrs. Anderson and Higgs on February 14, 1996,
executed promissory notes in favor of the Company in the amounts of $200,000
and $90,000, respectively. These notes bore no interest and were completely
repaid on February 23, 1996. See "Executive Compensation: Option Grants in
Last Fiscal Year."
PURCHASE OF RESIDENTIAL PROPERTY
On March 29, 1996, the Company paid a moving allowance of $41,667 to Mr.
Anderson in order to defray the expenses of his move from Dallas, Texas, to
San Francisco, California. Mr. Anderson and the Company subsequently agreed
that (i) Mr. Anderson would repay that allowance to the Company, (ii) the
Company would purchase from Mr. Anderson his former residence in Dallas, and
(iii) Mr. Anderson would indemnify the Company against any loss and expenses
that it might incur in excess of $41,667 in the process of purchasing,
owning, and ultimately selling that residence. Pursuant to that agreement,
(i) Mr. Anderson repaid the moving allowance, (ii) the Company purchased that
residence for $295,000 in July 1996, (iii) the Company sold that residence
for $263,900 in August 1996, incurring total losses and expenses of $60,287
with respect to its investment in that property, and (iv) Mr. Anderson
reimbursed the Company in the amount of $18,620 (I.E., in the amount of the
excess of $60,287 over $41,667). The out-of-pocket cost to the Company was
thus identical to the amount of the moving allowance that it initially paid
to, and that was subsequently repaid by, Mr. Anderson.
16
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Directors are elected annually and serve until the next annual
meeting of stockholders and until their successors are elected and qualified.
The Company's Bylaws provide that the number of Directors may, subject to
the rights of the holders of the Series B Preferred Stock, be increased or
decreased by a vote of a majority of the entire Board, so long as that number
is not less than three nor more than fifteen. Effective as of the Annual
Meeting, the number of positions on the board will be fixed at seven. The
Board may in the future attempt to locate additional qualified candidates for
the Board. If it locates such a person or persons, pursuant to the Company's
Bylaws and subject to the rights of the holders of the Series B Preferred
Stock, it could by a majority vote of the entire Board increase the number of
Board positions by up to two positions and elect a new director or directors
to fill the resulting vacancy or vacancies. Any director so elected would
hold office until the next annual meeting of stockholders and until his or
her successor is elected and qualified.
The Company's Charter provides that a majority of the Directors shall be
Independent Directors. The Board has nominated the seven individuals named
below to serve as members of the Board. All those nominees except Mr.
Anderson would qualify as Independent Directors.
The Company's Bylaws provide a procedure for stockholder nomination of
persons for election to the Board of Directors. Please see "Stockholder
Proposals and Nominations".
The nominees listed below currently are Directors whose present terms
expire at the Annual Meeting. Each nominee has agreed to serve if elected,
and management has no reason to believe that any nominee will be unavailable
to serve. Unless otherwise instructed, the proxy holders will vote Proxies
received by them in favor of the election of the nominees named below.
However, if any nominee becomes unavailable for election for any reason, the
Shares represented by those Proxies will be voted for any substitute nominee
designated by the Directors. Assuming that a quorum is present, a plurality
of all the votes cast at the Annual Meeting will be sufficient to elect a
nominee as a Director. For purposes of the election of Directors,
abstentions will not be counted as votes cast and will have no effect on the
result of the vote, although they will be counted in determining the presence
of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE LISTED BELOW,
AND, IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN
CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
17
<PAGE>
NOMINEES
The following table indicates each nominee's age, current position, and
business experience during the past five years or more:
ALLEN J. ANDERSON. Biographical information for Mr. Anderson is set forth
above in "General Company Information: Executive Officers."
C.E. CORNUTT, age 47, has since February 1997 established a partnership,
Argent Property Company, Ltd., to develop and invest in industrial properties
and industrial portfolio companies. Mr. Cornutt serves as President of Lasso
Property Company, which has partnered with an affiliate of Hunt Realty
Corporation to organize this new partnership. From 1993 until January 1997, he
served as the President of Hunt Realty Corporation and its parent company, Hunt
Capital Corporation. From 1984 until January 1997, he served as Chairman of
Hunt Refining Company, an independent refining company that is a subsidiary of
Hunt Capital Corporation. From 1983 to 1993, Mr. Cornutt served as the Chief
Financial Officer of Hunt Oil Company, an independent oil company based in
Dallas, Texas, with worldwide operations. From 1973 to 1983, Mr. Cornutt served
as Executive Vice President of Woodbine Development Corporation, a private real
estate company active in all phases of land development, construction, and
management of hotels, office buildings and industrial properties. Mr. Cornutt
graduated from Abilene Christian University in 1971 with a B.S. degree in
Business Administration.
T. PATRICK DUNCAN, age 47, joined USAA in November 1986 as Controller and,
since July 1992, has served as Senior Vice President of its real estate
operations. Mr. Duncan's responsibilities include the direction of all
acquisitions, sales, management and leasing of real estate for USAA and certain
affiliated companies. In addition, he is responsible for investment fund
raising and advisory services in real estate. Before joining USAA, Mr. Duncan
was an audit manager for the CPA firm of Deloitte & Touche and Controller of the
Trammell Crow Company in Dallas, Texas. Mr. Duncan is a certified public
accountant and holds a Texas real estate brokers license. He is a member of the
Texas and Arizona State Boards of Accounting, the Texas and Arizona State
Societies of Certified Public Accountants, the International Council of Shopping
Centers, the Urban Land Institute, The National Association of Real Estate
Investment Trusts, and the Pension Real Estate Association. Mr. Duncan serves
as director of USAA Investment Income I and II, USAA Real Estate Partnership III
and IV, and USAA Equities Advisor Inc. Mr. Duncan is also Vice Chairman of the
Board of the Daughters of Charity, a community organization that provides health
care to the poor. Mr. Duncan graduated from the University of Arizona in 1972
with a B.S. degree in Accounting and Finance.
PETER O. HANSON, age 62, has been the President of James E. Hanson, Inc.,
an industrial real estate development, property management, and realty brokerage
firm, since 1966. Since 1984, he has served as President of Property Investors
Associates, Inc. (a subsidiary of James E. Hanson, Inc.), which is the general
partner of five public real estate partnerships. He has been a director of
seven privately-held corporations and the general partner of 11 privately-held
real estate partnerships. He currently serves as a director of New American
Network. Mr. Hanson is a
18
<PAGE>
member of the Society of Industrial and Office Realtors and served as its
National President in 1985. He is also a member of the New York Metropolitan
Real Estate Brokers Association and in 1970 was its President. Until the
merger of the Merged REITs into the Company on February 23, 1996 (the
"Merger"), he served as a director of Trusts VI and VII and of MPP, and was
Chairman of Trust VI. Mr. Hanson currently serves as a trustee of Trust '83
and a director of Trust VIII. He holds a B.A. from Colgate University.
JOHN S. MOODY, age 48, has since June 1995 been a director and the
President and Chief Executive Officer of Cornerstone Properties, Inc., a REIT
that became self-advised in June 1995. From April 1991 to June 1995, Mr.
Moody was President and Chief Executive Officer of Deutsche Bank Realty
Advisors, where he was responsible for a $2 billion real estate portfolio.
Deutsche Bank Realty Advisors was a wholly-owned subsidiary of Deutsche Bank
AG and acted as the real estate advisor to all Deutsche Bank-sponsored real
estate in North America. Before joining Deutsche Bank, Mr. Moody was
President and Chief Executive Officer of Paine Webber Properties, a real
estate syndication, advisory, and asset management company for a $3 billion
portfolio of apartments, office buildings, and shopping centers. Mr. Moody
is an experienced real estate developer and previously practiced law,
specializing in real estate matters. He is a graduate of Stanford University
and received his J.D. from the University of Texas School of Law. His
professional affiliations include the Association of Foreign Investors in
U.S. Real Estate and the Urban Land Institute.
KENNETH N. STENSBY, age 57, was President and Chief Executive Officer of
United Properties, a large Minneapolis-based diversified real estate company,
from 1974 until his retirement in January 1995. Before joining United
Properties, Mr. Stensby was a Vice President at Northland Mortgage Company,
where he represented institutional investors as a mortgage banker from 1967
to 1971. He also served as a mortgage analyst for Connecticut General Life
Insurance Company from 1961 to 1967. Mr. Stensby is past President of the
National Association of Industrial and Office Parks and was a director of
First Asset Realty Advisors, a pension advisory subsidiary of First Bank of
Minneapolis. Mr. Stensby graduated from Carleton College with a B.A. in
economics in 1961.
LEE W. WILSON, age 56, has been the President and owner of L.W. Wilson &
Co., Inc., a registered specialist firm on the Pacific Stock Exchange, since
1975 and a specialist on the Pacific Stock Exchange since 1967. In 1977, he
served as the Chairman of the Board of Governors of the Pacific Stock
Exchange and in 1976 was Chairman of the Board of Directors of Pacific
Securities Depository Trust Company. Before the Merger, Mr. Wilson served as
a director of Trusts '84, IV, VI and VII and MPP and was Chairman of Trusts
'84 and VII.
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT
The firm of Arthur Andersen LLP has provided independent public
accounting services to the Company since its inception in 1995. The Board
has recommended to the stockholders that they ratify the selection of Arthur
Andersen LLP to examine the Company's financial statements
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for the year ending December 31, 1997. If the stockholders do not ratify the
selection of Arthur Andersen LLP as the Company's independent public
accountant, or if circumstances arise that make the continuation of Arthur
Andersen LLP as the Company's independent public accountant impossible or
inappropriate for the year ending December 31, 1997, that selection will be
reconsidered by the Audit Committee and the Board. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting to
respond to appropriate questions and to make a statement if he or she so
desires.
Assuming that a quorum is present, the affirmative vote of a majority of
all the votes cast at the Annual Meeting is necessary for approval of the
ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997. For
purposes of the vote on this proposal, abstentions will not be counted as
votes cast and will have no effect on the result of the vote, although they
will be counted in determining the presence of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL, AND, IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN CONNECTION WITH
THIS PROXY STATEMENT WILL BE SO VOTED.
PROPOSAL THREE
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
EMPLOYEE AND DIRECTOR INCENTIVE STOCK PLAN
BACKGROUND AND DESCRIPTION OF THE PROPOSAL
The Board adopted the Stock Plan in May 1995 and amended it in November
1995 and January 1996. The Company's stockholders approved the Stock Plan in
May 1995 and approved amendments in November 1995 and January 1996.
In February 1997 the Board approved certain amendments to the Stock Plan
to reflect recent changes to rules issued under Section 16(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") (the so-called "short
swing profit" rules). These amendments addressed the transferability of
awards granted under the Stock Plan, the manner in which non-employee
directors of the Company elect to receive certain of their compensation in
Common Stock, and definitional changes to conform to the language of the
revised rules. These amendments did not require the approval of the
Company's stockholders. At that time, the Compensation Committee considered
increasing the number of shares of Common Stock that may be issued under the
Stock Plan.
On March 24, 1997, the Compensation Committee recommended that the Stock
Plan be amended to provide that the maximum number of shares of Common Stock
that may be subject to outstanding awards at one time under the Stock Plan
shall be an amount equal to (a) seven percent of the aggregate of (i) the
total number of shares of Common Stock outstanding from
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time to time, plus (ii) the total number of securities convertible into or
exchangeable or exercisable for shares of Common Stock outstanding from time
to time (in each case other than any such securities issued under the Stock
Plan or any other stock-based plan for employees or directors of the
Company), minus (b) the total number of shares of Common Stock subject to
outstanding awards on the date of calculation under the Stock Plan and any
other stock-based plan for employees or directors of the Company. On March
27, 1997, the Board approved the proposed amendment to the Stock Plan and
recommended that it be submitted to the stockholders of the Company for their
approval. Under this amendment, the existing section 3 of the Stock Plan
would be replaced by a proposed new section 3. The text of both the existing
section 3 and the proposed new section 3 is attached to this Proxy Statement
as Attachment A. At the Annual Meeting, the stockholders of the Company will
be asked to approve the foregoing amendment to the Stock Plan as reflected
Attachment A. The affirmative vote of the holders of a majority of the
Shares present or represented and entitled to vote at the Annual Meeting is
required to approve the proposed amendment to the Stock Plan. The Stock Plan
is summarized below.
SUMMARY OF THE STOCK PLAN
The purpose of the Stock Plan is to enable the Company to attract, retain,
and motivate key employees, directors, and, on occasion, consultants and
advisors by providing them with equity participation in the Company.
Accordingly, the Stock Plan provides for the grant of incentive stock
options, non-statutory stock options, restricted stock, unrestricted stock
for non-employee directors, and stock appreciation rights to employees,
directors, and certain consultants and advisors of the Company and its
present and future subsidiaries. As of April 1, 1997, the Company and its
subsidiaries had twenty-six employees and seven non-employee directors. The
Stock Plan will terminate in May 2005 unless sooner terminated by the Board.
As of April 8, 1997, the closing price of the Company's Common Stock on the
New York Stock Exchange was $20.875.
ADMINISTRATION OF THE PLAN. The Stock Plan is administered by the Board
or a committee appointed by the board (the "Committee"). The Committee
necessarily administers the Stock Plan with respect to eligible persons who
are subject to Section 16(b) of the Exchange Act. The Committee must consist
of not less than two members of the Board (all of whom must be "non-employee
directors" as defined in Rule 16b-3 under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code
(the "Code")). The Board may administer the Stock Plan with respect to all
other eligible persons or may delegate those duties to the Committee.
References below to the "Administrator" are to the body that administers the
plan (that is, the Board, the Committee or a combination of the two). The
Board has delegated the administration of the Stock Plan to its Compensation
Committee, which is composed of non-employee directors.
SECURITIES SUBJECT TO THE PLAN. Currently, a maximum of 1,000,000 shares
of Common Stock (subject to adjustment under certain circumstances) may be
issued under the Stock Plan. As of April 1, 1997 the Company had granted
986,460 stock options to its employees and its non-employee directors. Upon
approval of the proposed amendment to the Stock Plan as
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<PAGE>
described above, the Company would be authorized to grant awards covering the
issuance of up to 1,162,549 shares of Common Stock (an amount calculated on
the basis of 13,597,214 shares of Common Stock, 2,272,727 shares of Series B
Preferred Stock, and 737,900 warrants to purchase Common Stock outstanding as
of April 1, 1997).
EMPLOYEE OPTIONS. The Company may grant incentive stock options (under
Section 422 of the Code) and non-statutory stock options under the Stock
Plan. The option exercise price of both incentive stock options and
non-statutory stock options may not be less than the fair market value of the
shares of stock covered by the option on the date the option is granted.
Options are transferable, subject to certain restrictions, only with the
approval of the Committee and then only if such transfer is (i) pursuant to a
qualified domestic relations order, (ii) to a trust established for the
benefit of the participant or a member of his or her family, (iii) to a
participant's "family" limited partnership, or (iv) otherwise in
circumstances that the Committee believes will result in the award continuing
to provide an incentive to the participant.
The Administrator selects the employees (and any consultants or advisors)
to whom options will be granted, the number of shares subject to each option,
and the other terms and conditions of options, but in all cases consistent
with the Stock Plan. Each option is evidenced by an Option Agreement. The
Option Agreement specifies whether the option is intended to be an incentive
stock option or non-statutory stock option. The Administrator may provide
that options will be exercisable from time to time, in installments or
otherwise, during such periods (up to 10 years from the date of the grant) as
the Administrator may determine in its discretion. The exercise price of
options will be payable in cash or, if the Administrator permits, by issuance
of a full recourse promissory note by the option holder or the surrender of
shares of Common Stock owned by the option holder.
DIRECTOR OPTIONS AND STOCK. On March 24, 1996, the Company granted each
of its Independent Directors (I.E., all directors except Mr. Anderson) a
non-statutory stock option to purchase 5,000 shares of Common Stock. In
addition, the Company automatically grants to each Independent Director
quarterly a non-statutory option to purchase 1,667 shares of Common Stock.
The exercise price of these options is the fair market value of the shares of
Common Stock covered by the options on the date of grant. Each of these
director options is fully exercisable beginning six months after the date of
grant and generally will terminate (unless sooner terminated under the terms
of the Stock Plan) ten years after the date of grant. If a Director ceases
to be a member of the Board for any reason other than death or disability,
these options will terminate on the first annual anniversary of the date the
director ceases to be a member of the Board. If a Director dies or becomes
disabled while a member of the Board, these options will terminate on the
second annual anniversary of the date the Director dies or becomes disabled.
The Company also pays each Independent Director an annual retainer in an
amount set by the Board from time to time. The annual retainer for 1997 is
$18,000. Under the Stock Plan, each Independent Director is entitled to
elect to receive all or a portion of this annual retainer in the form of
unrestricted shares of Common Stock. Independent Directors may instead elect
to
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<PAGE>
receive their entire annual retainer in cash.
RESTRICTED STOCK. The Administrator may also grant awards of restricted
shares of Common Stock to employees (and consultants and advisors). Each
restricted stock award will specify the number of shares of Common Stock to
be issued to the recipient, the date of issuance, any consideration for those
shares, and the restrictions imposed on those shares (including the
conditions of release or lapse of such restrictions). Shares of Common Stock
subject to a restricted stock award generally may not be sold, assigned,
transferred, or pledged until the restrictions have lapsed and the rights to
the shares have vested.
STOCK APPRECIATION RIGHTS. The Administrator may also grant awards of
stock appreciation rights to employees (and consultants and advisors). A
stock appreciation right entitles the holder to receive from the Company, in
cash or (if the Administrator so permits) Common Stock, at the time of
exercise, the excess of the fair market value at the date of exercise of a
share of Common Stock over a specified price fixed by the Administrator in
the award, multiplied by the number of shares as to which the holder of the
right is exercising the right. The specified price fixed by the
Administrator will not be less than the fair market value of shares of Common
Stock at the date of grant of the stock appreciation right.
TERMS AND CONDITIONS APPLICABLE TO ALL AWARDS. If there is a stock
dividend, stock split, reverse stock split, or reclassification of Common
Stock or if the outstanding shares of Common Stock are converted into or
exchanged for other securities as a result of a merger, consolidation, or
sale of substantially all of the Company's assets, appropriate adjustments
will be made in: (i) the number and class of shares of stock subject to the
Stock Plan, each outstanding award, and the entitlements of non-employee
directors and (ii) the exercise price of each outstanding award. Each such
adjustment will be determined by the Administrator in its sole discretion.
In addition, new awards may be substituted for awards previously granted,
or the Company's obligations respecting outstanding awards may be assumed by
an employer corporation other than the Company, in connection with any
merger, consolidation, or sale of substantial assets in which the Company is
involved (other than a merger, consolidation, or sale in which the Company is
the continuing corporation and which does not result in any reclassification
of the Company's shares). Further, in the event of such a merger,
consolidation, or sale, the Administrator may decide to pay cash to plan
participants other than non-employee directors and other persons then subject
to Section 16(b) who hold awards that have not been outstanding for at least
six months.
If a participant's employment with the Company is terminated, generally
the participant will forfeit any award that has not vested on or before the
date of termination. The Administrator will establish the effect of
employment termination on vested awards when awards are granted.
AMENDMENT AND TERMINATION. Subject to certain limitations, the Board may
at any time amend the Stock Plan. It also may terminate the Stock Plan at
any time, but termination will not affect options or other awards previously
granted.
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NEW PLAN BENEFITS TABLE
The following table sets forth, to the extent determinable, the benefits
or amounts that would have been granted in 1996 to the following persons if
the Stock Plan, as proposed to be amended, had been effective during 1996:
(i) the Named Executive Officers; (ii) the current executive officers as a
group; (iii) the current directors who are not executive officers as a group;
and (iv) all employees, including all current officers who are not executive
officers, as a group.
<TABLE>
<CAPTION>
Name and Principal Position Number of Securities Underlying Awards (1)
--------------------------- ------------------------------------------
<S> <C>
Allen J. Anderson
Chairman of the Board, Chief Executive Officer 280,000
Milton K. Reeder
President and Chief Financial Officer 148,000
Dennis D. Higgs
Senior Vice President 99,000
Robert A. Dobbin
General Counsel and Secretary 51,000
Timothy B. Keith
Vice President - Portfolio Management 35,000
Executive Group (nine persons) 635,500
Non-Executive Director Group (seven persons) 58,338
Non-Executive Officer Employee Group 18,000
</TABLE>
(1) Because Stock Plan awards (other than awards to non-employee directors)
are discretionary, the effect of the proposed amendment on the benefits or
amounts that will be received by or allocated to Stock Plan participants is
not determinable. As a result, the entries in this column represent the
actual grants of options under the Stock Plan during 1996.
FEDERAL INCOME TAX CONSEQUENCES
Participants in the Stock Plan who receive an incentive stock option
will not recognize income for federal income tax purposes as a result of the
receipt or exercise of the incentive stock option. However, exercise of the
incentive stock option will increase the optionee's alternative minimum
taxable income for purposes of the alternative minimum tax in an amount equal
to the excess of the fair market value of the Common Stock received over the
exercise price. The Company and its participating subsidiaries will not be
entitled to a deduction with respect to the grant or exercise of an incentive
stock option.
Provided the shares are held as a capital asset, gain recognized on the
disposition of Common Stock acquired by exercise of an incentive stock option
("Incentive Stock") will be treated as long-term capital gain if (i) the
Incentive Stock has been held by the optionee more than two years after the date
the incentive stock option was granted and more than one year after the date the
incentive stock option was exercised (the "Statutory Holding Period") and (ii)
certain other requirements of the Code are satisfied by the holder of the
Incentive Stock. Gain recognized on disposition of Incentive Stock held by the
optionee for less than the Statutory Holding Period (a
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<PAGE>
"Disqualifying Disposition") generally will be compensation income to the
optionee to the extent of the excess of the fair market value of the
Incentive Stock when received (or, if less, the amount realized on
disposition of the Incentive Stock) over the applicable exercise price.
However, if upon receipt the Incentive Stock is subject to a substantial risk
of forfeiture within the meaning of Section 83(c) of the Code, then special
rules apply concerning the date when the fair market value of the Incentive
Stock is determined. Any gain recognized in excess of the amount taxed as
compensation generally will be characterized as capital gain. If an optionee
pays the exercise price of an incentive stock option solely with cash, the
optionee's initial tax basis of the Incentive Stock received is equal to the
amount of cash paid. An optionee who pays all or a portion of the exercise
price of an incentive stock option with shares of Common Stock will be
subject to detailed rules as provided in regulations concerning recognition
of income or gain and the determination of basis in the shares received. In
the event of a Disqualifying Disposition, the Company or one of its
participating subsidiaries will be entitled to a corresponding deduction for
federal income tax purposes equal to the amount of compensation income
includible by the optionee (provided the optionee's total compensation for
that year is otherwise deductible and the applicable withholding requirements
are satisfied).
The grant of a non-statutory stock option should neither result in
recognition of taxable income by the optionee nor give rise to a deduction by
the Company and its participating subsidiaries. However, an optionee who
exercises a non-statutory stock option must generally, as of the exercise
date, recognize as compensation the income equal to the excess of (if any) of
the then fair market value of the Common Stock received over the exercise
price of the option. If the Common Stock received upon exercise of a
non-statutory stock option is subject to a substantial risk of forfeiture
within the meaning of Section 83(c) of the Code, then, unless the optionee
makes an election pursuant to Section 83(b) of the Code to be taxed currently
on the excess of the fair market value of the shares over the price paid, the
excess would not be includible as compensation income unless and until the
substantial risk of forfeiture has lapsed. Any gain or loss on the
subsequent sale or exchange of Common Stock received on exercise of a
non-statutory stock option will be treated as capital gain or loss, provided
the stock is held as a capital asset. If an optionee pays the exercise price
of a non-statutory stock option solely with cash, the tax basis of the Common
Stock received will equal the sum of the cash paid plus the amount of
compensation income includible by the optionee resulting from the exercise.
An optionee who pays all or a portion of the exercise price of a
non-statutory stock option with shares of Common Stock is subject to detailed
rules as provided in regulations concerning recognition of income or gain and
the determination of basis in the shares received. The amount of
compensation income includible in gross income by an optionee is deductible
by the Company during the Company's taxable year in which the income is
includible by the optionee (provided the optionee's total compensation for
that year is otherwise deductible and the applicable withholding requirements
are satisfied).
A participant generally will not recognize taxable income upon the grant
under the Stock Plan of either a stock appreciation right or other
performance-based award. Upon the exercise of a stock appreciation right or
the payment of other performance-based awards, the participant will recognize
ordinary income in an amount equal to the cash and fair market value of other
property received, including Common Stock. The value of the shares will be
determined (i) on the date
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<PAGE>
received, if the shares are substantially vested as of that date or (ii) the
first date on which the shares become substantially vested. Delivery of
shares of Common Stock previously owned by the participant to the Company (or
its subsidiary) to satisfy any tax withholding obligations of the Company (or
its subsidiary) will be a taxable event to the participant with respect to
the surrendered shares. The Company and its participating subsidiaries will
be entitled to a deduction in the amount and at the time that the participant
recognizes ordinary income in connection with the exercise of stock
appreciation right or the payment of a performance-based award, provided that
the participant's compensation is otherwise deductible and the Company
withholds the applicable federal income taxes (if required to do so). If the
stock appreciation right or other performance-based award is paid, in whole
or in part, in shares of Common Stock, the amount recognized by the
participant as ordinary income with respect to those shares becomes the
participant's basis in the shares of Common Stock for purposes of determining
any gain or loss in the subsequent sale of those shares.
A participant who receives a restricted stock award will recognize
ordinary income equal to the fair market value of the restricted Common Stock
received at the time the restrictions lapse, unless the participant makes an
election under Section 83(b) of the Code to report the fair market value of
the restricted Common Stock as ordinary income at the time of receipt. At
the time the participant is required to include such ordinary income or gross
income, the Company and its participating subsidiaries may deduct a
corresponding amount, provided the participant's compensation is reasonable
and the Company withholds the applicable federal income taxes (if required to
do so). During the period in which a participant holds restricted Common
Stock, before the lapse of the restrictions, if dividends are declared but
not distributed to the participant until the restrictions lapse, the
dividends will be treated for tax purposes by the participant and the Company
in the following manner: (i) if the participant makes an election under
Section 83(b) of the Code to recognize income at the time of receipt of the
restricted Common Stock, the dividends will be taxed as dividend income to
the participant when the restrictions lapse and the Company will not be
entitled to deduction and will not be required to withhold income tax, and
(ii) if no election is made under Section 83(b) by the participant, the
dividends will be taxed as compensation to the participant at the time the
restrictions lapse and will be deductible by the Company and subject to any
required income tax withholding at that time. In each case, the Company's
ability to deduct amounts with respect to any awards for U.S. federal income
tax purposes will be subject to compliance with the conditions or limitations
of Section 162(m) of the Code.
Assuming that a quorum is present, the affirmative vote of a majority of
the votes cast at the Annual Meeting is required for approval of the proposed
amendment to the Stock Plan. For purposes of the vote on that proposed
amendment, (i) abstentions and broker non-votes will not be counted as votes
cast and will have no effect on the result of the vote, although they will
count toward the presence of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL, AND, IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN CONNECTION WITH
THIS PROXY STATEMENT WILL BE SO VOTED.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
The Bylaws of the Company provide a procedure for stockholder proposals
and stockholder nominations of persons for election to the Board of
Directors. That procedure provides that any stockholder intending to present
a proposal or nomination for election of one or more Directors at the Annual
Meeting must deliver a written notice to the Company's Secretary at the
Company's principal executive offices not less than sixty days nor more that
ninety days before the first anniversary of the preceding year's annual
meeting, provided that if the date of the annual meeting is advanced more
than thirty days or delayed more than sixty days from that anniversary date,
that notice must be so delivered not earlier than the ninetieth day before
that meeting and not later than the close of business on the later of (i) the
sixtieth day before that meeting or (ii) the tenth day following the day on
which public announcement of that meeting's date is first made.
Any such notice from a stockholder to the Company's Secretary must
contain (i) the name and address of that stockholder as they appear on the
Company's books (and, if the nomination or proposal in question is made on
behalf of a beneficial owner of Shares, the name and address of that
beneficial owner) and (ii) the number of shares of each class of the
Company's stock held by that stockholder (and, if appropriate, that
beneficial owner). If the stockholder's notice to the Company's Secretary
proposes to nominate one or more individuals for election or re-election as
Director, that notice must also include for each such individual all
information relating to that person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act (including
that individual's written consent to being named in the proxy statement as a
nominee and to serve as a director if elected). If the stockholder's notice
to the Secretary proposes to bring other business before the meeting, that
notice must include a brief description of (i) that business, (ii) the
reasons for conducting that business at the meeting, and (iii) any material
interest in that business held by that stockholder (and by the beneficial
owner, if any, on whose behalf the proposal is made). If a stockholder
proposal or nomination is not made in accordance with the procedure set forth
above, the Chairman of the Annual Meeting shall, if the facts warrant, (i)
determine and declare at the Annual Meeting that the proposed business or
nomination was not properly brought before the Annual Meeting in accordance
with the procedures set forth in the Bylaws and (ii) direct that the business
not be transacted or that the defective nomination be disregarded.
Any stockholder desiring management to consider a proposal for inclusion
in the Company's proxy statement relating to the annual meeting of
stockholders to be held in 1998 must submit the proposal by certified mail,
return receipt requested, to the attention of the Company's Secretary at the
Company's principal executive office by December 15, 1997.
MISCELLANEOUS
This proxy statement and the accompanying Proxy are being solicited by
the order of the Directors, and all costs related to this solicitation will
be borne by the Company. Proxies may be solicited by mail, telephone, or
telegram or in person. The Company will request banks, brokerage
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<PAGE>
houses, and other institutions, nominees, or fiduciaries that hold Shares in
their names to forward the solicitation materials to the beneficial owners
thereof, and the Company will reimburse those persons for their reasonable
expenses in so forwarding these materials. Directors, Company officers, and
regular Company employees may, without additional compensation, solicit
Proxies by telephone or telegram or in person.
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K IS AVAILABLE
WITHOUT CHARGE TO THOSE STOCKHOLDERS WHO WOULD LIKE MORE DETAILED INFORMATION
CONCERNING THE COMPANY. IF YOU DESIRE A COPY OF THAT DOCUMENT, PLEASE SEND A
WRITTEN REQUEST TO INVESTOR RELATIONS, MERIDIAN INDUSTRIAL TRUST, INC., 455
MARKET STREET, 17TH FLOOR, SAN FRANCISCO, CALIFORNIA 94105 (TELEPHONE:
415-281-3900).
1996 ANNUAL REPORT
The Company's 1996 Annual Report, including audited financial statements
for the period May 18, 1995, to December 31, 1995, and for calendar year 1996
are being forwarded to each stockholder of record as of March 17, 1997,
together with this Proxy Statement.
OTHER BUSINESS
At this date, management knows of no other matters proposed to be
brought before the Annual Meeting. If any other business should properly
come before the Annual Meeting for stockholder action, the named proxies will
vote the Shares represented by the Proxies in accordance with their best
judgment.
BY ORDER OF THE DIRECTORS,
/s/ ROBERT A. DOBBIN
- ----------------------------------
Robert A. Dobbin, SECRETARY
San Francisco, California
April 14, 1997
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<PAGE>
ATTACHMENT A
The proposed amendment to the Stock Plan would replace the existing section
3 with a new section 3. The text of both the existing section 3 and the
proposed new section 3 are set forth below.
Existing section 3 (which would be replaced by the proposed new section 3
if the Company's stockholders approve Proposal Three) reads as follows:
3. STOCK SUBJECT TO THIS PLAN
The total number of shares of Stock that may be issued under
Awards, all or any part of which may be issued to any eligible person,
is 1,000,000. Such shares may consist, in whole or in part, of
authorized and unissued shares or shares reacquired in private
transactions or open market purchases, but all shares issued under the
Plan, regardless of their source, shall be counted against the
1,000,000-share limitation, including shares of Restricted Stock and
shares represented by Stock Appreciation Rights. Any shares that are
retained by the Company upon exercise or settlement of an Award in
order to satisfy the exercise price in whole or in part, or to pay
withholding taxes due with respect to such exercise or settlement,
shall be treated as issued to the Participant and will thereafter not
be available under the Plan. The number of shares reserved for
issuance under this Plan is subject to adjustment in accordance with
the provisions for adjustment in this Plan.
The proposed new section 3 (which would replace the existing section 3 if
the Company's stockholders approve Proposal Three) reads as follows:
3. SHARES OF STOCK SUBJECT TO THE PLAN
3.1 MAXIMUM AMOUNT OF SHARES. Subject to the provisions of
Section 3.6 of the Plan, the aggregate number of shares of Stock that
the Company may have subject to outstanding Awards at one time under
the Plan shall be an amount equal to (a) seven percent of the
aggregate of (i) the total number of shares of Stock outstanding from
time to time, PLUS (ii) the total number of securities convertible
into or exchangeable or exercisable for shares of Stock outstanding
from time to time (in each case other than any such securities issued
under this Plan and any other stock-based plan for employees or
directors of the Company) MINUS (b) the total number of shares of
Stock subject to outstanding Awards on the date of calculation under
this Plan and any other stock-based plan for employees or directors of
the Company.
3.2 DETERMINATION OF AVAILABLE SHARES. In computing the total
number of shares subject to outstanding Awards at one time under the
Plan, the Committee
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<PAGE>
shall count the number of shares of Stock subject to issuance upon
exercise or settlement of outstanding Options or SARs and the number of
shares of Stock subject to outstanding Restricted Stock Awards to the
extent such shares are subject to restriction, determined in each case
as of the Date of Grant of each Award (other than Awards designated to be
paid only in cash), but shall not count the number of shares of Stock that
have been issued upon prior exercise or settlement of Awards.
3.3 RESTORATION OF UNUSED AND SURRENDERED SHARES. If Stock
subject to any Award is not issued or transferred, or ceases to be
issuable or transferable for any reason, including (but not
exclusively) because an Award is forfeited, terminated, expires
unexercised, is settled in cash in lieu of Stock, or is exchanged for
other Awards, the shares of Stock that were subject to that Award
shall no longer be charged against the number of available shares and
shall again be available for issue, transfer, or exercise pursuant to
Awards under the Plan to the extent of such forfeiture, termination,
expiration, or other cessation of its subjection to an Award.
3.4 DESCRIPTION OF SHARES. The shares to be delivered under the
Plan shall be made available from (a) authorized but unissued shares
of Stock, (b) Stock held in the treasury of the Company, or (c)
previously issued shares of Stock reacquired by the Company, including
shares purchased on the open market, in each situation as the
Administrator may determine from time to time at its sole option.
3.5 REGISTRATION AND LISTING OF SHARES. From time to time, the
Board of Directors and appropriate officers of the Company shall and
are authorized to take whatever actions are necessary to file required
documents with governmental authorities, stock exchanges, and other
appropriate Persons to make shares of Stock available for issuance
pursuant to Awards.
3.6 REDUCTION IN OUTSTANDING SHARES OF STOCK. Nothing in this
Section 3 shall impair the right of the Company to reduce the number
of outstanding shares of Stock pursuant to repurchases, redemptions,
or otherwise; provided, however, that no reduction in the number of
outstanding shares of Stock shall (a) impair the validity of any
outstanding Award, whether or not that Award is fully exercisable or
fully vested or (b) impair the status of any shares of Stock
previously issued pursuant to an Award or thereafter issued pursuant
to a then-outstanding Award as duly authorized, validly issued, fully
paid, and nonassessable shares.
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SECOND AMENDED AND RESTATED
EMPLOYEE AND DIRECTOR INCENTIVE
STOCK PLAN
OF
MERIDIAN INDUSTRIAL TRUST, INC.
1. PURPOSE OF THE PLAN AND DEFINITIONS
1.1 PURPOSE. The purposes of this Second Amended and Restated Employee
and Director Incentive Stock Plan (the "Plan") of Meridian Industrial Trust,
Inc. (the "Company") are to:
(a) furnish incentive to individuals chosen to receive stock-based
awards because they are considered capable of responding by improving operations
and increasing profits;
(b) encourage selected employees to accept or continue employment
with the Company, and
(c) increase the interest of directors in the Company's welfare
through their participation in the growth in value of the Company's common stock
("Stock").
To accomplish these purposes, this Plan provides a means whereby employees and
directors may receive Awards. Options will be either NQOs subject to federal
income taxation upon exercise or ISOs not subject to federal income taxation
upon exercise.
1.2 DEFINITIONS. For purposes of this Plan, the following terms have the
following meanings:
"ADMINISTRATOR" has the meaning given it in Section 4.1.
"AFFILIATE" means a parent or subsidiary corporation, as defined in
the applicable provisions (currently Section 424) of the Code at the time this
definition is being applied.
"AWARD" means any award under this Plan, including any Option,
Restricted Stock, Stock Appreciation Right or Director Stock.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant or other written
document approved by the Administrator setting forth the terms and conditions of
the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.
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"COMMISSION" means the Securities and Exchange Commission and any
successor agency.
"COMMITTEE" has the meaning given it in Section 4.1.
"COMPANY" has the meaning given it in Section 1.1.
"DIRECTOR OPTION" has the meaning given it in Section 5.3.
"DIRECTOR STOCK" means stock issued to an Eligible Director under
Section 9.
"DISINTERESTED PERSON" means a person who is both a "non-employee
director" under Rule 16b-3 and an "outside director" as defined in Section
162(m), unless the Board has determined that the Plan should not comply with
Rule 16b-3 or Section 162 (m) or both.
"EFFECTIVE DATE" has the meaning given it in Section 18.
"ELIGIBLE DIRECTOR" has the meaning given it in Section 5.3.
"EMPLOYEE" has the meaning ascribed to it for purposes of Section
3401(c) of the Code and the Treasury Regulations adopted under that Section. It
includes an officer or a director who is also an employee.
"EMPLOYMENT TERMINATION" means that a Participant has ceased, for any
reason and with or without cause, to be an employee or director of, or a
consultant to, the Company or any Affiliate of the Company. However, the term
"Employment Termination" shall not include an Eligible Director ceasing to be a
director.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXECUTIVE OFFICER" means an eligible person who, as of the earliest
of the date an Award is vested, the date restrictions with respect to an Award
lapse or the date a payment is made pursuant to an Award Agreement, is one of
the "covered employees" defined in Treasury Regulations adopted under Section
162(m).
"GRANT DATE" means the date on which an Award becomes effective.
"INCENTIVE STOCK OPTION" or "ISO" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code or successor provision.
"NON-QUALIFIED STOCK OPTION" or "NQO" means any Option that is not an
Incentive Stock Option.
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"OPTION" means an option granted under Section 6.
"OPTION AGREEMENT" means an Award Agreement evidencing an Option.
"PARTICIPANT" means an eligible person granted an Award.
"PLAN" means this plan.
"RESTRICTED STOCK" means an Award of Stock subject to restrictions, as
more fully described in Section 7.
"RETAINER" has the meaning given it in Section 9.
"RULE 16B-3" means Rule 16b-3 adopted under Section 16(b) of the
Exchange Act or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rule 16b-3 refer to the corresponding
paragraphs or clauses of Rule 16b-3 as it exists at the Effective Date or the
comparable paragraph or clause of Rule 16b-3 or successor rule, as that
paragraph or clause may thereafter be amended.
"SECTION 162(M)" means Section 162(m) of the Code and the Treasury
Regulations adopted from time to time under that Section, or any successor law
or regulations as they may be amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"STOCK" has the meaning given it in Section 1.1( c).
"STOCK APPRECIATION RIGHT" means an Award granted under Section 8.
"STOCKHOLDER APPROVED STANDARD" means any pre-established, objective
performance goal qualifying under Section 162(m) and approved by the
stockholders of the Company in accordance with Section 162(m), including (a)
total stockholder return (stock price appreciation plus dividends), (b) net
income, (c) earnings per share, (d) return on sales, (e) return on equity, (f)
return on assets, (g) increase in the market price of Stock or other securities
of the Company and (h) the performance of the Company in any of the items
mentioned in clause (a) through (g) in comparison to the average performance of
the companies used in a self-constructed peer group established before the
beginning of the performance period.
"SUBSIDIARY" means a subsidiary corporation of the Company, as defined
in the applicable provisions (currently Section 424) of the Code at the time
this definition is being applied.
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"TEN PERCENT STOCKHOLDER" means any person who, at the time this
definition is being applied, owns, directly or indirectly (or is treated as
owning by reason of attribution rules currently set forth in Code Section 424),
stock of the Company constituting more than ten percent of the total combined
voting power of all classes of outstanding stock of the Company or of any
Affiliate of the Company.
2. ELIGIBLE PERSONS
Every person who, at or as of the Grant Date, is (a) a full-time employee
of the Company or a Subsidiary of the Company, (b) a director of the Company or
(c) someone whom the Administrator designates as eligible for an Award (other
than for Incentive Stock Options) because the person (i) performs bona fide
consulting or advisory services for the Company or a Subsidiary of the Company
(other than services in connection with the offer or sale of securities in a
capital-raising transaction) and (ii) has a direct and significant effect on the
financial development of the Company or a Subsidiary of the Company shall be
eligible to receive Awards. Directors of the Company who are not full-time
employees are only eligible to receive NQOs under Section 5.3 and Director Stock
under Section 9. Notwithstanding the foregoing provisions of this Section 2, to
ensure that the requirements of Section 4 are satisfied, the Board may from time
to time specify individuals who shall not be eligible for the grant of Awards
under any plan of the Company or its affiliates. Nevertheless, the Board may at
any time determine that an individual who has been so excluded from eligibility
shall become eligible for grants of Awards under any plans of the Company or its
affiliates so long as that eligibility will not impair the Plan's satisfaction
of the conditions of Rule 16b-3, unless the Board has determined that the Plan
should not comply with Rule 16b-3.
3. SHARES OF STOCK SUBJECT TO THE PLAN
3.1 MAXIMUM AMOUNT OF SHARES. Subject to the provisions of Section 3.6 of
the Plan, the aggregate number of shares of Stock that the Company may have
subject to outstanding Awards at one time under the Plan shall be an amount
equal to (a) seven percent of the aggregate of (i) the total number of shares
of Stock outstanding from time to time, PLUS (ii) the total number of securities
convertible into or exchangeable or exercisable for shares of Stock outstanding
from time to time (in each case other than any such securities issued under this
Plan and any other stock-based plan for employees or directors of the Company)
MINUS (b) the total number of shares of Stock subject to outstanding Awards on
the date of calculation under this Plan and any other stock-based plan for
employees or directors of the Company.
3.2 DETERMINATION OF AVAILABLE SHARES. In computing the total number of
shares subject to outstanding Awards at one time under the Plan, the Committee
shall count the number of shares of Stock subject to issuance upon exercise or
settlement of outstanding Options or SARs and the number of shares of Stock
subject to outstanding Restricted Stock Awards to the extent such shares are
subject to restriction, determined in each case as of the Date of Grant of each
Award (other than Awards designated to be paid only in cash), but shall not
count the number of shares of Stock that have been issued upon prior exercise or
settlement of Awards.
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3.3 RESTORATION OF UNUSED AND SURRENDERED SHARES. If Stock subject to any
Award is not issued or transferred, or ceases to be issuable or transferable for
any reason, including (but not exclusively) because an Award is forfeited,
terminated, expires unexercised, is settled in cash in lieu of Stock, or is
exchanged for other Awards, the shares of Stock that were subject to that Award
shall no longer be charged against the number of available shares and shall
again be available for issue, transfer, or exercise pursuant to Awards under the
Plan to the extent of such forfeiture, termination, expiration, or other
cessation of its subjection to an Award.
3.4 DESCRIPTION OF SHARES. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Company, or (c) previously issued shares of
Stock reacquired by the Company, including shares purchased on the open market,
in each situation as the Administrator may determine from time to time at its
sole option.
3.5 REGISTRATION AND LISTING OF SHARES. From time to time, the Board of
Directors and appropriate officers of the Company shall and are authorized to
take whatever actions are necessary to file required documents with governmental
authorities, stock exchanges, and other appropriate Persons to make shares of
Stock available for issuance pursuant to Awards.
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<PAGE>
3.6 REDUCTION IN OUTSTANDING SHARES OF STOCK. Nothing in this Section 3
shall impair the right of the Company to reduce the number of outstanding shares
of Stock pursuant to repurchases, redemptions, or otherwise; provided, however,
that no reduction in the number of outstanding shares of Stock shall (a) impair
the validity of any outstanding Award, whether or not that Award is fully
exercisable or fully vested or (b) impair the status of any shares of Stock
previously issued pursuant to an Award or thereafter issued pursuant to a then-
outstanding Award as duly authorized, validly issued, fully paid, and
nonassessable shares.
4. ADMINISTRATION
4.1 ADMINISTRATOR. This Plan shall be administered by the Board or by a
committee or sub-committee (the "Committee") appointed by the Board. The
Committee shall administer the Plan with respect to all eligible persons who are
subject to Section 16(b) of the Exchange Act, but the Committee shall not have
the power to appoint members of the Committee or to terminate, modify or amend
the Plan. The Board may administer the Plan with respect to all other eligible
persons or may delegate all or part of that duty to the Committee or to any
other person or persons. Unless the context otherwise requires, references in
this Plan to the "Administrator" shall refer to the Committee or the Board or
its delegee as administrator of the Plan for eligible persons who are not
subject to Section 16(b). Unless the Board determines not to have Awards under
the Plan comply with the requirements of Rule 16b-3 and Section 162(m), the
Committee shall be constituted so that, as long as Stock is registered under
Section 12 of the Exchange Act: (a) each member of the Committee shall be a
Disinterested Person who is a member of the Board and so that the Plan in all
other applicable respects will qualify transactions related to the Plan for the
exemptions from Section 16(b) provided by Rule 16b-3, to the extent exemptions
may be available, and for the performance-based compensation exemption of
Section 162(m), and (b) no discretion regarding Awards to eligible persons shall
be afforded to a person who is not a Disinterested Person if such discretion
would cause such Award not to qualify for the performance-based compensation
exemption of Section 162(m) or the exemptions provided by Rule 16b-3. The
number of persons that shall constitute the Committee shall be determined from
time to time by a majority of all the members of the Board and, unless the
majority of the Board determines otherwise, shall be no fewer than two persons.
With the exception of grants or awards of the type specified in Sections 5.3 and
9.1 of this Plan, persons elected to serve on the Committee as Disinterested
Persons shall not be eligible to receive Awards or equity securities under any
plan of the Company or any of its affiliates while they are serving as members
of the Committee and shall not have been granted or awarded equity securities
under the Plan or any other plan of the Company or any of its affiliates during
the year before their appointments to the Committee become effective.
4.2 DURATION, REMOVAL, ETC. The members of the Committee shall serve at
the pleasure of the Board, which shall have the power, at any time and from time
to time, to remove members from or add members to the Committee. Removal from
the Committee may be with or without cause. Any individual serving as a member
of the Committee shall have the right to resign from the Committee by giving at
least three days' written notice to the Board. The Board, and not the remaining
members of the Committee, shall have the power and authority to fill vacancies
on the Committee, however caused. The Board shall promptly fill any vacancy
that causes the number of members of the Committee to be fewer than two or any
other number that Rule 16b-3 or Section
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<PAGE>
162(m) may require from time to time (unless the Board of Directors expressly
determines not to have Awards under the Plan comply with Rule 16b-3 or
Section 162(m)).
4.3 MEETINGS AND ACTIONS OF COMMITTEE. The Board shall designate which
of the Committee members shall be the chair of the Committee. If the Board
fails to designate a chair for the Committee, the members of the Committee
shall elect one of the Committee members as chair, who shall act as chair
until the director ceases to be a member of the Committee or until the Board
elects a new chair. The Committee shall hold its meetings at those times and
places as the chair of the Committee may determine. At all meetings of the
Committee, a quorum for the transaction of business shall be required and a
quorum shall be deemed present if at least a majority of the members of the
Committee is present. At any meeting of the Committee, each member shall
have one vote. All decisions and determinations of the Committee shall be
made by the majority vote of all of its members present at a meeting at which
a quorum is present; provided, however, that any decision or determination
reduced to writing and signed by all members of the Committee shall be as
fully effective as if it had been made at a meeting that was duly called and
held. The Committee may make any rules and regulations for the conduct of
its business that are not inconsistent with this Plan, the charter or bylaws
of the Company, Rule 16b-3 (so long as it is applicable) or Section 162(m)
(so long as it is applicable).
4.4 ADMINISTRATOR'S POWERS. Subject to the express provisions of the
Plan, Rule 16b-3 (so long as it is applicable) and Section 162(m) (so long as it
is applicable), the Administrator shall have the authority, in its sole
discretion: (a) to adopt, amend and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) to determine the eligible
persons to whom, and the time or times at which, Awards shall be granted; (c) to
determine the number of shares of Stock that shall be the subject of each Award;
(d) to determine the terms and provisions of each Award Agreement (which need
not be identical) and any amendments thereof, including provisions defining or
otherwise relating to (i) the period or periods and extent of exercisability of
any Options or Stock Appreciation Rights, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of Employment Termination, death or disability
on the Award and (iv) the effect of approved leaves of absence (consistent with
any applicable regulations of the Internal Revenue Service); (e) to accelerate
the time of exercisability of any option or Stock Appreciation Right; (f) to
construe the respective Award Agreements and the Plan; (g) to make
determinations of the fair market value of Stock; (h) to waive any provision,
condition or limitation set forth in an Award Agreement; (i) to delegate its
duties under the Plan to such agents as it may appoint from time to time,
PROVIDED, HOWEVER, that the Committee of Disinterested Persons may not delegate
its duties with respect to making or exercising discretion with respect to
Awards to eligible persons if such delegation would cause Awards not to qualify
for the performance-based compensation exemption of Section 162(m) or the
exemptions provided by Rule 16b-3 (unless the Board of Directors expressly
determines not to have Awards under the Plan comply with Section 162(m) or Rule
16b-3) and (j) to make all other determinations, perform all other acts and
exercise all other powers and authority necessary or advisable for administering
the Plan, including the delegation of those ministerial acts and
responsibilities as the Committee deems appropriate. Subject to Rule 16b-3 (so
long as it is applicable) and Section 162 (m) (so long as it is
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<PAGE>
applicable), the Administrator may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, in any Award or in any Award
Agreement in the manner and to the extent it deems necessary or desirable to
implement the Plan, and the Administrator shall be the sole and final judge
of that necessity or desirability. The determinations of the Administrator
on the matters referred to in this Section 4.4 shall be final and conclusive.
Notwithstanding any provision in this Plan to the contrary, Awards will be
made to Eligible Directors only under Sections 5.3 and 9 of this Plan. In
addition, notwithstanding any provision of this Plan to the contrary, the
Administrator shall not have the authority to vary or waive the terms of the
Director Stock Option Agreement for Eligible Directors attached to this Plan
as Exhibit A and may not in any manner exercise discretion under the Plan
with respect to any Awards made to Eligible Directors.
4.5 TERM OF PLAN. No Awards shall be granted under this Plan after ten
years from the Effective Date of this Plan.
5. GRANT OF OPTIONS
5.1 WRITTEN AGREEMENT. Each Option shall be evidenced by an Option
Agreement. The Option Agreement shall specify whether each Option it
evidences is a NQO or an ISO.
5.2 ANNUAL $100,000 LIMITATION ON ISOS. To the extent that the
aggregate "fair market value" of Stock with respect to which ISOs first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account ISOs granted under this Plan and any other plan of the
Company or any Affiliate of the Company, the Options covering such additional
shares becoming exercisable in that year shall cease to be ISOs and
thereafter be NQOs. For this purpose, the "fair market value" of Stock
subject to Options shall be determined as of the date the Options were
awarded. In reducing the number of Options treated as ISOs to meet this
$100,000 limit, the most recently granted options shall be reduced first.
5.3 ANNUAL GRANTS TO DIRECTORS. On the 30th calendar day after
Meridian Point Realty Trust IV Co., Meridian Point Realty Trust VI and
Meridian Point Realty Trust VII Co. are merged into the Company, each person
who is then a member of the Board and who is not then an employee of the
Company shall automatically be granted a NQO to purchase 5,000 shares of
Stock. On the first day of each calendar quarter beginning with the first
day of the second full calendar quarter after that grant date, each person
who is then a member of the Board and is not then an employee of the Company
shall automatically be granted an NQO to purchase 1,667 shares of Stock.
(Each member of the Board who is not an employee of the Company is referred
to in this Plan as an "Eligible Director" and each option referred to in the
previous two sentences is referred to as a "Director Option".) The exercise
price of Director Options shall be the fair market value of the Stock subject
to the Option on the date the Option is granted. Each Director Option shall
be fully exercisable commencing six months after the date of grant and
continuing, unless sooner terminated as provided in this Plan, for ten years
after the date it is granted. If, for any reason other than death or
permanent and total disability, an Eligible Director ceases to be a member of
the Board, each Director Option held by that Eligible Director at the date of
termination may be exercised in whole or in part at any time within one year
after the date of such termination or until the expiration of the Director
Option, whichever is earlier. If an Eligible Director dies or becomes
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<PAGE>
permanently and totally disabled (within the meaning of Section 422(c)(6) of
the Code) while a member of the Board (or within the period that the Director
Options remain exercisable after the Eligible Director ceases to be a member
of the Board), each Director Option then held by that Eligible Director may
be exercised, in whole or in part, by the Eligible Director, by the Eligible
Director's personal representative or by the person to whom the Eligible
Director transferred the Director Option by will or the laws of descent and
distribution, at any time within two years after the date of death or
permanent and total disability of the Eligible Director or until the
expiration date of the Director Option, whichever is earlier. Nothing in
this Section 5.3 or in Section 6.1(c) shall have the effect of accelerating
the exercisability of any Director Option. Each Director Option shall be
evidenced by an Option Agreement in the form of Exhibit A to this Plan.
6. CERTAIN TERMS AND CONDITIONS OF OPTIONS AND OTHER AWARDS
Each Option shall be designated as an ISO or a NQO and shall be subject
to the terms and conditions set forth in Section 6.1. NQOs shall also be
subject to the terms and conditions set forth in Section 6.2, but not those
set forth in Section 6.3. ISOs shall also be subject to the terms and
conditions set forth in Section 6.3, but not those set forth in Section 6.2.
Notwithstanding the foregoing, the Administrator may provide for different
terms and conditions in any Award Agreement or amendment thereto as provided
in Section 4.4.
6.1 ALL AWARDS. All Options and other Awards shall be subject to the
following terms and conditions:
(a) CHANGES IN CAPITAL STRUCTURE. If the number of outstanding
shares of Stock is increased by means of a stock dividend payable in shares
of Stock, a stock split or other subdivision or by a reclassification of
shares of Stock, then, from and after the record date for such dividend,
subdivision or reclassification, the number and class of shares of stock
subject to this Plan (including its Sections 3, 5.3 and 9) and each
outstanding Award shall be increased in proportion to such increase in
outstanding shares of Stock and the then-applicable exercise price of each
outstanding Award shall be correspondingly decreased. If the number of
outstanding shares of Stock is decreased by means of a stock split or other
subdivision or by a reclassification of shares of Stock, then, from and after
the record date for such split, subdivision or reclassification, the number
and class of shares of stock subject to this Plan (including its Sections 3,
5.3 and 9) and each outstanding Award shall be decreased in proportion to
such decrease in outstanding shares of Stock and the then-applicable exercise
price of each outstanding Award shall be correspondingly increased.
(b) CERTAIN CORPORATE TRANSACTIONS. This Section 6.1(b) addresses
the impact of certain corporate transactions on outstanding Awards other than
Awards granted to Eligible Directors (except to the extent provided in
Section 6.1(c)) and other than transactions requiring adjustments in
accordance with Section 6.1(a). In case of any reclassification or change of
outstanding shares of Stock issuable upon exercise of an outstanding Award or
in the case of any consolidation or merger of the Company with or into
another entity (other than a merger in which the Company is a continuing
corporation and which does not result in any reclassification or change in
the then-outstanding shares of Stock) or in the case of any sale or
conveyance to another entity of
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<PAGE>
the property of the Company as an entirety or substantially as an entirety,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company or such successor or purchasing entity, as
the case may be, shall make lawful and adequate provision whereby the holder
of each outstanding Award shall thereafter have the right, on exercise of
such Award, to receive the kind and amount of securities, property and/or
cash receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a holder of the number of securities issuable upon
exercise of such Award immediately before such reclassification, change,
consolidation, merger, sale or conveyance. Such provision shall include
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 6.1(a). Notwithstanding the foregoing,
if such a transaction occurs, in lieu of causing such rights to be
substituted for outstanding Awards, the Administrator may, upon 20 days'
prior written notice to Participants in its sole discretion: (i) shorten the
period during which Awards are exercisable, provided they remain exercisable,
to the extent otherwise exercisable, for at least 20 days after the date the
notice is given or (ii) cancel an Award upon payment to the Participant in
cash, with respect to each Award to the extent then exercisable, of an amount
which, in the sole discretion of the Administrator, is determined to be
equivalent to the amount, if any, by which the fair market value (at the
effective time of the transaction) of the consideration that the Participant
would have received if the Award had been exercised before the effective time
exceeds the exercise price of the Award. The actions described in this
Section 6.1(b) may be taken without regard to any resulting tax consequences
to the Participant. The fourth sentence of this Section 6.1(b) shall not
apply to any Award held by a person then subject to Section 16(b) if such
Award has not been outstanding for at least six months.
(c) SPECIAL RULE FOR ELIGIBLE DIRECTORS. In the case of any of
the transactions described in the second sentence of Section 6.1(b), that
second sentence and the third sentence, but not the fourth sentence, of
Section 6.1(b) shall apply to any outstanding Options granted to Eligible
Directors under Section 5.3.
(d) GRANT DATE. Each Award Agreement shall specify the date as of
which it shall be effective (the "Grant Date").
(e) FAIR MARKET VALUE. For purposes of this Plan, the fair market
value of Stock shall be determined as follows:
(i) If the Stock is listed on any established stock exchange
or a national market system, including, without limitation, the National
Market System of the National Association of Securities Dealers Automated
Quotation System, its fair market value shall be the closing sales price for
the Stock, or the mean between the high bid and low asked prices if no sales
were reported, as quoted on such system or exchange (or, if the Stock is
listed on more than one exchange, then on the largest such exchange) for the
date the value is to be determined (or if there are no sales or bids for such
date, then for the last preceding business day on which there were sales or
bids), as reported in The Wall Street Journal or similar publication.
(ii) If the Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its fair market value shall be the
mean between the high bid and low
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asked prices for the Stock on the date the value is to be determined (or if
there are no quoted prices for the date of grant, then for the last preceding
business day on which there were quoted prices).
(iii) In the absence of an established market for the Stock,
the fair market value shall be determined in good faith by the Administrator,
with reference to the Company's net worth, prospective earning power,
dividend-paying capacity and other relevant factors, including the goodwill
of the Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
corporations in the same or similar lines of business.
(f) TIME OF EXERCISE; VESTING. Awards may, in the sole discretion
of the Administrator, be exercisable or may vest, and restrictions may lapse,
as the case may be, at such times and in such amounts as may be specified by
the Administrator in the grant of the Award.
(g) TRANSFERS OF AWARDS. The Committee may (in its sole
discretion) permit a Participant to transfer an Award, or may cause the
Company to grant an Award that otherwise would be granted to an eligible
individual, in any of the following circumstances: (i) pursuant to a
qualified domestic relations order, (ii) to a trust established for the
benefit of the eligible individual or one or more of the children,
grandchildren, or spouse of the Participant, (iii) to a limited partnership
in which all the interests are held by the eligible individual and that
person's children, grandchildren or spouse; or (iv) to another person in
circumstances that the Committee believes will result in the Award continuing
to provide an incentive for the eligible individual to remain in the service
of the Company and apply their best efforts for the benefit of the Company.
If the Committee determines to allow such transfers or issuances of Awards,
any Participant or eligible individual desiring such transfers or issuances
shall make application therefore in the manner and time that the Committee
specifies and shall comply with such other requirements as the Committee may
require to assure compliance with all applicable laws, including securities
laws, and to assure fulfillment of the purposes of this Plan. The Committee
shall not authorize any such transfer or issuance if it may not be made in
compliance with all applicable federal, state and foreign securities laws.
The granting of permission for such an issuance or transfer shall not
obligate the Company to register the shares of Stock to be issued under the
applicable Award.
(h) NOTICE AND PAYMENT. To the extent it is exercisable, an Award
shall be exercisable only by written or recorded electronic notice of
exercise, in the manner specified by the Administrator from time to time,
delivered to the Company or its designated agent during the term of the
Award. The notice shall (i) state the number of shares of Stock with respect
to which the Award is being exercised, (ii) be signed or otherwise given by
the holder of the Award or by the person authorized to exercise the Award
pursuant to Section 6.1(g) if the holder is dead, disabled or incompetent and
(iii) include such other information, instruments and documents as may be
required to satisfy any other condition to exercise set forth in the Award
Agreement. Except as provided below, payment in full, in cash, shall be made
for all Stock purchased at the time notice of exercise of an Award is given
to the Company. The proceeds of any payment shall constitute general funds
of the Company. At the time an Award is granted or before it is exercised,
the Administrator, in the exercise of its sole discretion, may authorize any
one or more of the following additional methods of payment:
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<PAGE>
(i) acceptance of the Participant's full recourse promissory
note for some or all of the exercise price of the shares being acquired,
payable on such terms and bearing such interest rate as determined by the
Administrator, and secured in such manner, if at all, as the Administrator
shall approve, including, without limitation, by a security interest in the
Stock or other securities;
(ii) delivery by the Participant of Stock of the Company
already owned by the Participant for all or part of the exercise price of the
shares being acquired, provided that the fair market value of such Stock is
equal on the date of exercise to the exercise price of the shares being
acquired, or such portion thereof as the Participant is authorized to pay and
elects to pay by delivery of such Stock;
(iii) surrender by the Participant, or withholding by the
Company from the shares issuable upon exercise of the Award, of a number of
shares subject to the Award being exercised with a fair market value equal to
some or all of the exercise price of the shares being acquired, together with
such documentation as the Administrator and the broker, if applicable, shall
require or
(iv) to the extent permitted by applicable law, payment may
be made pursuant to arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Participant, shall pay to the Company the
exercise price of the Award being exercised (either as a loan to the
Participant or from the proceeds of the sale of Stock issued under that
Award), and the Company shall promptly cause the shares being purchased under
the Award to be delivered to the brokerage firm. Such transactions shall be
effected in accordance with the procedures that the Administrator may
establish from time to time.
If the exercise price is satisfied in whole or in part by the delivery of
shares of Stock pursuant to paragraph (ii) above, the Administrator may issue
the Participant an additional Option, with terms identical to those set forth
in the Option Agreement governing the exercised Option, except for the
exercise price which shall be the fair market value used for such delivery
and the number of shares subject to such additional Option shall be the
number of shares so delivered.
(i) TERMINATION OF EMPLOYMENT. Any Award or portion thereof which
has not vested on or before the date of a Participant's Employment
Termination shall expire on the date of Employment Termination. As to an
Award or portion thereof that has vested by the time of Employment
Termination, the Administrator shall establish, in respect of each Award when
granted, the effect of an Employment Termination on the rights and benefits
thereunder and in so doing may, but need not, make distinctions based upon
the cause of termination (such as retirement, death, disability or other
factors) or which party effected the termination (the employer or the
employee). Notwithstanding any other provision in this Plan or the Award
Agreement, the Administrator may decide in its discretion at the time of any
Employment Termination (or within a reasonable time thereafter) to extend the
exercise period of an Award (but not beyond the period specified in Section
6.2(b) or 6.3(b), as applicable) and not decrease the number of shares
covered by the Award with respect to which the Award is exercisable or
vested. A transfer of a Participant
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from the Company to an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence duly authorized by the Company, shall not be
deemed an Employment Termination or a break in continuous employment unless
the Administrator has provided otherwise.
(j) OTHER PROVISIONS. Each Award Agreement may contain such other
terms, provisions and conditions not inconsistent with this Plan, as may be
determined by the Administrator, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify such
Option as an "incentive stock option" within the meaning of Section 422 of
the Code, unless the Administrator determines otherwise.
(k) WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of
an Award, the lapse of restrictions on an Award or a disqualifying
disposition of Stock issued under an ISO (see Section 6.3(c)), the
Participant shall remit to the Company in cash all applicable federal and
state withholding and employment taxes. The Administrator may, in the
exercise of the Administrator's sole discretion, permit a Participant to pay
some or all of such taxes by means of a recourse promissory note on such
terms as the Administrator deems appropriate. If and to the extent authorized
and approved by the Administrator in its sole discretion, a Participant may
elect, by means of a form of election to be prescribed by the Administrator,
to have shares which are acquired upon exercise of an Award withheld by the
Company or tender other shares of Stock owned by the Participant to the
Company at the time the amount of such taxes is determined, in order to pay
the amount of such tax obligations, subject to such limitations as the
Administrator determines are necessary or appropriate to comply with Rule
16b-3 in the case of Participants who are subject to Section 16(b). For
example, the Administrator may require that the election be irrevocable and
that it satisfy one of the following two conditions:
(i) the election may not be made within six months of the
acquisition of the securities to be tendered to satisfy the tax withholding
obligation (except that this limitation shall not apply in the event that
death or disability of the Participant occurs before the expiration of the
six-month period) or
(ii) the election must be made in any ten-day period
beginning on the third business day after the date of release by the Company
for publication of quarterly or annual summary statements of sales or
earnings of the Company.
Any shares of Stock so withheld or tendered shall be valued by the Company as
of the date they are withheld or tendered. If shares of Stock are tendered
to satisfy such withholding tax obligation, the Administrator may issue the
Participant an additional Option, with terms identical to those set forth in
the Option Agreement governing the Option exercised, except that the exercise
price shall be the fair market value used by the Company in accepting the
tender of shares for such purpose and the number of shares subject to the
additional Option shall be the number of shares tendered.
6.2 TERMS AND CONDITIONS TO WHICH ONLY NQOS ARE SUBJECT. Options
granted under this Plan which are designated as NQOs shall be subject to the
following terms and conditions:
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(a) EXERCISE PRICE. The exercise price of an NQO shall be
determined by the Administrator; provided, however, that the exercise price
of an NQO shall not be less than 100 percent of the fair market value of the
Stock subject to the Option on the Grant Date or, if required by applicable
state securities laws in the case of an NQO granted to any Ten Percent
Stockholder, not less than 110 percent of such fair market value.
(b) OPTION TERM. Unless an earlier expiration date is specified
by the Administrator at the Grant Date, each NQO shall expire ten years after
the Grant Date or, if required by applicable state securities laws in the
case of an NQO granted to a Ten Percent Stockholder, five years after the
Grant Date.
6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
(a) EXERCISE PRICE. The exercise price of an ISO shall be
determined in accordance with the applicable provisions of the Code and shall
in no event be less than 100 percent of the fair market value of the stock
covered by the ISO at the Grant Date; provided, however, that the exercise
price of an ISO granted to a Ten Percent Stockholder shall not be less than
110 percent of such fair market value.
(b) OPTION TERM. Unless an earlier expiration date is specified
by the Administrator at the Grant Date, each ISO shall expire ten years after
the Grant Date; PROVIDED, HOWEVER, that an ISO granted to a Ten Percent
Stockholder shall expire no later than five years after the Grant Date.
(c) DISQUALIFYING DISPOSITIONS. If Stock acquired by exercise of
an ISO is disposed of within two years after the Grant Date or within one
year after the transfer of the Stock to the optionee, the holder of the Stock
immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition, shall provide such other
information regarding the disposition as the Company may reasonably require
and shall pay the Company any withholding and employment taxes which the
Company in its sole discretion deems applicable to the disposition.
6.4 SURRENDER OF OPTIONS. The Administrator, acting in its sole
discretion, may include a provision in an Option Agreement allowing the
optionee to surrender the Option covered by the agreement, in whole or in
part in lieu of exercise in whole or in part, on any date that the fair
market value of the Stock subject to the Option exceeds the exercise price
and the Option is exercisable (to the extent being surrendered). The
surrender shall be effected by the delivery of the Option Agreement, together
with a signed statement which specifies the number of shares as to which the
optionee is surrendering the Option, together with a request for such type of
payment. Upon such surrender, the optionee shall receive (subject to any
limitations imposed by Rule 16b-3) payment in cash or Stock, or a combination
of the two, equal to (or equal in fair market value to) the excess of the
fair market value of the shares covered by the portion of the Option being
surrendered on the date of surrender over the exercise price for such shares.
The Administrator, acting in its sole discretion, shall determine the form
of payment, taking into account such factors as it deems
14
<PAGE>
appropriate. To the extent necessary to satisfy Rule 16b-3, the
Administrator may terminate an optionee's rights to receive payments in cash
for fractional shares. Any Option Agreement providing for such surrender
privilege shall also incorporate such additional restrictions on the exercise
or surrender of Options as may be necessary to satisfy the conditions of Rule
16b-3.
7. RESTRICTED STOCK
Shares of Restricted Stock shall be subject to the following terms and
conditions:
7.1 GRANT. The Administrator may grant one or more Awards of Restricted
Stock to any Participant other than Eligible Directors. Each Restricted Stock
Award shall specify the number of shares of Stock to be issued to the
Participant, the date of issuance, the consideration for such shares (not
less than the minimum consideration required under applicable state law) and
the restrictions imposed on the shares including the conditions of release or
lapse of such restrictions. Unless the Administrator provides otherwise, such
restrictions shall not lapse earlier than the later of (i) six months after
the date of the Award or (ii) the satisfaction of a specified Stockholder
Approved Standard. Pending the lapse of restrictions, stock certificates
evidencing shares of Restricted Stock shall bear a legend referring to the
restrictions and shall be held by the Company. Upon issuance of Restricted
Stock Awards, the Participant may be required to furnish such additional
documentation or other assurances as the Administrator may require to enforce
the restrictions.
7.2 RESTRICTIONS. Except as specifically provided elsewhere in this
Plan or the Restricted Stock Award, Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until the restrictions have lapsed and the
rights to the shares have vested. The Administrator may in its discretion
provide for the lapse of such restrictions in installments and may accelerate
or waive such restrictions, in whole or in part, based on service,
performance or such other factors or criteria as the Administrator may
determine.
7.3 DIVIDENDS. Unless otherwise determined by the Administrator, cash
dividends with respect to shares of Restricted Stock shall be paid to the
recipient of the Restricted Stock Award on the normal dividend payment dates,
and dividends payable in Stock shall be paid in the form of Restricted Stock
having the same terms as the Restricted Stock upon which such dividend is
paid. The Award Agreement shall specify whether and, if so, the extent to
which the Participant shall be obligated to return to the Company any cash
dividends paid with respect to any shares of Restricted Stock which are
subsequently forfeited.
7.4 FORFEITURE OF RESTRICTED SHARES. Except to the extent otherwise
provided in the Award Agreement, when a Participant's Employment Termination
occurs, the Participant shall forfeit all shares still subject to restriction.
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8. STOCK APPRECIATION RIGHTS
The Administrator may grant Stock Appreciation Rights to eligible
persons other than Eligible Directors. A Stock Appreciation Right shall
entitle its holder to receive from the Company, at the time of exercise of
the right, an amount in cash equal to (or, at the Administrator's discretion,
shares of Stock equal in fair market value to) the excess of the fair market
value (at the date of exercise) of a share of Stock over a specified price
fixed by the Administrator in the governing Award Agreement multiplied by the
number of shares as to which the holder is exercising the Stock Appreciation
Right. The specified price fixed by the Administrator shall not be less than
the fair market value of the Stock at the date of grant of the Stock
Appreciation Right. Stock Appreciation Rights may be granted in tandem with
any previously or contemporaneously granted Option or independent of any
Option. The specified price of a tandem Stock Appreciation Right shall be the
exercise price of the related Option. Any Stock Appreciation Rights granted
in connection with an ISO shall contain such terms as may be required to
comply with Section 422 of the Code.
9. DIRECTOR STOCK
9.1 ELECTION. The Company intends to pay each Eligible Director an
annual retainer in the amount set from time to time by the Board (the
"Retainer"). Each Eligible Director shall be entitled to receive his or her
Retainer exclusively in cash, exclusively in shares of Stock ("Director
Stock") or any portion in cash and any portion in Director Stock. Each
Eligible Director shall be given the opportunity, during the month the
Eligible Director first becomes an Eligible Director and during the last
month of each quarter thereafter, to elect among these choices for the
remainder of the quarter (in the case of the election made when the Eligible
Director first becomes an Eligible Director) and for the following quarter
(in the case of any subsequent election). If the Eligible Director chooses
to receive at least some of his or her Retainer in Director Stock, the
election shall also indicate the percentage of the Retainer to be paid in
Director Stock. If an Eligible Director makes no election during his or her
first opportunity to make an election, the Eligible Director shall be assumed
to have elected to receive his or her entire Retainer in cash. If an
Eligible Director makes no election during any succeeding election month, the
Eligible Director shall be assumed to have remade the election then currently
in effect for that Eligible Director. An election by an Eligible Director to
receive a portion of his or her retainer in Director Stock shall either (a)
be approved by (i) the Committee or (ii) the Board of Directors or (b)
provide that Director Stock received by the Eligible Director pursuant to
such election shall be held by the Eligible Director for a period of six
months.
9.2 ISSUANCE. The Company shall make the first issuance of shares of
Director Stock on the first trading day of the first full calendar quarter
after the effective time of the merger referred to in Section 5.3. Subsequent
issuances of Director Stock shall be made on the first trading day of each
subsequent calendar quarter and shall be made to all persons who are Eligible
Directors on that trading day except any Eligible Director whose Retainer is
to be paid entirely in cash. The number of shares of Stock issuable to those
Eligible Directors on the relevant trading date indicated above shall equal:
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(% x R/4) / P
WHERE:
% = the percentage of the Eligible Director's Retainer that the
Eligible Director elected or is deemed to have elected to receive in the
form of Director Stock, expressed as a decimal
R = the Eligible Director's Retainer for the year during which the
issuance occurs
P = the closing price, as quoted on the principal exchange on which
Stock is traded, on the date of issuance.
Director Stock shall not include any fractional shares. Fractions shall be
rounded to the nearest whole share.
10. SECURITIES LAWS
Nothing in this Plan or in any Award or Award Agreement shall require the
Company to issue any shares with respect to any Award if, in the opinion of
counsel for the Company, that issuance could constitute a violation of the
Securities Act, any other law or the rules of any applicable securities exchange
or securities association then in effect. As a condition to the grant or
exercise of any Award, the Company may require the Participant (or, in the event
of the Participant's death, the Participant's legal representatives, heirs,
legatees or distributees) to provide written representations concerning the
Participant's (or such other person's) intentions with regard to the retention
or disposition of the Stock covered by the Award and written covenants as to the
manner of disposal of such Stock as may be necessary or useful to ensure that
the grant, exercise or disposition will not violate the Securities Act, any
other law or any rule of any applicable securities exchange or securities
association then in effect. The Company shall not be required to register any
Stock under the Securities Act or register or qualify any Stock under any state
or other securities laws.
11. EMPLOYMENT OR OTHER RELATIONSHIP
Nothing in this Plan or any Award shall in any way interfere with or limit
the right of the Company or of any of its Affiliates to terminate any
Participant's employment or status as a consultant or director at any time, nor
confer upon any Participant any right to continue in the employ of, or as a
director or consultant of, the Company or any of its Affiliates.
17
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12. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board may at any time amend, suspend or discontinue this Plan without
stockholder approval, except as required by applicable law; PROVIDED, HOWEVER,
that no amendment, alteration, suspension or discontinuation shall be made which
would impair the rights of any Participant under any Award previously granted,
without the Participant's consent, except to conform this Plan and Awards
granted to the requirements of federal or other tax laws including ERISA, or to
the requirements of Rule 16b-3. The provisions of the Plan relating to Awards
for Eligible Directors may not be amended more than once each six months. The
Board may choose to require that the Company's stockholders approve any
amendment to this Plan in order to satisfy the requirements of Section 422 of
the Code, Rule 16b-3, Section 162(m) for any other reason.
13. LIABILITY AND INDEMNIFICATION OF ADMINISTRATOR
No person constituting, or member of the group constituting, the
Administrator shall be liable for any act or omission on such person's part,
including but not limited to the exercise of any power or discretion given to
such member under this Plan, except for those acts or omissions resulting from
such member's gross negligence or willful misconduct. The Company shall
indemnify each present and future person constituting, or member of the group
constituting, the Administrator against, and each person or member of the group
constituting the Administrator shall be entitled without further act on his or
her part to indemnity from the Company for, all expenses (including the amount
of judgments and the amount of approved settlements made with a view to the
curtailment of costs of litigation) reasonably incurred by such person in
connection with or arising out of any action, suit or proceeding to the fullest
extent permitted by law and by the Articles of Incorporation and Bylaws of the
Company.
14. GRANTS TO PERSONS EXPECTED TO BECOME EMPLOYEES OR DIRECTORS
The Administrator may grant Awards to persons who are expected to become
employees, directors (other than Eligible Directors) or consultants of the
Company. The grant shall be deemed to have been made upon the date the grantee
becomes an employee, director or consultant of the Company without further
action or approval by the Administrator.
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15. CERTAIN DIRECTORS AND OFFICERS
All Awards Agreements for Participants who are subject to Section 16(b)
shall be deemed to include such additional limitations, terms and provisions as
Rule 16b-3 then requires unless the Committee determines that any such Award
should not comply with the requirements of Rule 16b-3. Unless the Committee
determines that an Award to an eligible person is not intended to qualify for
the exemption for performance-based compensation under Section 162(m) or unless
(and then only to the extent) the requirements of Section 162 (m) change: (a) an
Award of a Stock Option shall have an exercise price (and an Award of a Stock
Appreciation Right shall have a specified price fixed by the Administrator) at
least equal to the fair market value of a share of Stock on the Grant Date of
the Award, (b) the period over which the performance objectives of the Award
must be satisfied shall not be shorter than six months, (c) the performance
objectives applicable to the Award shall be based on one or more of the
Stockholder Approved Standards and (d) the Award shall be subject to any
additional requirements of Section 162(m).
16. SECURITIES LAW LEGENDS
Certificates for shares of Stock, when issued, may have the following
legend and statements of other applicable restrictions endorsed thereon:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE SOLE
DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR
OTHER DISPOSITION WILL NOT VIOLATE ANY APPLICABLE FEDERAL OR STATE
SECURITIES LAWS.
This legend shall not be required for any shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
19
<PAGE>
17. SEVERABILITY
If any provision of this Plan is held to be illegal or invalid for any
reason, that illegality or invalidity shall not affect the remaining provisions
of this Plan, but such provision shall be fully severable and the Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included in this Plan. If any of the terms or provisions of this Plan or any
Award Agreement conflict with the requirements of Rule 16b-3 (as those terms or
provisions are applied to eligible persons who are subject to Section 16(b)),
Section 422 of the Code (with respect to ISOs) or Section 162(m) (with respect
to the exception for performance-based compensation), those conflicting terms or
provisions shall be deemed inoperative to the extent they conflict with those
requirements. With respect to ISOs, if this Plan does not contain any provision
required to be included in a plan under Section 422 of the Code, that provision
shall be deemed to be incorporated into this Plan with the same force and effect
as if it had been expressly set out in this Plan; provided, further, that, to
the extent any Option that is intended to qualify as an ISO cannot so qualify,
that Option (to that extent) shall be deemed a NQO for all purposes of the Plan.
18. EFFECTIVE DATE AND PROCEDURAL HISTORY
This Plan was originally approved by the Company's Board on May 30, 1995.
It was approved in that form by the holders of the Company's voting stock on
May 31, 1995 (the "Effective Date"). It was amended by the Board on
December 15, 1995. It was amended again by the Board on January 26, 1996. On
January 26, 1996, the Plan, as amended by the Board on December 15, 1995 and
January 26, 1996, was approved by the holders of the Company's voting stock. On
January __ 1997, the Board approved certain additional ammendments to the Plan
which were effective immediately. On March 27, 1997, the Board approved an
amendment to the Plan to increase the number of shares of Stock subject to
issuance under the Plan and recommended that that amendment be submitted to the
stockholders of the Company for their approval; on May 16, 1996, the Company's
stockholders approved that amendment.
20
<PAGE>
P MERIDIAN INDUSTRIAL TRUST, INC.
R PROXY
O SOLICITED ON BEHALF OF THE BOARD OF
X DIRECTORS OF MERIDIAN INDUSTRIAL TRUST, INC.
Y FOR THE MAY 16, 1997, ANNUAL MEETING OF
STOCKHOLDERS AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned stockholder of Meridian Industrial Trust, Inc., a Maryland
Corporation ("Meridian"), hereby (a) acknowledges receipt of the Notice to
Stockholders of the Annual Meeting of Stockholders of Meridian to be held on
May 16, 1997, and of the accompanying Proxy Statement; (b) appoints Allen J.
Anderson and Milton K. Reeder, as Proxies for the undersigned, or any of
them, each with full power of substitution; (c) authorizes the Proxies to
represent the undersigned at the meeting and to cast on behalf of the
undersigned all votes that the undersigned is entitled to cast as the holder
of those shares of Meridian Common Stock or Meridian Series B Preferred Stock
held of record by the undersigned at the close of business on March 17, 1997,
at the meeting and at any adjournment or postponement thereof; and (d)
revokes any proxies previously given.
SEE REVERSE
SIDE
FOLD AND DETACH HERE
<PAGE>
/X/ Please mark your
votes as in this
example.
The votes entitled to be cast by the undersigned will be cast as instructed
below. If this proxy is executed but no instruction is given, the votes
entitled to be cast by the undersigned will be cast "FOR" each of the
nominees for director and "FOR" each of the other proposals as described in
the Proxy Statement and in the discretion of the Proxies on any other matter
that may properly come before the meeting or any adjournment or postponement
thereof.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE MOMINEES
LISTED AND FOR PROPOSALS 2 AND 3.
- -------------------------------------------------------------------------------
FOR WITHHELD AS TO ALL
Election of
seven Directors. / / / /
FOR, Except vote for the following nominee(s) is withheld:
- ----------------------------------------------------------
Nominees for Director:
Allen J. Anderson John S. Moody
C.E. Cornutt Kenneth N. Stensby
T. Patrick Duncan Lee W. Wilson
Peter O. Hanson
FOR AGAINST ABSTAIN
2. A proposal to ratify the selection of Arthur
Anderson LLP as Meridian's independent auditors
for fiscal year ending December 31, 1997. / / / / / /
3. A proposal to amend the Company's incentive
stock plan to increase the authorized number
of shares that may be issued thereunder. / / / / / /
4. In their discretion, the Proxies are
authorized to vote on such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
Please sign and date this proxy and return it as promptly as possible in the
envelope provided. Joint owners should each sign. Signature(s) should
correspond exactly with the name(s) printed on this proxy. Attorneys,
executors, administrators, guardians, and officers signing in a
representative capacity should give full title.
- --------------------------------------------------------
- --------------------------------------------------------
Signature(s) Date
FOLD AND DETACH HERE
