Public Storage 1996 Annual Report Download - page 26

Notes to Consolidated Financial Statements (continued)
P UBLIC S TORAGE , I NC . 1996 A NNUAL R EPORT
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dividend period will not be less than 6.75% per annum nor greater than 10.75% per annum. The dividend rate with respect to the first quarter of
1997 will be equal to 7.26% per annum.
The Mandatory Convertible Participating Preferred Stock was issued in connection with the acquisition of all of the limited partnership interests
in a real estate limited partnership in 1995. Dividends with respect to the Mandatory Convertible Participating Preferred Stock varied depending
on operating results of the underlying real estate facilities of the partnership. During June 1996, the Mandatory Convertible Participating Preferred
Stock was exchanged for common stock of the Company.
12. S TOCK O PTIONS
The Company has a 1990 Stock Option Plan (which was adopted by the Board of Directors in 1990 and approved by the shareholders in 1991) (the
“1990 Plan”) which provides for the grant of non-qualified stock options. The Company has a 1994 Stock Option Plan (which was adopted by the
Board of Directors and approved by the shareholders in 1994) (the “1994 Plan”) and a 1996 Stock Option and Incentive Plan (which was adopted
by the Board of Directors and approved by the shareholders in 1996 (the “1996 Plan”), each of which provides for the grant of non-qualified options
and incentive stock options. (The 1990 Plan, the 1994 Plan and the 1996 Plan are collectively referred to as the “Plans”). Under the Plans, the
Company has granted non-qualified options to certain directors, officers and key employees and service providers to purchase shares of the
Company’s common stock at a price equal to the fair market value of the common stock at the date of grant. Generally, options under the Plans vest
over a three-year period from the date of grant at the rate of one-third per year and expire (i) under the 1990 Plan, five years after the date they
became exercisable and (ii) under the 1994 Plan and 1996 Plan, ten years after the date of grant. The 1996 Plan also provides for the grant of
restricted stock to officers, key employees and service providers on terms determined by the Audit Committee of the Board of Directors. No shares
of restricted stock have been granted.
Information with respect to the Plans during 1996 and 1995 is as follows:
1996 1995
Number Average Number Average
of Price per of Price per
Options Share Options Share
Options outstanding January 1 693,667 $13.61 512,834 $11.88
Granted 1,183,000 21.39 227,500 16.48
Exercised (100,663) 10.29 (46,667) 8.63
Canceled (23,835) 16.02 – –
Options outstanding December 31 1,752,169 $19.02 693,667 $13.61
$8.125 $8.125
Option price range at December 31 to 25.875 to $18.00
Options exercisable at December 31 367,947 $13.05 302,485 $10.89
Options available for grant at December 31 3,497,835 807,000
In 1996, the Company adopted the disclosure requirement provision of SFAS 123 in accounting for stock-based compensation issued to employees.
As of December 31, 1996 and 1995, there were 1,391,500 and 208,500 options outstanding, respectively, that were subject to SFAS 123 disclosure
requirements. The fair value of these options was estimated utilizing prescribed valuation models and assumptions as of each respective grant date.
Based on the results of such estimates, management determined that there was no material effect on net income or earnings per share for the years
ended December 31, 1996 and 1995. The remaining contractual lives were 8.6 and 7.2 years, respectively, at December 31, 1996 and 1995.
13. P ROPOSED M ERGERS
In December 1996, Public Storage Properties XIV, Inc. (“Properties 14”) and Public Storage Properties XV, Inc. (“Properties 15”) each agreed, sub-
ject to certain conditions, to merge with and into the Company. Properties 14 and Properties 15 are affiliated publicly traded equity REITs. Each of
the mergers is conditioned on approval by the respective shareholders of Properties 14 and Properties 15. However, the mergers are not conditioned
on approval of each other. The Company expects that if approved by the shareholders the mergers would be completed in April 1997.
The estimated value of the Properties 14 and Properties 15 merger is approximately $63.8 million and $58.5 million, respectively. Properties 14
and Properties 15 own 14 properties (912,000 square feet) and 19 properties (1,087,000 square feet), respectively. The Company currently owns
approximately 33% and 35% of the economic interest in Properties 14 and Properties 15, respectively.