<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-14166
MERIDIAN INDUSTRIAL TRUST, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 94-3224765
- ----------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
455 MARKET STREET
17TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 281-3900
------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of the common and
preferred stock, as of the latest practicable date:
<TABLE>
<S> <C>
SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK AS OF AUGUST 1, 1998: 1,623,376
SHARES OF SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK AS OF AUGUST 1, 1998: 2,000,000
SHARES OF COMMON STOCK AS OF AUGUST 1, 1998: 31,672,388
</TABLE>
<PAGE>
This Form 10-Q/A amends Item 1 of Part I of the registrant's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1998 to read in its
entirety as follows and amends Item 5 and Item 6 of Part II:
- ------------------------------------------------------------------------------
PART I: FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Annual Report on Form 10-K
for the year ended December 31, 1997 and the Quarterly Report on Form 10-Q
for the three months ended March 31, 1998 of Meridian Industrial Trust, Inc.
(the "Company"). These condensed consolidated statements have been prepared
in accordance with the instructions of the Securities and Exchange Commission
Form 10-Q and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, all material
adjustments of a normal, recurring nature considered necessary for a fair
presentation of the results of operations for the interim periods have been
included. The results of consolidated operations for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
1
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1998 1997
(unaudited) (audited)
----------- ----------
<S> <C> <C>
Investment in Real Estate Assets:
Rental Properties Held for Investment $ 974,076 $813,389
Less: Accumulated Depreciation (23,912) (14,374)
---------- --------
950,164 799,015
Rental Properties Held for Divestiture 267 9,492
---------- --------
950,431 808,507
Investment in Unconsolidated Joint Venture 21,500 21,500
---------- --------
Total Investment in Real Estate Assets 971,931 830,007
Other Assets:
Investment in and Advances to Unconsolidated Subsidiaries 46,019 --
Cash and Cash Equivalents 8,195 7,855
Cash Held in Consolidated Limited Partnerships 2,506 992
Restricted Cash and Cash Held in Escrow 7,031 11,267
Note Receivable 8,000 --
Accounts Receivable, Net of Reserves of $468 and $228 at
June 30, 1998 and December 31, 1997, respectively 4,837 3,460
Capitalized Loan Fees, Lease Commissions and Other Assets, Net 23,739 9,931
---------- --------
Total Assets $1,072,258 $863,512
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unsecured Notes, Including Unamortized Debt Premium of $105
and $109 at June 30, 1998 and December 31, 1997, respectively $ 160,105 $160,109
Mortgage Loan 66,094 66,094
Unsecured Credit Facility 145,800 20,500
Mortgage Notes Payable, Including Unamortized Debt Premium of $12
and $153 at June 30, 1998 and December 31, 1997, respectively 31,580 10,503
Accrued Dividends Payable 10,723 9,473
Accounts Payable, Prepaid Rent, Tenant Deposits and Other Liabilities 22,439 21,562
---------- --------
Total Liabilities 436,741 288,241
---------- --------
Minority Interest in Consolidated Limited Partnerships 17,024 5,132
---------- --------
Commitments and Contingencies -- --
Stockholders' Equity:
Authorized Shares - 175,000,000 shares of Common Stock and
25,000,000 shares of Preferred Stock authorized, each with par
value of $0.001; 30,799,933 and 30,165,662 shares of Common Stock
issued and outstanding at June 30, 1998 and December 31, 1997,
respectively; 1,623,376 and 2,272,727 shares of Series B
Convertible Preferred Stock issued and outstanding with a
liquidation preference of $25,000 and $35,000 at June 30, 1998 and
December 31, 1997, respectively; and 2,000,000 shares of Series D
Preferred Stock issued and outstanding with a liquidation preference
of $50,000 at June 30, 1998 35 32
Additional Paid-in Capital 621,912 574,848
Distributions in Excess of Income (3,454) (4,741)
---------- --------
Total Stockholders' Equity 618,493 570,139
---------- --------
Total Liabilities and Stockholders' Equity $1,072,258 $863,512
---------- --------
---------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments $ 28,393 $ 12,870 $ 54,653 $ 24,564
Income from Unconsolidated Joint Venture 495 -- 990 --
Income from Unconsolidated Subsidiaries 563 -- 750 --
Interest and Other Income 427 147 528 304
----------- ----------- ----------- -----------
TOTAL REVENUES 29,878 13,017 56,921 24,868
----------- ----------- ----------- -----------
EXPENSES:
Interest Expense 5,888 2,160 10,480 3,784
Property Taxes 3,515 1,764 6,824 3,393
Property Operating 2,263 956 4,262 2,042
General and Administrative 2,087 1,350 3,976 2,501
Depreciation and Amortization 5,467 2,211 10,470 4,216
----------- ----------- ----------- -----------
TOTAL EXPENSES 19,220 8,441 36,012 15,936
----------- ----------- ----------- -----------
Income Before Minority Interest 10,658 4,576 20,909 8,932
Minority Interest in Net (Income) (158) -- (247) --
----------- ----------- ----------- -----------
Income Before Gain (Loss) on Divestiture of
Properties and Extraordinary Item 10,500 4,576 20,662 8,932
Gain (Loss) on Divestiture of Properties, Net 1,993 (877) 2,054 (448)
----------- ----------- ----------- -----------
Income Before Extraordinary Item 12,493 3,699 22,716 8,484
Extraordinary Item - Expenses Incurred in
Connection with Debt Restructuring
and Retirements -- (808) -- (808)
----------- ----------- ----------- -----------
NET INCOME $ 12,493 $ 2,891 $ 22,716 $ 7,676
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income $ 12,493 $ 2,891 $ 22,716 $ 7,676
Less Preferred Dividends Declared:
Series B Preferred Stock (536) (705) (1,286) (1,409)
Series D Preferred Stock (12) -- (12) --
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON $ 11,945 $ 2,186 $ 21,418 $ 6,267
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BASIC PER SHARE DATA:
Income Before Extraordinary Item $ 0.40 $ 0.22 $ 0.71 $ 0.52
Extraordinary Item -- (0.06) -- (0.06)
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON PER BASIC
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
$ 0.40 $ 0.16 $ 0.71 $ 0.46
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DILUTED PER SHARE DATA:
Income Before Extraordinary Item $ 0.37 $ 0.22 $ 0.68 $ 0.51
Extraordinary Item -- (0.06) -- (0.06)
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON PER DILUTED
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
$ 0.37 $ 0.16 $ 0.68 $ 0.45
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 30,182,754 13,598,756 30,180,624 13,597,570
Diluted 33,331,951 14,015,823 33,212,739 14,030,853
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 22,716 $ 7,676
Adjustments to Reconcile Net Income to Cash Provided by
Operating Activities:
Depreciation and Amortization 10,470 4,216
Amortization of Debt Premium (146) (22)
Amortization of Financing Costs 202 176
Straight Line Rent (1,893) (851)
Income Allocated to Minority Partner Interest 247 --
(Gain) Loss on Divestiture of Properties (2,054) 448
Extraordinary Item - Expenses Incurred in Connection with
Debt Restructuring and Retirements -- 808
Increase in Accounts Receivable and Other Assets (5,105) (6,004)
Decrease in Accounts Payable, Prepaid Rent,
Tenant Deposits and Other Liabilities (1,199) (75)
----------- ---------
Net Cash Provided by Operating Activities 23,238 6,372
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Proceeds from Property Sales 3,693 11,195
Decrease in Restricted Cash and Cash Held In Escrow 34 317
Increase in Cash Held In Consolidated Limited Partnerships (1,311) --
Investment in and Advances to Unconsolidated Subsidiaries (46,007) --
Investments in Real Estate (117,897) (57,148)
Recurring Building Improvements (1,465) (228)
Recurring Tenant Improvements (480) (637)
Recurring Leasing Commissions (1,892) (735)
Receipt of Note Receivable -- 503
Purchase of Minority Partner Interest (1,089) --
Distributions Paid to Minority Partners (105) --
Purchase of Other Assets (6,753) (94)
----------- ---------
Net Cash Used in Investing Activities (173,272) (46,827)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for Capitalized Loan Fees (82) (121)
Principal Payments on Mortgage Notes Payable (170) (24)
Borrowings on Unsecured Credit Facility 183,800 53,500
Repayment of Borrowings on Unsecured Credit Facility (58,500) (4,500)
Distributions Paid to Stockholders (20,178) (9,295)
Net Proceeds from issuance of Common and Preferred Stock, Exercise
of Warrants and Stock Options 51,362 48
Repurchase and Cancellation of Shares and Offering Costs (5,858) --
----------- ---------
Net Cash Provided by Financing Activities 150,374 39,608
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 340 (847)
Cash and Cash Equivalents at Beginning of Period 7,855 2,942
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,195 $ 2,095
----------- ---------
----------- ---------
CASH PAID FOR INTEREST $ 12,365 $ 4,023
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA AND PROPERTY DATA)
1. ORGANIZATION
Meridian Industrial Trust, Inc. (the "Company") was incorporated
in the state of Maryland on May 18, 1995. The Company is a self-administered
and self-managed real estate investment trust ("REIT") engaged primarily in
the business of owning, acquiring, developing, managing and leasing
income-producing warehouse/distribution and light industrial properties. At
June 30, 1998, the Company's principal asset was its portfolio of 213
warehouse/distribution and light industrial properties, two retail properties
and eleven properties under development. As of June 30, 1998 and 1997, the
Company's properties were 96% and 97% occupied, respectively.
On February 23, 1996, the Company merged with Meridian Point
Realty Trust IV Co., Meridian Point Realty Trust VI Co. and Meridian Point
Realty Trust VII Co. ("Trust IV," "Trust VI" and "Trust VII," respectively;
collectively referred to as the "Merged Trusts"), with the Company as the
surviving entity (that transaction is referred to below as the "Merger").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION The accompanying consolidated financial
statements include the results of the Company, its wholly-owned subsidiaries
and its majority-owned and controlled partnerships. All intercompany
transactions have been eliminated.
(B) USE OF ESTIMATES The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(C) RENTAL PROPERTIES HELD FOR INVESTMENT Investments in rental
properties are stated at cost unless circumstances indicate that cost cannot
be recovered, in which case, the carrying value of the property is reduced to
estimated fair value. Estimated fair value: (i) is based upon the Company's
plans for the continued operation of each property and (ii) is computed using
estimated sales price, as determined by prevailing market values for
comparable properties and/or the the application of capitalization rates to
annualized rental income. The capitalization rate is based upon the age,
construction and use of the building. The fulfillment of the Company's plans
related to each of its properties is dependent upon, among other things, the
presence of economic conditions which will enable the Company to continue to
hold and operate the properties to yield an acceptable return on the
Company's investment. Due to uncertainties inherent in the valuation process
and in the economy, management can provide no assurances that the actual
results of operating and disposing of the Company's properties will not be
materially different than current expectations.
Rental Properties Held for Investment are depreciated over 35
years using the straight-line method. Expenditures for maintenance, repairs,
and improvements which do not materially prolong the normal useful life of an
asset are charged to operations as incurred. Tenant improvements are
capitalized and amortized under the straight-line method over the term of the
related lease.
5
<PAGE>
Rental Properties Held for Divestiture are stated at the lower of
cost or estimated fair value. Estimated fair value is based upon prevailing
market values for comparable properties or the application of capitalization
rates to annualized rental income. The capitalization rate is based upon the
age, construction and use of building. No depreciation is recorded on Rental
Properties Held for Divestiture.
(D) CONSTRUCTION IN PROGRESS Costs clearly associated with the
development and construction of a real estate project are capitalized as
construction in progress. In addition, interest, real estate taxes, insurance
and other holding costs are capitalized until the property is placed in
service.
(E) CASH AND CASH EQUIVALENTS For the purposes of reporting cash
flows, Cash and Cash Equivalents include cash on hand and short-term
investments with an original maturity of three months or less when purchased.
(F) CAPITALIZED LOAN FEES, LEASE COMMISSIONS AND OTHER ASSETS
Capitalized Loan Fees are amortized as interest expense over the term of the
related debt. Lease Commissions are amortized into depreciation and
amortization expense on a straight-line basis over the term of the related
lease. Other Assets are comprised of a loan extended to a minority limited
partner, security deposits for future acquisitions and deferred rent
receivable.
(G) FAIR VALUE OF FINANCIAL INVESTMENTS Statement of Financial
Accounting Standards No. 107, "Accounting for Fair Value of Financial
Instruments," requires disclosure of fair value for all financial
instruments. Based on the borrowing rates currently available to the Company,
the carrying amount of its debt approximates fair value. The carrying amount
of Cash and Cash Equivalents also approximates fair value.
(H) OFFERING COSTS Underwriting commissions, offering costs and
other expenses incurred in connection with stock offerings of the Company's
Common and Preferred Stock have been reflected as a reduction of
Stockholders' Equity.
(I) RENTALS FROM REAL ESTATE INVESTMENTS All leases are classified
as operating leases. The Company recognizes rental income on a straight-line
basis over the term of the lease. Deferred rent receivable, included in Other
Assets, represents the excess of rental revenue on a straight-line basis over
the cash received under the applicable lease provision.
Certain of the Company's leases relating to its properties require
tenants to pay all or a portion of real estate taxes, insurance and operating
expenses ("Expense Recaptures"). Expense Recaptures are recognized as
revenues in the same period the related expenses are incurred by the Company.
For the three months ended June 30, 1998 and 1997, Expense Recaptures of
$3,741 and $1,731, respectively, have been included in Rentals from Real
Estate Investments. For the six months ended June 30, 1998 and 1997, Expense
Recaptures of $7,507 and $3,111, respectively, have been included in Rentals
from Real Estate Investments.
(J) INCOME TAXES The Company has previously elected to be taxed as
a REIT for federal and, where the federal rules are allowed, state income tax
purposes. To continue to qualify for REIT status, the Company must meet a
number of ongoing organizational and operational requirements. If the Company
satisfies those REIT requirements and the Company currently distributes all
of its net taxable income (including net capital gains) to its stockholders,
the Company should generally owe no federal or state income tax. The REIT
provisions of the Internal Revenue Service Code of 1986, as amended,
generally allow a REIT to deduct dividends paid to stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
certain state and federal taxes imposed on its income and properties.
As a result of deductions allowed for the dividends paid to
stockholders and the utilization of net operating loss carryovers of the
Merged Trusts, the Company has no federal or state taxable income.
Accordingly, no provisions for federal or state income taxes have been made
in the accompanying consolidated statements of operations for the three and
six months ended June 30, 1998.
6
<PAGE>
(K) EARNINGS PER SHARE During the first quarter of 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share." SFAS 128 requires the
disclosure of basic earnings per share and modifies existing guidance for
computing diluted earnings per share. Under the new standard, basic earnings
per share is computed as net income or loss divided by the weighted average
number of shares of Common Stock outstanding, excluding the dilutive effects
of stock options and other potentially dilutive securities. SFAS No. 128 is
effective for periods ending after December 15, 1997. Earnings per share for
the three and six months ended June 30, 1997 have been restated to conform to
the new standards as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income - Basic $ 11,945 $ 2,186 $ 21,418 $ 6,267
Net Income - Diluted 12,481 2,186 22,704 6,267
Weighted Average Shares Outstanding:
Basic 30,182,754 13,598,756 30,180,624 13,597,570
Stock options 315,459 275,550 358,539 285,861
Warrants 137,400 141,517 160,931 147,422
Series B Preferred Stock 2,258,456 -- 2,265,552 --
Operating Limited Partnership Units 437,882 -- 247,093 --
----------- ----------- ----------- -----------
Diluted 33,331,951 14,015,823 33,212,739 14,030,853
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income (Loss) Per Share:
Basic $ 0.40 $ 0.16 $ 0.71 $ 0.46
Diluted 0.37 0.16 0.68 0.45
</TABLE>
In connection with the Merger, the Company issued approximately
553,000 warrants to purchase an equal number of shares of the Company's
Common Stock (the "Merger Warrants"). Each Merger Warrant entitles the holder
to purchase one share of the Company's Common Stock at the exercise price of
$16.23. The exercise period began May 23, 1997 and ends February 23, 1999. As
of June 30, 1998, the Company had issued 94,034 shares pursuant to exercise
of the Merger Warrants.
On June 29, 1998, 649,351 shares of the Company's Series B
Preferred Stock were converted into shares of Common Stock on a one-for-one
basis.
On June 30, 1998, the Company completed a public offering of
2,000,000 shares of Series D Cumulative Redeemable Preferred Stock for an
aggregate offering price of $50,000 or $25.00 per share. The net proceeds of
$48,425 were used to reduce borrowings under the Company's unsecured credit
facility. Shares of the Series D Preferred Stock are redeemable by the
Company on or after June 30, 2003 and have a liquidation preference of
$50,000. Shares of the Series D Preferred Stock are not convertible into any
other securities of the Company. Dividends on the Series D Preferred Shares
are cumulative and payable quarterly at the rate of 8.75% of the liquidation
preference per annum.
(L) NEW ACCOUNTING PRONOUNCEMENT In June, 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 is effective for fiscal years beginning after December
15, 1997. Management has not yet determined the level of additional
disclosure, if any, that may be required by SFAS No. 131. Additional
disclosure that may be required will be provided beginning with the financial
statements of the Company for the year ending December 31, 1998.
(M) RECLASSIFICATIONS Certain 1997 items have been reclassified
to conform to the 1998 presentation.
7
<PAGE>
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
The Company has an investment in an unconsolidated subsidiary,
Meridian Refrigerated, Inc. ("MRI"), formed for the purpose of acquiring and
operating companies providing refrigerated distribution services. In the six
months ended June 30, 1998, MRI completed two strategic operating company
acquisitions: Arctic Cold Storage, Inc. ("Arctic") and C.E.G.F. (USA), Inc.
("CEGF"). In its first acquisition on February 19, 1998, MRI acquired for an
aggregate purchase price of $36,000, the real estate, business, and operating
assets including $15,263 in cash of Arctic, a refrigerated distribution and
freight consolidation company operating three refrigerated warehouses. The
facilities are located in the Los Angeles Basin and aggregate 7.2 million
cubic feet and 299,000 square feet.
In its second acquisition on June 11, 1998, MRI acquired for
$29,741 the common stock of CEGF, a refrigerated distribution services
company located in Tampa, Florida. CEGF operates two facilities in Tampa,
Florida and one facility in Houston, Texas aggregating 9.2 million cubic feet
and 332,924 square feet.
The Company's investment in MRI is comprised of secured and
unsecured notes and non-voting participating preferred stock. The voting
common stock of MRI is owned by certain officers of the Company. The Company
accounts for its investment in MRI using the equity method. At June 30, 1998,
the outstanding balances on the secured and unsecured notes totaled $30,650
and $5,879, respectively.
4. LONG-TERM DEBT
The Company assumed a fixed rate facility (the "Mortgage Loan") in
connection with the Merger. The Mortgage Loan has a principal balance of
$66,094, bears interest at an annual rate of 8.63%, requires interest only
payments until its maturity in 2005 and is secured by a pool of the Company's
properties with a net book value of $137,311 as of June 30, 1998.
Concurrent with the Merger, the Company entered into an unsecured
credit facility (the "Unsecured Credit Facility"). The Unsecured Credit
Facility originally bore interest at LIBOR plus 1.7%, was scheduled to mature
in February 1998, and provided for a maximum borrowing amount of $75,000. On
April 21, 1997, the Unsecured Credit Facility was amended and restated. This
amendment and restatement of the Unsecured Credit Facility provided for (i)
an increase in the borrowing limit from $75,000 to $150,000, (ii) a decrease
in the interest rate spread over LIBOR from 1.7% to 1.4%, and (iii) an
extension of the maturity date to April 3, 2000, from February 26, 1998. The
Company recorded an extraordinary expense of $808 in loan costs in the second
quarter of 1997 in connection with this restructuring.
On September 23, 1997, the Unsecured Credit Facility was further
amended and restated to provide for (i) an increase of the borrowing limit
from $150,000 to $250,000 and (ii) a decrease in the interest rate spread
over LIBOR from 1.4% to 1.3%. Effective, May 26, 1998, the interest rate
spread over LIBOR for the Unsecured Credit Facility was further decreased
from 1.3% to 1.2%. At June 30, 1998, the weighted average interest rate on
the Unsecured Credit Facility was 6.9%. The Company paid a fee totaling $250
in connection with this amendment.
On November 20, 1997, the Company completed a private offering to
institutional investors of $160,000 in principal of unsecured senior notes
(the "Unsecured Notes"). The Unsecured Notes were issued in two tranches,
$135,000 maturing on November 20, 2007, bearing an interest rate of 7.25% per
annum, and $25,000 maturing on November 20, 2009, bearing an interest rate of
7.30% per annum. Interest on these notes is payable semiannually. The
proceeds were used to repay borrowings on the Unsecured Credit Facility. In
connection with this transaction, the Company entered into two forward
exchange rate contracts which resulted in a payment to the Company totaling
$109, which was accounted for as a premium.
8
<PAGE>
In the opinion of the Company's management, the Company was in
compliance with all loan covenants related to the debt instruments discussed
above at June 30, 1998.
5. MORTGAGE NOTES PAYABLE
On May 13, 1997, the Company purchased a property located in
Montebello, California, subject to a mortgage note payable bearing an
interest rate different from the prevailing market rate at the date of
acquisition. This interest rate differential was recorded as a premium. This
mortgage note payable had a maturity date of July 15, 1998, an outstanding
balance of $10,429 and provided for monthly principal and interest payments
of $96 based on an interest rate of 9.89% per annum and a 30-year
amortization schedule. The premium totaling $324 was amortized over the term
of the mortgage note payable using the effective interest method. As of June
30,1998, this mortgage note payable and debt premium had outstanding balances
of $10,286 and $12, respectively. Subsequent to June 30, 1998, the mortgage
note payable was repaid from borrowings made under the Company's Unsecured
Credit Facility.
The Company, through one of its consolidated partnerships, assumed
a mortgage note payable in the principal amount of $3,676 in connection with
a contribution of a property located in Orlando, Florida (see Note 6). The
mortgage note payable has a maturity date of February 1, 2006, and provides
for monthly principal and interest payments of $28 based on an interest rate
of 7.90% per annum and a 25-year amortization schedule. As of June 30, 1998,
this mortgage note payable had an outstanding balance of $3,656.
During the six months ended June 30, 1998, the Company, through
one of its consolidated partnerships, assumed three mortgage notes payable in
connection with the acquisition of three properties located in Las Vegas,
Nevada and four properties located in Plano, Texas. Two of the mortgage notes
payable are secured by properties located in Las Vegas, Nevada. One mortgage
note payable had a principal balance of $6,212 as of June 30, 1998, matures
on July 1, 2011 and provides for monthly principal and interest payments of
$47 based on an interest rate of 7.50% per annum and a 23-year amortization
schedule. The second mortgage note payable had a principal balance of $7,505
as of June 30, 1998, matures on December 1, 2009 and provides for monthly
principal and interest payments of $63 based on an interest rate of 8.30% per
annum and a 22-year amortization schedule. The third mortgage note payable,
which is secured by a property in Texas, had a principal balance of $3,909 as
of June 30, 1998, matures on April 15, 2006 and provides for monthly
principal and interest payments of $28 based on an interest rate of 6.95% per
annum.
6. PROPERTY ACQUISITIONS AND DEVELOPMENTS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, purchased 16
properties located in California, Massachusetts, Nevada, Ohio and Texas, with
an aggregate square footage of approximately 1,771,000. The aggregate
purchase price for these properties totaled $88,121. The Company funded a
portion of these acquisitions from cash reserves and funded the majority of
the remaining costs with borrowings under the Unsecured Credit Facility. In
addition, the Company assumed three mortgage notes payable totaling $17,713.
In connection with the acquisition relating to the consolidated partnership,
the Company's minority partners' contribution is valued at $11,000.
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, acquired
approximately 172 acres of land scheduled for future development for an
aggregate purchase price of $21,262. The aggregate cost to develop these
parcels is expected to be approximately $108,774, to be funded from
borrowings under the Unsecured Credit Facility and from cash reserves. These
properties, when complete, will total approximately 2,576,000 square feet.
During the six months ended June 30, 1998, the Company, either
directly or through consolidated partnerships, completed development of and
placed in service three warehouse/distribution properties comprising
approximately 803,000 square feet with an aggregate cost of $29,228.
9
<PAGE>
At June 30, 1998, the Company had, directly or through
consolidated partnerships, eleven warehouse/distribution properties either
under development or scheduled for development which will total approximately
4,447,000 square feet upon completion. The aggregate cost for the design and
construction of these development projects is estimated to be approximately
$171,409. As of June 30, 1998, the Company had incurred total project costs
of approximately $45,512 on these development projects. The Company
anticipates funding the balance of such development costs from cash reserves
and borrowings under the Unsecured Credit Facility.
In connection with land acquisitions and development activities
relating to the consolidated partnerships, the Company's minority partners
contributed land and other consideration valued at $4,948.
On April 2, 1998, the minority partners of one of the Company's
consolidated partnerships contributed a property located in Orlando, Florida
with a square footage of approximately 120,000. The minority partners'
contribution totaled $950. With regard to this transaction, the partnership
assumed a mortgage note payable in the principal amount of $3,676 (see Note
5).
On April 22, 1998, the Company and a minority partner of one of
its consolidated partnerships, executed an Assignment of Partnership
Interests, whereby the Company, as the managing general partner, exercised
its right to purchase the partnership interest of the minority partner. The
Company purchased the partnership interest for a total purchase price of
$1,089.
On May 7, 1998, the Company entered into a property exchange
transaction. This transaction involved the Company's transfer of its interest
in three properties located in Nashville, Tennessee with a net book value of
$6,174 to the other property owner in exchange for five properties owned by
the other property owner located in Memphis, Tennessee. The Company paid $350
to the other property owner representing the difference in the exchange
values of the properties. In addition, the Company paid closing costs and
prorated items totaling $317.
7. PROPERTY DIVESTITURES
During the six months ended June 30, 1998, the Company divested
two properties located in California and Tennessee for an aggregate sales
price of $12,080. After closing costs and pro-rated items which totaled $387
and acceptance of a note receivable of $8,000, the Company received net cash
proceeds of $3,693.
10
<PAGE>
8. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS
The following table summarizes the Company's non-cash investing
and financing transactions for the six months ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Property Acquisitions:
Acquisition Price $ 141,122 $ 49,557
Land for Built-to-Suit Facilities 1,196 9,410
Restricted Cash (4,228) --
Minority Limited Partners' Capital Contributions (11,992) 1,130
Purchase of Minority Partner Interest 637 --
Mortgage Notes Payable Assumed (21,389) (16,136)
Shares of Common Stock Issued (1,525) --
Accrued Closing Costs and Pro-rated Items (1,864) (386)
Property Divestitures:
Net Basis (15,835) (11,543)
Note Receivable 8,000 --
Other Assets Net of Other Liabilities 105 44
</TABLE>
During the six months ended June 30, 1998 and 1997, interest
expense totaling $1,857 and $684, respectively, was capitalized for
properties under development. For the three months ended June 30, 1998 and
1997, interest expense totaling $1,061 and $473, respectively, was
capitalized for properties under development.
9. SUBSEQUENT EVENTS
ACQUISITIONS
Subsequent to June 30, 1998, the Company purchased a property
located in Indiana comprising approximately 133,000 square feet for a
purchase price of $4,400. This acquisition was funded through borrowings
under the Unsecured Credit Facility.
Subsequent to June 30, 1998, the Company acquired approximately 61
acres of land scheduled for future development for an aggregate purchase
price of $4,416. The costs to develop these parcels are expected to aggregate
to approximately $29,600, to be funded from borrowings under the Unsecured
Credit Facility and from cash reserves. These properties, when complete, will
total approximately 909,000 square feet.
Subsequent to June 30, 1998, the Company completed development of
and placed in service two warehouse/distribution properties comprising
approximately 1,069,000 square feet. The aggregate development cost for
these properties was approximately $40,655.
DIVESTITURE
Subsequent to June 30, 1998, the Company divested a property
located in California for a sales price of $335. After closing costs and
pro-rated items which totaled $18, the Company received net proceeds of $317.
11
<PAGE>
OTHER
Subsequent to June 30, 1998, the Company completed a direct
placement of 850,000 shares of the Company's Common Stock at an offering
price of $23.50 per share, resulting in gross proceeds of $19,975. The
Company used the net proceeds of the direct placement to reduce borrowings
under the Unsecured Credit Facility.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(DOLLARS IN THOUSANDS, UNLESS INDICATED OTHERWISE)
INTRODUCTION
The Company is a self-administered and self-managed real estate
investment trust engaged primarily in the business of owning, acquiring,
managing, leasing and developing income-producing warehouse/distribution and
light industrial properties. At June 30, 1998, the Company's principal asset
was its portfolio of 213 warehouse/distribution and light industrial
properties, two retail properties and eleven properties under development. As
of June 30, 1998 and 1997, the Company's properties were 96% and 97%
occupied, respectively.
The following discussion should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
the Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1998 and the Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Operations and Condensed Consolidated Statements
of Cash Flows and the notes thereto included in pages 2 through 12 of this
report. Unless otherwise defined in this report, or unless the context
otherwise requires, the capitalized words or phrases used in this section
either (i) describe accounting terms that are used as line items in such
financial statements, or (ii) have the meanings ascribed to them in such
financial statements and the notes thereto.
This report, including the financial information and statements,
and the notes thereto appearing elsewhere in this report, contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ materially from the events and results discussed in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, the general economic climate, competition
and the supply of and demand for industrial properties in the Company's
markets, interest rate levels, the availability of financing, potential
environmental liability and other risks associated with the ownership,
development and acquisition of properties, including risks that tenants will
not take or remain in occupancy or pay rent, or that construction or
operating costs may be greater than anticipated, and additional factors
discussed in detail in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company intends to finance its operating cash needs,
distributions to common and preferred stockholders, property acquisitions,
development, expansions and renovations using a combination of cash flow from
operations and bank and institutional debt financing, supplemented with
private or public debt or equity placements. Where intermediate or long-term
debt financing is employed, the Company generally seeks to obtain fixed
interest rates or enter into agreements intended to cap the effective
interest rate on floating rate debt. The Company intends to operate with a
ratio of debt-to-total market capitalization that generally will not exceed
50%. Total market capitalization is the sum of total indebtedness, Series D
Preferred Stock with a liquidation preference of $50,000, and the market
value of the Company's Common Stock, after giving effect to the conversion of
the Company's 1,623,376 outstanding shares of Series B Preferred Stock and
limited partnership units. At June 30, 1998, the Company's debt-to-total
market capitalization rate was 33.4%.
SOURCES OF LIQUIDITY
The Company's main sources of liquidity are: (i) cash flows from
operating activities, (ii) cash reserves, (iii) borrowings under the
Unsecured Credit Facility, (iv) proceeds from private or public equity or
debt placements, and (iv) proceeds from the divestiture of properties. A
summary of the Company's historical cash flows for the six months ended June
30, 1998 and 1997 is as follows:
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Cash flows provided by (used in):
Operating activities $ 23,238 $ 6,372
Investing activities (173,272) (46,827)
Financing activities 150,374 39,608
</TABLE>
In addition to cash flows and net income, management considers
Funds From Operations to be one additional measure of the performance of an
equity REIT because, together with net income and cash flows, Funds From
Operations provides investors with an additional basis to evaluate the
ability of the Company to incur and service debt and to fund acquisitions and
other capital expenditures. However, Funds From Operations does not measure
whether cash flow is sufficient to fund all of the Company's cash needs
including principal amortization, capital improvements and distributions to
stockholders. Funds From Operations also does not represent cash generated
from operating, investing or financing activities as determined in accordance
with generally accepted accounting principles. Funds From Operations should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity. Funds From Operations is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss
(computed in accordance with generally accepted accounting principles),
excluding gains or losses from debt restructurings and divestitures of
properties, plus depreciation and amortization of real estate assets, and
after adjustment for unconsolidated partnerships and joint ventures. The
Company calculates Funds From Operations as defined by NAREIT and as
interpreted in NAREIT's White Paper (i.e. the Company does not add back
amortization of deferred financing costs and depreciation of non-rental real
estate assets to net income). In addition, other real estate companies may
calculate Funds From Operations differently than the Company. A
reconciliation of the Company's income before gains or losses on divestiture
of properties, minority interest in net income and extraordinary item to
Funds From Operations for the six months ended June 30, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1998 1997
------------- --------------
<S> <C> <C>
Income Before Minority Interest, Gain (Loss) on
Divestiture of Properties and Extraordinary Item $20,909 $ 8,932
Reconciling Items:
Depreciation and Amortization
Relating to Real Estate Operations 10,562 4,179
Series D Preferred Stock Dividends
and Other (57) --
------- -------
Funds From Operations $31,414 $13,111
------- -------
------- -------
</TABLE>
As of June 30, 1998, the Company had approximately $8,195 in
unrestricted cash and cash equivalents.
At June 30, 1998, the outstanding balance on the Mortgage Loan was
$66,094. The Mortgage Loan bears interest at the annual rate of 8.63% and
requires interest only payments until its maturity in 2005.
14
<PAGE>
During the six months ended June 30, 1998, the Company borrowed
$183,800 under its Unsecured Credit Facility to fund property acquisitions
and developments.
At June 30, 1998, the outstanding balances on the Company's
Unsecured Notes and corresponding premium were $160,000 and $105,
respectively. The Unsecured Notes were issued in two tranches, $135,000
maturing on November 20, 2007, bearing an interest rate of 7.25% per annum,
and $25,000 maturing on November 20, 2009, bearing an interest rate of 7.30%
per annum. Interest on these notes is payable semiannually.
On May 13, 1997, the Company purchased a property located in
Montebello, California, subject to a mortgage note payable bearing an
interest rate different from the prevailing market rate at the date of
acquisition. This interest rate differential was recorded as a premium. This
mortgage note payable had a maturity date of July 15, 1998, an outstanding
balance of $10,429 and provided for monthly principal and interest payments
of $96 based on an interest rate of 9.89% per annum and a 30-year
amortization schedule. The premium totaling $324 was amortized over the term
of the mortgage note payable using the effective interest method. As of June
30,1998, this mortgage note payable and debt premium had outstanding balances
of $10,286 and $12, respectively. Subsequent to June 30, 1998, the mortgage
note payable was repaid from borrowings made under the Company's Unsecured
Credit Facility.
The Company, through one of its consolidated partnerships, assumed
a mortgage note payable in the principal amount of $3,676 in connection with
a contribution of a property located in Orlando, Florida. The mortgage note
payable has a maturity date of February 1, 2006, and provides for monthly
principal and interest payments of $28 based on an interest rate of 7.90% per
annum and a 25-year amortization schedule. As of June 30, 1998, this mortgage
note payable had an outstanding balance of $3,656.
During the six months ended June 30, 1998, the Company, through
one of its consolidated partnerships, assumed three mortgage notes payable in
connection with the acquisition of three properties located in Las Vegas,
Nevada and four properties located in Plano, Texas. Two of the mortgage notes
payable are secured by properties located in Las Vegas, Nevada. One mortgage
note payable had a principal balance of $6,212 as of June 30, 1998, matures
on July 1, 2011 and provides for monthly principal and interest payments of
$47 based on an interest rate of 7.50% per annum and a 23-year amortization
schedule. The second mortgage note payable had a principal balance of $7,505
as of June 30, 1998, matures on December 1, 2009 and provides for monthly
principal and interest payments of $63 based on an interest rate of 8.30% per
annum and a 22-year amortization schedule. The third mortgage note payable,
which is secured by a property in Texas, had a principal balance of $3,909 as
of June 30, 1998, matures on April 15, 2006 and provides for monthly
principal and interest payments of $28 based on an interest rate of $6.95%
per annum.
The Company currently has a policy of incurring debt only if, upon
such incurrence, the Company's debt-to-total market capitalization would be
50% or less. However, the Company's organizational documents do not contain
any limitation on the amount of indebtedness the Company may incur.
Accordingly, the Board could alter or eliminate this policy and would do so
if, for example, it were necessary in order for the Company to continue to
qualify as an REIT. If this policy were changed, the Company could become
more highly leveraged, resulting in an increase in debt service that could
adversely affect the cash available for distribution to stockholders and
could increase the risk of default on the Company's indebtedness.
In addition to the variable interest rate contracts on the
Unsecured Credit Facility, the Company may incur indebtedness in the future
that bears interest at a variable rate or may be required to refinance its
debt at higher rates. As a result, increases in interest rates could increase
the Company's interest expense, which could adversely affect the Company's
ability to pay distributions to stockholders.
In connection with the Merger, the Company issued approximately
553,000 warrants to purchase an equal number of shares of the Company's
Common Stock. Each Merger Warrant entitles the holder to purchase one share
of the Company's Common Stock at the exercise price of $16.23. The exercise
period began May 23, 1997 and ends February 23, 1999. As of June 30, 1998,
the Company had issued 94,034 shares pursuant to exercise of the Merger
Warrants.
15
<PAGE>
On June 30, 1998, the Company completed a public offering of
2,000,000 shares of Series D Cumulative Redeemable Preferred Stock for an
aggregate offering price of $50,000 or $25.00 per share. The net proceeds of
$48,425 were used to reduce borrowings under the Company's Unsecured Credit
Facility. Shares of the Series D Preferred Stock are redeemable by the
Company on or after June 30, 2003 and have a liquidation preference of
$50,000. Shares of the Series D Preferred Stock are not convertible into any
other securities of the Company. Dividends on the Series D Preferred Shares
are cumulative and payable quarterly at the rate of 8.75% of the liquidation
preference per annum.
Subsequent to June 30, 1998, the Company completed a direct
placement of 850,000 shares of the Company's Common Stock at an offering
price of $23.50 per share, resulting in gross proceeds of $19,975. The
Company used the net proceeds of the direct placement to reduce borrowings
under the Unsecured Credit Facility.
During the six months ended June 30, 1998, the Company divested
two properties located in California and Tennessee for an aggregate sales
price of $12,080. After closing costs and pro-rated items which totaled $387
and acceptance of a note receivable of $8,000, the Company received net cash
proceeds of $3,693.
Subsequent to June 30, 1998, the Company divested a property
located in California for a sales price of $335. After closing costs and
pro-rated items which totaled $18, the Company received net proceeds of $317.
USES OF LIQUIDITY
The Company's principal applications of its cash resources are:
(i) funding of property acquisitions and developments; (ii) payments of
capital improvements and leasing costs; (iii) payment of distributions; (iv)
payment of property operating costs including property expenses, property
taxes, general and administrative expenses, and interest expense; and (v)
principal payments on debt. Planned capital improvements on the Company's
properties consist of tenant improvements and other expenditures necessary to
lease and maintain the properties.
During the six months ended June 30, 1998, the Company declared
dividends to holders of its Common Stock, Series B Preferred Stock in the
aggregate amounts of $20,131 and $1,286 respectively, or $0.33 and $0.33 per
share, respectively. In addition, during the six months ended June 30, 1998,
the Company accrued $12 in dividends to holders of its Series D Preferred
Stock.
During the six months ended June 30, 1998, the Company repaid
borrowings on its Unsecured Credit Facility totaling $58,500 using the net
proceeds from the issuance of 2,000,000 shares of the Series D Preferred
Stock and the direct placement of 850,000 shares of Common Stock.
DEVELOPMENT PROJECTS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, acquired
approximately 172 acres of land scheduled for future development for an
aggregate purchase price of $21,262. The aggregate cost to develop these
parcels is expected to be approximately $108,774. These properties, when
complete, will total approximately 2,576,000 square feet.
16
<PAGE>
During the six months ended June 30, 1998, the Company, either
directly or through consolidated partnerships, completed development of and
placed in service three warehouse/distribution properties comprising
approximately 803,000 square feet with an aggregate cost of $29,228.
At June 30, 1998, the Company had, directly or through
consolidated partnerships, eleven warehouse/distribution properties either
under development or scheduled for development which will total approximately
4,447,000 square feet upon completion. The aggregate cost for the design and
construction of these development projects is estimated to be approximately
$171,409. As of June 30, 1998, the Company had incurred total project costs
of approximately $45,512 on these development projects.
In connection with land acquisitions and development activities
relating to the consolidated partnerships, the Company's minority partners
contributed land and other consideration valued at $4,948.
Subsequent to June 30, 1998, the Company acquired approximately 61
acres of land scheduled for future development for an aggregate purchase
price of $4,416. The costs to develop these parcels are expected to aggregate
to approximately $29,600. These properties, when complete, will total
approximately 909,000 square feet.
Subsequent to June 30, 1998, the Company completed development of
and placed in service two warehouse/distribution properties comprising
approximately 1,069,000 square feet. The aggregate development cost for these
properties was approximately $40,655.
The Company expects to fund its future development costs with
Borrowings under the Unsecured Credit Facility, cash reserves, bank and
institutional debt financing, and private or public debt and equity placements.
PROPERTY ACQUISITIONS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, purchased 16
properties located in California, Massachusetts, Nevada, Ohio and Texas, with
an aggregate square footage of approximately 1,771,000. The aggregate
purchase price for these properties totaled $88,121. The Company funded a
portion of these acquisitions from cash reserves and funded the majority of
the remaining costs with borrowings under the Unsecured Credit Facility. In
addition, the Company assumed three mortgage notes payable totaling $17,713.
In connection with the acquisition relating to the consolidated partnership,
the Company's minority partners' contribution is valued at $11,000.
On April 2, 1998, the minority partners of one of the Company's
consolidated partnerships contributed a property located in Orlando, Florida
with a square footage of approximately 120,000. The minority partners'
contribution totaled $950. With regard to this transaction, the partnership
assumed a mortgage note payable in the principal amount of $3,676 (see Note
5).
On April 22, 1998, the Company and a minority partner of one of
its consolidated partnerships, executed an Assignment of Partnership
Interests, whereby the Company, as the managing general partner, exercised
its right to purchase the partnership interest of the minority partner. The
Company purchased the partnership interest for a total purchase price of
$1,089.
On May 7, 1998, the Company entered into a property exchange
transaction. This transaction involved the Company's transfer of its interest
in three properties located in Nashville, Tennessee with a net book value of
$6,174 to the other property owner in exchange for five properties owned by
the other property owner located in Memphis, Tennessee. The Company paid $350
to the other property owner representing the difference in the exchange
values of the properties. In addition, the Company paid closing costs and
prorated items totaling $317.
17
<PAGE>
The Company has an investment in an unconsolidated subsidiary,
MRI, formed for the purpose of acquiring and operating companies providing
refrigerated distribution services. In the six months ended June 30, 1998,
MRI completed two strategic operating company acquisitions: Arctic and CEGF.
In its first acquisition on February 19, 1998, MRI acquired for an aggregate
purchase price of $36,000, the real estate, business, and operating assets
including $15,263 in cash of Arctic, a refrigerated distribution and freight
consolidation company operating three refrigerated warehouses. The facilities
are located in the Los Angeles Basin and aggregate 7.2 million cubic feet and
299,000 square feet.
In its second acquisition on June 11, 1998, MRI acquired for
$29,741 the common stock of CEGF, a refrigerated distribution services
company located in Tampa, Florida. CEGF operates two facilities in Tampa,
Florida and one facility in Houston, Texas aggregating 9.2 million cubic feet
and 332,924 square feet.
The investment in MRI is comprised of secured and unsecured notes
and non-voting participating preferred stock. The Company accounts for its
investment in MRI using the equity method. At June 30, 1998, the outstanding
balances on the secured and unsecured notes totaled $30,650 and $5,879
respectively.
Subsequent to June 30, 1998, the Company purchased a property
located in Indiana comprising approximately 133,000 square feet for a
purchase price of $4,400. This acquisition was funded through borrowings
under the Unsecured Credit Facility.
YEAR 2000 COMPLIANCE
The Company utilizes a number of computer software programs and
operating systems, including applications used in financial business systems
and various administrative functions. To the extent that the Company's
software applications contain source code that is unable to appropriately
interpret the upcoming calendar year "2000" and beyond, replacement or some
level of modification of such application will be necessary. The Company's
current information systems environment is based on a WINTEL platform (Intel
PC/LAN/WAN) configuration. The environment does not contain mainframe
computers.
The Company has substantially completed its assessment of the
effect of Year 2000 compliance on its information systems. Based on its
assessment, the Company believes that substantially all of its systems are
currently Year 2000 compliant. The Company also believes that its
non-information-technology systems are Year 2000 compliant.
If material suppliers of products or services purchased by the
Company and others with whom the Company does business are not Year 2000
compliant, the Company's results of operations could be negatively impacted.
Although the Company has no reason to believe that its material vendors and
other material third parties with whom it does business are not Year 2000
compliant (or will not be compliant on a timely basis), the Company is unable
to determine at this time the effect that any such non-compliance would have
on the Company's operations. The Board of Directors of the Company has
directed the Company's management team to assess the potential impact on the
Company of the Year 2000 compliance status of material third parties with
whom the Company does business. This assessment is currently in its
preliminary stage.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rentals from Real Estate Investments for the six months ended June
30, 1998 and 1997 totaled $54,653 and $24,564, respectively. The increase of
$30,089 was due to primarily to (i) Properties acquired during 1997 and 1998
("Property Acquisitions") which increased rental revenues by $28,067 and (ii)
the rental revenues generated by the build-to-suit properties placed in
service during 1997 and 1998 ("Completed Build-to-Suits") totaling $3,066.
These increases were offset by Properties divested during 1997 and 1998
("Property Divestitures") which reduced rental revenues by $988.
Income from Unconsolidated Joint Venture totaled $990 for the six
months ended June 30, 1998 resulting from interest income on the $21,500
participating mortgage loan purchased by the Company in 1997 in connection
with the property-for-stock transaction with Ameritech Pension Trust.
Income from Unconsolidated Subsidiaries totaled $750 for the six
months ended June 30, 1998 resulting from MRI's secured and unsecured notes
payable to the Company and equity earnings of MRI.
Interest and Other Income totaled $528 and $304 for the six months
ended June 30, 1998 and 1997, respectively. The increase of $224 was
primarily due to interest income from the note receivable from the
divestiture of a property located in California and a loan extended to a
minority limited partner.
Interest Expense increased by $6,696 to $10,480 during the six
months ended June 30, 1998 from the same period in 1997. The increase was
primarily due to (i) the Company's completion of a private offering of
$160,000 in principal of unsecured senior notes to institutional investors in
November 1997 resulting in an increase of $5,806 and (ii) the assumption of
mortgage notes payable relating to the acquisitions in Florida, Nevada and
Texas resulting in an increase of $790.
Compared to the same period in 1997, Property Taxes increased by
$3,431 to $6,824 during the six months ended June 30, 1998. The increase was
primarily due to (i) the Property Taxes attributable to the Property
Acquisitions totaling $3,355 and (ii) the Property Taxes for the Completed
Build-to-Suits amounting to $209. These increases were partially offset by
Property Divestitures, which reduced Property Taxes by $112.
Compared to the same period in 1997, Property Operating Expenses
increased by $2,220 to $4,262 during the six months ended June 30, 1998. The
increase was primarily due to (i) the Property Operating Expenses
attributable to the Property Acquisitions totaling $2,192 and (iii) the
Property Operating Expenses for the Completed Build-to-Suits amounting to
$422. These increases were offset in part by Property Divestitures, which
reduced Property Operating Expenses by $213.
18
<PAGE>
General and Administrative Expenses totaled $3,976 and $2,501 for
the six months ended June 30, 1998 and 1997, respectively. The increase of
$1,475 was primarily due to (i) an increase in personnel and administrative
costs of $708 arising from the growth of the Company, (ii) an increase of
$332 in fees relating to terminated property deals and (iii) an increase of
$367 in accounting, legal, marketing and system conversion costs resulting
from the increased size of the Company's property portfolio.
Compared to the same period in 1997, Depreciation and Amortization
Expense increased by $6,254 to $10,470 during the six months ended June 30,
1998. The increase was primarily due to (i) Depreciation Expense attributable
to the Property Acquisitions totaling $5,639 and (ii) Depreciation Expense
for the Completed Build-to-Suits amounting to $538. These increases were
offset by Property Divestitures, which reduced Depreciation and Amortization
Expenses by $185.
The Gain on Divestiture of Properties totaling $2,054 for the six
months ended June 30, 1998 was attributable to the divestiture of the San
Carlos property located in California and the 4013 Premier property located
in Tennessee.
The Net Loss on Divestiture of Properties totaling $448 for the six
months ended June 30, 1997 was attributable to the divestiture of the
Wildwood and Golden Cove properties which resulted in a total loss of $1,158.
The losses were partially offset by gains on the divestiture of the
Birmingham I, Birmingham II and Phoenix North 23rd properties totaling $710.
The Extraordinary Item totaling $808 for the six months ended June
30, 1997 was attributable to the restructuring of the Company's Unsecured
Credit Facility.
19
<PAGE>
- ------------------------------------------------------------------------------
PART II: OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or to which any of the assets of the
Company or any of its subsidiaries is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 15, 1998. At
that meeting, the stockholders voted on and approved the following
proposals:
1. The election of seven directors for terms expiring in 1999.
2. A proposal to ratify the selection of Arthur Andersen LLP as
the Company's independent auditors for the fiscal year ending
December 31, 1998.
The proposals were approved by the following votes:
1. Election of Directors
---------------------
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Allen J. Anderson 28,316,538 77,557
C. E. Cornutt 28,316,312 77,783
T. Patrick Duncan 28,118,582 275,513
Peter O. Hanson 28,312,396 81,699
John S. Moody 28,139,406 254,689
Kenneth N. Stensby 28,118,351 275,744
Lee W. Wilson 28,312,730 81,365
</TABLE>
2. Ratification of Independent Auditors
<TABLE>
<CAPTION>
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
<S> <C> <C> <C>
28,332,476 19,655 41,964 N/A
</TABLE>
ITEM 5. OTHER INFORMATION
On May 15th, 1998, the Board of Directors amended the Second Amended
and Restated Bylaws as follows:
1. The Board amended Section 2.3 SPECIAL MEETINGS to require that a
special meeting of stockholders shall be called by the secretary of
the Corporation upon the written request of the holders of shares
entitled to cast not less than a majority of all the votes entitled
to be cast at that meeting. The Second Amended Bylaws previously
required 10% of the votes entitled to be cast before a special
meeting would be called.
2. The Board amended Section 2.12.3(c) GENERAL to state that nothing
in Section 2.12 would be deemed to affect the rights of the
Corporation to omit proposals from the Corporation's proxy statement
pursuant to Rule 14a-18 under the Exchange Act.
3. The board amended Section 2.9 PROXIES by changing the phrase
"attorney in fact" to "agent".
The Third Amended and Restated Bylaws appear as Exhibit 3.3.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<C> <S>
1.1(1) Underwriting Agreement dated June 24, 1998, among Meridian
Industrial Trust, Inc., Goldman Sachs & Co., Prudential
Securities Incorporated, ABN AMRO Incorporated, A.G.
Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated,
and PaineWebber, Incorporated, as representatives of the
several underwriters.
1.2(1) Pricing Agreement dated June 24, 1998, among Meridian
Industrial Trust, Inc., Goldman Sachs & Co., Prudential
Securities Incorporated, ABN AMRO Incorporated, A.G.
Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated,
and PaineWebber, Incorporated, as representatives of the
several underwriters.
3.1(2) The Company's Third Amended and Restated Articles of Incorporation.
3.2(1) Articles Supplementary dated June 25, 1998, classifying 2,300,000
shares of 8.75% Series D Cumulative Redeemable Preferred Stock.
3.3(3) The Company's Third Amended and Restated Bylaws.
10.1(4) Second Amendment dated June 23, 1998 to Third Amended and
Restated Revolving Credit Agreement dated February 19, 1998
among (i) the Company, (ii) MIT Unsecured L.P. and Meridian
Refrigerated, Inc. (iv) BankBoston, N.A., Chase Bank of
Texas, National Association, NationsBank of Texas, N.A.,
Wells Fargo Bank, N.A., Dresdner Bank AG, New York Branch
and Grand Cayman Branch, and First American Bank Texas,
S.S.B., (collectively, the "Banks"), (iii) BankBoston, N.A.
as Agent for the Banks, (iv) Chase Bank of Texas, National
Association as Documentation Agent for the Banks, and (v)
NationsBank of Texas, N.A. as Syndication Agent for the
Banks.
10.2(4) Registration Rights Agreement dated June 30, 1998 among
Meridian Industrial Trust, Inc., R. William Gardner,
Douglas C. Gardner, Steven D. Gardner, and Todd L. Platt.
10.3(3) Second Amended and Restated Employee and Director
Incentive Stock Plan of Meridian Industrial Trust, Inc.
27.1(4) Financial Data Schedule.
</TABLE>
- --------
(1) Filed on June 26, 1998, as part of the Company's Current Report on Form
8-K dated June 25, 1998, and incorporated herein by reference.
(2) Filed with the Company's Amendment No. 1 to Registration Statement No.
333-02322 on March 25, 1996, and incorporated herein by reference.
(3) Filed with this report.
(4) Previously filed.
21
<PAGE>
(b) Reports on Form 8-K: The following reports on Form 8-K were filed
during the quarter ended June 30, 1998:
Current Report on Form 8-K dated and filed May 29, 1998,
filing financial statements related to the Company's
acquisition of properties located in Arlington, Carrollton,
and Grand Prairie, Texas.
Current Report on Form 8-K dated and filed June 23, 1998,
filing financial statements related to the Company's
acquisition of properties located in Las Vegas, Nevada, and
Dallas, Texas.
Current Report on Form 8-K dated June 25, 1998, (filed June
26, 1998) filing exhibits related to the Company's sale of
Series D preferred stock.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to its quarterly report
on Form 10-Q to be signed on its behalf by the undersigned thereunto duly
authorized.
MERIDIAN INDUSTRIAL TRUST, INC.
Dated: September 10, 1998 By: /s/ Robert A. Dobbin
---------------------------
Robert A. Dobbin
Secretary and General Counsel
23
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
(corresponding to the Sequentially
Exhibit Table of Item Numbered
601 of Regulation S-K) Description Page
---------------------- ----------- ------------
<C> <S> <C>
1.1(1) Underwriting Agreement dated June 24, 1998,
among Meridian Industrial Trust, Inc., Goldman
Sachs & Co., Prudential Securities Incorporated,
ABN AMRO Incorporated, A.G. Edwards & Sons,
Inc., Legg Mason Wood Walker, Incorporated, and
PaineWebber, Incorporated, as representatives of
the several underwriters.
1.2(1) Pricing Agreement dated June 24, 1998, among
Meridian Industrial Trust, Inc., Goldman Sachs &
Co., Prudential Securities Incorporated, ABN
AMRO Incorporated, A.G. Edwards & Sons, Inc.,
Legg Mason Wood Walker, Incorporated, and
PaineWebber, Incorporated, as representatives of
the several underwriters.
3.1(2) The Company's Third Amended and Restated Articles of
Incorporation.
3.2(1) Articles Supplementary dated June 25, 1998, classifying
2,300,000 shares of 8.75% Series D Cumulative Redeemable
Preferred Stock.
3.3(3) The Company's Third Amended and Restated Bylaws.
</TABLE>
24
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
(corresponding to the Sequentially
Exhibit Table of Item Numbered
601 of Regulation S-K) Description Page
---------------------- ----------- ------------
<C> <S> <C>
10.1(4) Second Amendment dated June 23, 1998 to Third
Amended and Restated Revolving Credit Agreement
dated February 19, 1998 among (i) the Company,
(ii) MIT Unsecured L.P. and Meridian
Refrigerated, Inc. (iv) BankBoston, N.A., Chase
Bank of Texas, National Association, NationsBank
of Texas, N.A., Wells Fargo Bank, N.A., Dresdner
Bank AG, New York Branch and Grand Cayman
Branch, and First American Bank Texas, S.S.B.,
(collectively, the "Banks"), (iii) BankBoston,
N.A. as Agent for the Banks, (iv) Chase Bank of
Texas, National Association as Documentation
Agent for the Banks, and (v) NationsBank of
Texas, N.A. as Syndication Agent for the Banks.
10.2(4) Registration Rights Agreement dated June 30, 1998
among Meridian Industrial Trust, Inc., R. William
Gardner, Douglas C. Gardner, Steven D. Gardner, and
Todd L. Platt
10.3(3) Second Amended and Restated Employee and
Director Incentive Stock Plan of Meridian
Industrial Trust, Inc.
27.1(4) Financial Data Schedule.
</TABLE>
- --------
(1) Filed on June 26, 1998, as part of the Company's Current Report on Form
8-K dated June 25, 1998, and incorporated herein by reference.
(2) Filed with the Company's Amendment No. 1 to Registration Statement No.
333-02322 on March 25, 1996, and incorporated herein by reference.
(3) Filed with this report.
(4) Previously filed.
25
<PAGE>
THIRD AMENDED AND RESTATED
BYLAWS
OF
MERIDIAN INDUSTRIAL TRUST, INC.
--------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1
OFFICES
1.1 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Additional Offices . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
ARTICLE 2
MEETINGS OF STOCKHOLDERS
2.1 Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2.2 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.5 Scope of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.6 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.7 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.8 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.9 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.10 Voting of Stock by Certain Holders . . . . . . . . . . . . . . . . . . -3-
2.10.1 Voting Authority and Procedures . . . . . . . . . . . . . . . -3-
2.10.2 Voting Rights of Certain Control Shares . . . . . . . . . . . -4-
2.11 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.12 Nominations and Stockholder Business . . . . . . . . . . . . . . . . . -4-
2.12.1 Annual Meetings of Stockholders . . . . . . . . . . . . . . . -4-
2.12.2 Special Meetings of Stockholders. . . . . . . . . . . . . . . -5-
2.12.3 General . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.13 Voting by Ballot . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
ARTICLE 3
DIRECTORS
3.1 General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.2 Number, Tenure and Qualifications. . . . . . . . . . . . . . . . . . . -7-
3.3 Annual and Regular Meetings. . . . . . . . . . . . . . . . . . . . . . -7-
3.4 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.7 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.8 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.9 Informal Action by Directors . . . . . . . . . . . . . . . . . . . . . -8-
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
3.10 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
3.12 Loss of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.13 Surety Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.14 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
3.15 Certain Rights of Directors, Officers, Employees and Agents. . . . . . -9-
ARTICLE 4
COMMITTEES
4.1 Number and Tenure. . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
4.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
4.3 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
4.4 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .-10-
4.5 Informal Action by Committees. . . . . . . . . . . . . . . . . . . . .-10-
4.6 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-10-
ARTICLE 5
OFFICERS
5.1 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . .-10-
5.2 Removal and Resignation. . . . . . . . . . . . . . . . . . . . . . . .-10-
5.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-11-
5.4 Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . .-11-
5.5 President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-11-
5.6 Chief Executive Officer. . . . . . . . . . . . . . . . . . . . . . . .-11-
5.7 Chief Financial Officer. . . . . . . . . . . . . . . . . . . . . . . .-11-
5.8 Chief Operating Officer. . . . . . . . . . . . . . . . . . . . . . . .-11-
5.9 Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . . . . .-11-
5.10 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-12-
5.11 Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-12-
5.12 Assistant Secretaries and Assistant Treasurers . . . . . . . . . . . .-12-
5.13 Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
ARTICLE 6
CONTRACTS, LOANS, CHECKS AND DEPOSITS
6.1 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
6.2 Checks and Drafts. . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
6.3 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
* (ii)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7
STOCK
7.1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
7.2 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
7.3 Replacement Certificates . . . . . . . . . . . . . . . . . . . . . . .-14-
7.4 Closing of Transfer Books or Fixing of Record Date . . . . . . . . . .-14-
7.5 Stock Ledger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-15-
7.6 Fractional Stock; Issuance of Units. . . . . . . . . . . . . . . . . .-15-
ARTICLE 8
ACCOUNTING YEAR
ARTICLE 9
DISTRIBUTIONS
9.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
9.2 Contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
ARTICLE 10
INVESTMENT POLICY
ARTICLE 11
SEAL
11.1 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
11.2 Affixing Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
ARTICLE 12
INDEMNIFICATION AND ADVANCES FOR EXPENSES
ARTICLE 13
WAIVER OF NOTICE
</TABLE>
(iii)
<PAGE>
ARTICLE 14
AMENDMENT OF BYLAWS
(iv)
<PAGE>
THIRD AMENDED AND RESTATED
BYLAWS
OF
MERIDIAN INDUSTRIAL TRUST, INC.
--------------------------
ARTICLE 1
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of Meridian Industrial
Trust, Inc. (the "Corporation") shall be located at such place or places as
the Board of Directors may designate.
1.2 ADDITIONAL OFFICES. The Corporation may have additional offices
at such places as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
2.1 PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
2.2 ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board
of Directors during the month of May in each year, provided that the annual
meeting for 1996 shall be held during the month of June 1996.
2.3 SPECIAL MEETINGS. The chairman of the board, if there be one,
president or Board of Directors may call special meetings of the
stockholders. Special meetings of stockholders shall also be called by the
secretary of the Corporation upon the written request of the holders of
shares entitled to cast not less than a majority of all the votes entitled to
be cast at such meeting or as otherwise provided in any Articles
Supplementary, Articles of Amendment or Articles of Amendment and Restatement
with respect to the rights of any class or series of stock then outstanding.
Such request shall state the purpose of such meeting and the matters proposed
to be acted on at such meeting. Except as otherwise provided in any Articles
Supplementary, Articles of Amendment or Articles of Amendment and Restatement
with respect to the rights of any class or series of stock then outstanding,
the secretary shall inform such stockholders of the reasonably estimated cost
of preparing and mailing notice of the meeting and, upon payment to the
Corporation by such stockholders of such costs, the secretary shall give
notice to each stockholder entitled to notice of the meeting. Unless
requested by the stockholders entitled to cast a majority of all the votes
entitled
<PAGE>
to be cast at such meeting, a special meeting need not be called to consider
any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding twelve months.
The provisions of this Section 2.3 are subject to the provisions of Section
2.12 of these Bylaws.
2.4 NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder
entitled to vote at such meeting and to each stockholder not entitled to vote
who is entitled to notice of the meeting written or printed notice stating
the time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by any statute, the purpose for which the meeting
is called, either by mail or by presenting it to such stockholder personally
or by leaving it at his residence or usual place of business. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail addressed to the stockholder at his post office address as it appears on
the records of the Corporation, with postage thereon prepaid.
2.5 SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute
to be stated in such notice. No business shall be transacted at a special
meeting of stockholders except as specifically designated in the notice.
2.6 ORGANIZATION. At every meeting of stockholders, the chairman of
the board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the chairman of the board, one of the
following officers present shall conduct the meeting in the order stated: the
vice chairman of the board, if there be one, the president, the vice
presidents in their order of rank and seniority, or a chairman chosen by the
stockholders entitled to cast a majority of the votes which all stockholders
present in person or by proxy are entitled to cast, shall act as chairman
(which person need not, in the case of a meeting of stockholders of any
series of preferred stock then outstanding, be an officer of the
Corporation), and the secretary, or, in his absence, an assistant secretary,
or in the absence of both the secretary and assistant secretaries, a person
appointed by the chairman shall act as secretary.
2.7 QUORUM. At any meeting of stockholders, the presence in person or
by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this
Section 2.7 shall not affect any requirement under any statute or the charter
of the Corporation for the vote necessary for the adoption of any measure.
If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally notified.
2.8 VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient
to elect a director. Each share may be voted for as
-2-
<PAGE>
many individuals as there are directors to be elected and for whose election
the share is entitled to be voted; provided, however, that no stockholder
shall be entitled to cumulative voting. A majority of the votes cast at a
meeting of stockholders duly called and at which a quorum is present shall be
sufficient to approve any other matter which may properly come before the
meeting, unless more than a majority of the votes cast is required by statute
or by the charter of the Corporation. Unless otherwise provided in the
charter, each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote at a meeting of stockholders.
2.9 PROXIES. A stockholder may vote the stock owned of record by him,
either in person or by proxy executed in writing by the stockholder or by his
duly authorized agent. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided
in the proxy.
2.10 VOTING OF STOCK BY CERTAIN HOLDERS.
2.10.1 VOTING AUTHORITY AND PROCEDURES.
(a) Stock of the Corporation registered in the name of a
corporation, partnership, trust or other entity, if entitled to be voted, may
be voted by the chairman of the board, if there be one, president or a vice
president, a general partner or trustee thereof, as the case may be, or a
proxy appointed by any of the foregoing individuals, unless some other person
who has been appointed to vote such stock pursuant to a bylaw or a resolution
of the board of directors of such corporation or the governing body of such
other entity or pursuant to an agreement of the partners of a partnership, as
the case may be, presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or
other fiduciary may vote stock registered in his name as such fiduciary,
either in person or by proxy.
(b) Shares of stock of the Corporation directly or indirectly
owned by it shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding shares entitled to be voted at
any given time, unless they are held by it in a fiduciary capacity, in which
case they may be voted and shall be counted in determining the total number
of outstanding shares at any given time.
(c) The Board of Directors may adopt by resolution a procedure
by which a stockholder may certify in writing to the Corporation that any
shares of stock registered in the name of the stockholder are held for the
account of a specified person other than the stockholder. The resolution
shall set forth the class of stockholders who may make the certification, the
purpose for which the certification may be made, the form of certification
and the information to be contained in it; if the certification is with
respect to a record date or closing of the stock transfer books, the time
after the record date or closing of the stock transfer books within which the
certification must be received by the Corporation; and any other provisions
with respect to the procedure which the Board of Directors considers
necessary or desirable. On receipt of such certification, the person
specified
-3-
<PAGE>
in the certification shall be regarded as, for the purposes set forth in the
certification, the stockholder of record of the specified stock in place of
the stockholder who makes the certification.
2.10.2 VOTING RIGHTS OF CERTAIN CONTROL SHARES. Notwithstanding
any other provision of the charter of the Corporation or these Bylaws,
Subtitle 7 of Title 3 of the Maryland General Corporation Law or any
successor statute (the "Maryland General Corporation Law") shall not apply to
any acquisition of shares of stock of the Corporation by (a) Hunt
Acquisitions Partners, Ltd., a Delaware limited partnership, RRH Corporation,
a Delaware corporation (or any affiliate thereof), or Ray L. Hunt (or any
affiliate of Ray L. Hunt) (individually and collectively referred to as
"Hunt"), (b) USAA Real Estate Company, a Delaware corporation, or United
Services Automobile Association (or any direct or indirect subsidiary
thereof) (individually and collectively referred to as "USAA"), (c) The
Prudential Insurance Company of America, a New Jersey insurance company
("Prudential"), or (d) State Street Bank and Trust Company, as Trustee for
Ameritech Pension Trust ("Ameritech"). This Section 2.10.2 may not be
amended or repealed, in whole or in part, at any time, whether before or
after an acquisition of "control shares" (as defined under the Maryland
General Corporation Law) by Hunt, USAA, Prudential or Ameritech, without the
prior written consent of such entities.
2.11 INSPECTORS. At any meeting of stockholders, the chairman of the
meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain
and report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report
the results and perform such other acts as are proper to conduct the election
and voting with impartiality and fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him
or by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall
be the report of the inspectors. The report of the inspector or inspectors
on the number of shares represented at the meeting and the results of the
voting shall be PRIMA FACIE evidence thereof.
2.12 NOMINATIONS AND STOCKHOLDER BUSINESS.
2.12.1 ANNUAL MEETINGS OF STOCKHOLDERS.
(a) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors, (iii) as provided in any Articles Supplementary, Articles of
Amendment or Articles of Amendment and Restatement with respect to the rights
of any class or series of stock then outstanding, or (iv) by any stockholder
of the Corporation who was a stockholder of record at the time of giving of
notice provided for in this Section 2.12.1, who is entitled to vote at the
meeting and who complied with the notice procedures set forth in this Section
2.12.1.
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(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iv) of Section
2.12.1(a), the stockholder must have given timely notice thereof in writing
to the secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that
in the event that the date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the 90th
day prior to such annual meeting and not later than the close of business on
the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth: (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such 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
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and of the beneficial owner, if any, on
whose behalf the proposal is made; and (iii) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (x) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner and (y) the
number of shares of each class of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of Section
2.12.1(b) to the contrary, subject to the rights of the holders of shares of
any class or series of stock then outstanding, in the event that the number
of directors to be elected to the Board of Directors is increased and there
is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 2.12.1
shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
secretary at the principal executive offices of the Corporation not later
than the close of business on the tenth day following the day on which such
public announcement is first made by the Corporation.
2.12.2 SPECIAL MEETINGS OF STOCKHOLDERS. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting.
Subject to the rights of the holders of shares of any class or series of
stock then outstanding, nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected (i) pursuant to the Corporation's notice of meeting, (ii)
by or at the direction of the Board of Directors or (iii) provided that the
Board of Directors has determined that directors shall be elected at such
special meeting, by
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any stockholder of the Corporation who is a stockholder of record at the time
of giving of notice for in this Section 2.12.2, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 2.12.2. Subject to the rights of the holders of shares of any class
or series of stock then outstanding, in the event the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder may nominate a
person or persons (as the case may be) for election to such position as
specified in the Corporation's notice of meeting, if the stockholder's notice
containing the information required by Section 2.12.1(b) shall be delivered
to the secretary at the principal executive offices of the Corporation not
earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special
meeting or the tenth day following the date on which public announcement is
first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
2.12.3 GENERAL.
(a) Only such persons who are nominated in accordance with the
procedures set forth in this Section 2.12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.12. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section 2.12 and, if any proposed
nomination or business is not in compliance with this Section 2.12, to
declare that such defective nomination or proposal be disregarded.
(b) For purposes of this Section 2.12, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this Section
2.12, a stockholder shall also comply with all applicable requirements of
state law and of the Exchange Act and the rules and regulations thereunder
with respect to the matters set forth in this Section 2.12. Nothing in this
Section 2.12 shall be deemed to affect any rights of stockholders to request
inclusion of proposals in, or the rights of the Corporation to omit proposals
from, the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
2.13 VOTING BY BALLOT. Voting on any question or in any election may
be VIVA VOCE unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
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ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors.
3.2 NUMBER, TENURE AND QUALIFICATIONS. Except as otherwise provided
in any Articles Supplementary, Articles of Amendment or Articles of Amendment
and Restatement with respect to the rights of any class or series of stock
then outstanding, at any regular meeting or at any special meeting called for
that purpose, a majority of the entire Board of Directors may establish,
increase or decrease the number of directors, provided that the number
thereof shall never be less than the minimum number required by the Maryland
General Corporation Law or the charter of the Corporation, nor more than 15,
and further provided that the tenure of office of a director shall not be
affected by any decrease in the number of directors.
3.3 ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings
of the Board of Directors without other notice than such resolution.
3.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the chairman of the board, if there be one,
president or by any two directors then in office. The person or persons
authorized to call special meetings of the Board of Directors may fix any
place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.
3.5 NOTICE. Notice of any special meeting of the Board of Directors
shall be delivered personally or by telephone, facsimile transmission, United
States mail or courier to each director at his business or residence address.
Notice by personal delivery, by telephone or a facsimile transmission shall
be given at least 24 hours prior to the meeting. Notice by mail shall be
given at least three days prior to the meeting and shall be deemed to be
given when deposited in the United States mail properly addressed, with
postage thereon prepaid. Telephone notice shall be deemed to be given when
the director is personally given such notice in a telephone call to which he
is a party. Facsimile transmission notice shall be deemed to be given upon
completion of the transmission of the message to the number given to the
Corporation by the director and receipt of a completed answer-back indicating
receipt. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be stated
in the notice, unless specifically required by statute or these Bylaws.
3.6 QUORUM. A majority of the directors shall constitute a quorum for
transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting,
a majority of the directors present may adjourn the meeting
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from time to time without further notice, and provided further that if,
pursuant to the charter of the Corporation or these Bylaws, the vote of a
majority of a particular group of directors is required for action, a quorum
must also include a majority of such group. The Board of Directors present
at a meeting which has been duly called and convened may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum.
3.7 VOTING. The action of the majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for
such action by applicable statute.
3.8 TELEPHONE MEETINGS. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person
at the meeting.
3.9 INFORMAL ACTION BY DIRECTORS. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by each director
and such written consent is filed with the minutes of proceedings of the
Board of Directors.
3.10 VACANCIES. If for any reason any or all the directors cease to be
directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Subject to the rights of the holders of shares of
any class or series of stock then outstanding, any vacancy on the Board of
Directors for any cause other than an increase in the number of directors
shall be filled by a majority of the remaining directors, although such
majority is less than a quorum. Subject to the rights of the holders of
shares of any class or series of stock then outstanding, any vacancy in the
number of directors created by an increase in the number of directors may be
filled by a majority vote of the entire Board of Directors. Except as
otherwise provided in any Articles Supplementary, Articles of Amendment, or
Articles of Amendment and Restatement with respect to any class or series of
stock then outstanding, any individual so elected as director shall hold
office until the next annual meeting of stockholders and until his successor
is elected and qualifies.
3.11 COMPENSATION. Directors shall not receive any stated salary for
their services as directors (including services on committees of the Board
of Directors) but, by resolution of the Board of Directors, may receive
fixed sums (which may be payable in cash or securities of the Corporation)
per year and/or per meeting and/or per visit to real property or other
facilities owned or leased by the Corporation and for any service or
activity they performed or engaged in as directors (including services on
committees of the Board of Directors). Directors may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting
of the Board of Directors or of any committee thereof and for their
expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained
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shall be construed to preclude any directors from serving the Corporation in
any other capacity and receiving compensation therefor.
3.12 LOSS OF DEPOSITS. No director shall be liable for any loss which
may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
3.13 SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
3.14 RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made
to the Corporation by any of its officers or employees or by the adviser,
accountants, appraisers or other experts or consultants selected by the Board
of Directors or officers of the Corporation, regardless of whether such
counsel or expert may also be a director.
3.15 CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Except as otherwise set forth in any policy duly
adopted by the Board of Directors (which may be amended from time to time
after adoption by the Board), any director, officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or
in competition with those of or relating to the Corporation.
ARTICLE 4
COMMITTEES
4.1 NUMBER AND TENURE. The Board of Directors may appoint from among
its members an Executive Committee, an Audit Committee, a Compensation
Committee and other committees, composed of one or more directors, to serve
at the pleasure of the Board of Directors.
4.2 POWERS. The Board of Directors may delegate to committees
appointed under Section 4.1 any of the powers of the Board of Directors,
except as prohibited by law.
4.3 MEETINGS. Notice of committee meetings shall be given in the same
manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction
of business at any meeting of the committee. The act of a majority of the
committee members present at a meeting shall be the act of such committee.
The Board of Directors may designate a chairman of any committee, and such
chairman or any two members of any committee may fix the time and place of
its meeting unless the Board shall otherwise provide. Each committee shall
keep minutes of its proceedings.
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4.4 TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these
means shall constitute presence in person at the meeting.
4.5 INFORMAL ACTION BY COMMITTEES. Any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be
taken without a meeting, if a consent in writing to such action is signed by
each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
4.6 VACANCIES. The Board of Directors shall have the power at any
time to change the membership of any committee, to fill all vacancies, to
designate alternate members to replace any absent or disqualified member or
to dissolve any such committee.
ARTICLE 5
OFFICERS
5.1 GENERAL PROVISIONS. The officers of the Corporation shall include
a chief executive officer, a president, a secretary and a treasurer and may
include a chairman of the board, a vice chairman of the board, a chief
financial officer, one or more vice presidents, a chief operating officer,
one or more assistant secretaries and one or more assistant treasurers. In
addition, the Board of Directors may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders, except that the chairman of the board,
if there be one, or president, if there is no chairman of the board, may
appoint one or more vice presidents, assistant secretaries and assistant
treasurers. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until his successor is elected and qualifies or
until his death, resignation or removal in the manner hereinafter provided.
Any two or more offices except president and vice president may be held by
the same person. In its discretion, the Board of Directors may leave
unfilled on a permanent or temporary basis any office except that of chief
executive officer, president, treasurer and secretary. Election of an
officer or agent shall not of itself create contract rights between the
Corporation and such officer or agent.
5.2 REMOVAL AND RESIGNATION. Any officer or agent of the Corporation
may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board of Directors, the chairman of
the board, if there be one, the president or the secretary. Any resignation
shall take effect at any time subsequent to the time specified therein or, if
the time when it shall become effective is not specified therein, immediately
upon its receipt. The acceptance of a resignation shall not be necessary to
make it effective unless otherwise stated in the
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resignation. Such resignation shall be without prejudice to the contract
rights, if any, of the Corporation.
5.3 VACANCIES. A vacancy in any office may be filled by the Board of
Directors for the balance of the term.
5.4 CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer be elected, shall, if present, preside at all meetings of the
stockholders and at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time be assigned
to such person by the Board of Directors or prescribed by the Bylaws. The
chairman of the board shall in addition be the chief executive officer of the
Corporation and shall have the powers and duties prescribed in Section 5.6,
unless the president has been so designated the chief executive officer.
5.5 PRESIDENT. In the absence of the chairman of the board, or if
there be none, the president shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. The president
shall have the responsibilities and duties as set forth by the Board of
Directors or the chairman of the board (if there be one and if the chairman
of the board is the chief executive officer). If there is a chairman of the
board, the president may be the chief executive officer of the Corporation,
if so designated by the Board of Directors. If there is no chairman of the
board, the president shall be the chief executive officer.
5.6 CHIEF EXECUTIVE OFFICER. The chief executive officer, subject to
the control of the Board of Directors, shall have general supervision,
direction and control of the business and other officers of the Corporation.
The chief executive officer may execute any deed, mortgage, bond, contract or
other instrument, except as otherwise required by law or in cases where the
execution thereof shall be expressly delegated by the Board of Directors or
by these Bylaws to some other officer or agent of the Corporation.
5.7 CHIEF FINANCIAL OFFICER. The chief financial officer, if such an
officer is elected,shall have the responsibilities and duties as set forth by
the Board of Directors, the chairman of the board, if there be one, or the
president.
5.8 CHIEF OPERATING OFFICER. The Board of Directors may designate a
chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors, the
chairman of the board, if there be one, or the president.
5.9 VICE PRESIDENTS. In the absence of the president or in the event
of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at
the time of their election or, in the absence of any designation, then in the
order of their election) shall perform the duties of the president and when
so acting shall have all the powers of and be subject to all the restrictions
upon the president; and shall perform such other duties as from time to time
may be assigned to him by the Board of Directors, the chairman of the
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board, if there be one, or the president. The Board of Directors may
designate one or more vice presidents as executive vice president or as vice
president for particular areas of responsibility.
5.10 SECRETARY. The secretary shall: (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b)
provide that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and of the seal of the Corporation; (d) keep a register, or cause the
Corporation's transfer agent to keep a record, of the post office address of
each stockholder which shall be furnished to the secretary or transfer agent
by such stockholder; (e) have general charge, or cause the Corporation's
transfer agent to have general charge, of the share transfer books of the
Corporation; and (f) in general perform such other duties as from time to
time may be assigned to him by the Board of Directors, the chairman of the
board, if there be one, or the president.
5.11 TREASURER. The treasurer shall have the custody of the funds and
securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to chairman of the board, if there be one,
the president and Board of Directors, at the regular meetings of the Board of
Directors or whenever the chairman of the board, president or Board of
Directors may so require, an account of all the treasurer's transactions and
of the financial condition of the Corporation.
If required by the Board of Directors, the chairman of the board, if
there be one, or the president, the treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the
office of treasurer and for the restoration to the Corporation, in case of
the treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, moneys and other property of whatever kind in the
treasurer's possession or under the treasurer's control belonging to the
Corporation.
5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, in general, shall perform such duties
as shall be assigned to them by the secretary or treasurer, respectively, or
by the chairman of the board, if there be one, the president or the Board of
Directors. The assistant treasurers shall, if required by the Board of
Directors, the chairman of the board, if there be one, or the president, give
bonds for the faithful performance of their duties in such sums and with such
surety or sureties as shall be satisfactory to the Board of Directors,
chairman of the board or president.
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5.13 SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Board of Directors and no officer
shall be prevented from receiving such salary or other compensation by reason
of the fact that such officer is also a director.
ARTICLE 6
CONTRACTS, LOANS, CHECKS AND DEPOSITS
6.1 CONTRACTS. The Board of Directors may authorize any officer or
agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be
general or confined to specific instances. Any agreement, deed, mortgage,
lease or other document executed by one or more of the directors or by an
authorized person shall be valid and binding upon the Board of Directors and
upon the Corporation when authorized or ratified by action of the Board of
Directors.
6.2 CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the
Board of Directors.
6.3 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE 7
STOCK
7.1 CERTIFICATES. A certificate or certificates representing the
number of shares of each class of stock held by each stockholder shall be
issued and transferred in accordance with these Bylaws; provided, however,
that the Corporation may elect to issue shares of stock to any stockholder in
uncertificated form unless a stockholder requests that the Corporation issue
certificates which represent and certify such shares to such stockholder. If
shares of any class of stock held by a stockholder are issued by the
Corporation in uncertificated form, the Corporation shall provide such
stockholder with a written statement which contains the information required
under applicable law, including the information required under Section 2-211
of the Maryland General Corporation Law and the Maryland Uniform Commercial
Code, if applicable. Each certificate representing shares of stock of the
Corporation shall be signed by the chairman of the board, if there be one,
the president or a vice president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer and may be
sealed with the actual corporate seal, if any, of the Corporation or a
facsimile of it or in any other form. The signatures may be either manual or
facsimile. Certificates shall be consecutively numbered; and if the
Corporation shall, from time to time, issue several classes of stock, each
class may have its own number series. A certificate is valid and may be
issued whether or not an officer who signed it is still an officer when it is
issued. Each certificate representing shares which are restricted as to
their
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transferability or voting powers, which are preferred or limited as to their
dividends or as to their allocable portion of the assets upon liquidation or
which are redeemable at the option of the Corporation, shall have a statement
of such restriction, limitation, preference or redemption provision, or a
summary thereof, plainly stated on the certificate. If the Corporation has
authority to issue stock of more than one class, the certificate shall
contain on the face or back a full statement or summary of the designations
and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class of stock
and, if the Corporation is authorized to issue any preferred or special class
in series, the differences in the relative rights and preferences between the
shares of each series to the extent they have been set and the authority of
the Board of Directors to set the relative rights and preferences of
subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information
to any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation
will furnish information about the restrictions to the stockholder on request
and without charge.
7.2 TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue an initial transaction statement or a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share
or on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State
of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of
the terms and conditions contained therein.
7.3 REPLACEMENT CERTIFICATES. Any officer designated by the Board of
Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, an officer designated by the
Board of Directors may, in such officer's discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or the owner's legal representative to advertise the
same in such manner as such officer shall require and/or to give bond, with
sufficient surety, to the Corporation to indemnify it against any loss or
claim which may arise as a result of the issuance of a new certificate.
7.4 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of
Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to
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vote at any meeting of stockholders or determining stockholders entitled to
receive payment of any dividend or the allotment of any other rights, or in
order to make a determination of stockholders for any other proper purpose.
Such date, in any case, shall not be prior to the close of business on the
day the record date is fixed and shall be not more than 90 days and, in the
case of a meeting of stockholders, not less than ten days, before the date on
which the meeting or particular action requiring such determination of
stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the
date of such meeting.
If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day on which the
notice of meeting is mailed or the 30th day before the meeting, whichever is
the closer date to the meeting and (b) the record date for the determination
of stockholders entitled to receive payment of a dividend or an allotment of
any other rights shall be the close of business on the day on which the
resolution of the directors, declaring the dividend or allotment of rights,
is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section 7.4, such
determination shall apply to any adjournment thereof, except when (i) the
determination has been made through the closing of the transfer books and the
stated period of closing has expired or (ii) the meeting is adjourned to a
date more than 120 days after the record date fixed for the original meeting,
in either of which case a new record date shall be determined as set forth
herein.
7.5 STOCK LEDGER. The Corporation shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
7.6 FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may
issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any
other provision of the Corporation's charter or these Bylaws, the Board of
Directors may issue units consisting of different securities of the
Corporation. Any security issued in a unit shall have the same
characteristics as any identical securities issued by the Corporation, except
that the Board of Directors may provide that for a specified period
securities of the Corporation issued in such unit may be transferred on the
books of the Corporation only in such unit.
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ARTICLE 8
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE 9
DISTRIBUTIONS
9.1 AUTHORIZATION. Dividends and other distributions upon the stock
of the Corporation may be authorized and declared by the Board of Directors,
subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of
the Corporation, subject to the provisions of law and the charter.
9.2 CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board
of Directors may from time to time, in its absolute discretion, determine to
be proper as a reserve fund for contingencies, for equalizing dividends or
other distributions, for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall
determine to be in the best interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it
was created.
ARTICLE 10
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any
policy or policies with respect to investments by the Corporation as it shall
deem appropriate in its sole discretion.
ARTICLE 11
SEAL
11.1 SEAL. The Board of Directors may authorize the adoption of a seal
for use by the Corporation. The seal shall contain the name of the
Corporation and the year of its incorporation and the words "Incorporated
Maryland." The Board of Directors may authorize one or more duplicate seals
and provide for the custody thereof.
11.2 AFFIXING SEAL. Whenever the Corporation is permitted or required
to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the
word "(SEAL)" adjacent to the signature of the person authorized to execute
the document on behalf of the Corporation.
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ARTICLE 12
INDEMNIFICATION AND ADVANCES FOR EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses (including court costs, attorneys' fees and
related disbursements) in advance of final disposition of a proceeding to (a)
any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of such
individual's service in that capacity or (b) any individual who, while a
director of the Corporation and at the request of the Corporation, serves or
has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise and who is made a party to the proceeding by
reason of such individual's service in that capacity. The Corporation may,
with the approval of its Board of Directors, provide such indemnification and
advance for expenses to a person who served a predecessor of the Corporation
in any of the capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article 12, nor the adoption or
amendment of any other provision of the Bylaws or the charter of the
Corporation inconsistent with this Article 12, shall apply to or affect in
any respect the applicability of the preceding paragraph with respect to any
act or failure to act which occurred prior to such amendment, repeal or
adoption.
Notwithstanding any amendment or repeal of this Article 12, upon the
prior approval of the Board of Directors, the Corporation may enter into
contracts with any or all of its directors and officers and with other
parties regarding indemnification and advancement of expenses.
ARTICLE 13
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent
to the giving of such notice. Neither the business to be transacted at nor
the purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where
such person attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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ARTICLE 14
AMENDMENT OF BYLAWS
Except as otherwise provided herein, the Board of Directors shall have
the exclusive power to adopt, alter or repeal any provision of these Bylaws,
to adopt additional Bylaws and to amend and restate these Bylaws.
The foregoing are certified as the Bylaws of the Corporation adopted by
the Board of Directors as of May 15, 1998.
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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.
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
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(a) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35%
or more of either (x) the then outstanding shares of Stock (the
"OUTSTANDING COMPANY COMMON STOCK") or (y) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that
for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control; (i) any acquisition
directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any entity
controlled by the Company or (iv) any acquisition by any entity
pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) below; and provided further that an
acquisition of beneficial ownership that is a direct result of a
redemption, repurchase or cancellation of shares of Outstanding
Company Common Stock or Outstanding Company Voting Securities
authorized by the Incumbent Board (as hereinafter defined) shall
not constitute a Change of Control; or
(b) Individuals who, as of the date of this Plan, constitute the Board
(the "INCUMBENT BOARD") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of this Plan
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company or an acquisition of assets of another entity (a
"BUSINESS COMBINATION"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such
Business Combination (including, without limitation, an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting
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Securities, as the case may be, (ii) no Person (excluding any entity
resulting from such Business Combination, any employee benefit plan (or
related trust) of the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the Company
resulting from such Business Combination or the combined voting power of
the then outstanding voting securities of such Company except to the
extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
Company resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"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
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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.
"NON-SURVIVING EVENT" means an event of Restructure as described
in either subparagraph (b) or (c) of the definition of "Restructure"set forth
below.
"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.
"PERSON" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a limited liability company, a partnership, a trust or other
entity. A Person, together with that Person's affiliates and associates (as
those terms are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
"PLAN" means this plan.
"RESTRICTED STOCK" means an Award of Stock subject to
restrictions, as more fully described in Section 7.
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"RESTRUCTURE" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Company with any Person,
whether effected as a single transaction or a series of related
transactions, with the Company remaining the continuing or
surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock
or other securities of any other Person or of the Company, cash or
other property;
(b) The merger or consolidation of the Company with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Company not being the continuing or
surviving entity of that merger or consolidation or (ii) the
Company remaining the continuing or surviving entity of that
merger or consolidation but all or a part of the outstanding
shares of Stock are changed into or exchanged for stock or other
securities of any other Person or the Company, cash or other
property; or
(c) The transfer, directly or indirectly, of all or substantially all
of the assets of the Company (whether by sale, merger,
consolidation, liquidation or otherwise) to any Person whether
effected as a single transaction or a series of related
transactions.
"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)
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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.
"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
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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.
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
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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 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).
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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 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.
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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
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
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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.
(i) 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 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). The actions described in
this Section 6.1(b) may be taken without regard to any resulting tax
consequences to the Participant.
(ii) CHANGE OF CONTROL. Upon the occurrence of a Change of
Control, (A) all outstanding Stock Appreciation Rights and Options shall
immediately become fully vested
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and exercisable in full, including that portion of any Stock Appreciation
Right or Option (other than Director Options) that pursuant to the terms
and provisions of the applicable Award Agreement had not yet become
exercisable (the total number of shares of Stock as to which a Stock
Appreciation Right or Option is exercisable upon the occurrence of a
Change of Control is referred to herein as the "Total Shares"); and (B)
the restriction period of any Restricted Stock Award shall immediately be
accelerated and the restrictions shall expire. If a Change of Control
involves a Restructure or occurs in connection with a series of related
transactions involving a Restructure and if such Restructure is in the
form of a Non-Surviving Event and as a part of such Restructure shares of
stock, other securities, cash or property shall be issuable or
deliverable in exchange for Stock, then the holder of an Award shall be
entitled to purchase or receive (in lieu of the Total Shares that the
Participant would otherwise be entitled to purchase or receive), as
appropriate for the form of Award, the number of shares of stock, other
securities, cash or property to which that number of Total Shares would
have been entitled in connection with such Restructure (and, for Options,
at an aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on
the exercise of the Option immediately before the consummation of the
Restructure). Nothing in this Section 6.1(b) shall impose on a
Participant the obligation to exercise any Award immediately before or
upon the Change of Control, nor shall the Participant forfeit the right
to exercise the Award during the remainder of the original term of the
Award because of a Change of Control or because the Participant's
employment is terminated for any reason following a Change of Control.
The Company shall attempt to keep all Participants informed with respect
to any Change of Control or Restructure or of any potential Change of
Control or Restructure to the same extent that the Company's stockholders
are informed by the Company of any such event or potential event."
(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
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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 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
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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:
(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
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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 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.
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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:
(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.
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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 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.
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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.
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.
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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:
(% x R divided by 4) divided by 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.
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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.
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.
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
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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 Amended and Restated Employee and Director Incentive
Stock Plan, was approved by the holders of the Company's voting stock. On
February 28, 1998, 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 on May 16, 1996 the holders of the Company's
voting stock approved such amendment. On January 20, 1998, the Board
approved a further amendment to the Plan. On May 15, 1998, the Board
approved this Second Amended and Restated Employee and Director Stock Plan.
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