SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
Filed by the Registrant [X}
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
MISSION WEST PROPERTIES, INC.
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
MISSION WEST PROPERTIES, INC.
10050 Bandley Drive
Cupertino, California 95014
Dear Stockholder,
You are cordially invited to attend the 2007 Annual Meeting of Stockholders
of MISSION WEST PROPERTIES, INC. (the "Company") to be held on May 17, 2007 at
10:00 a.m., Pacific time, at the Company's offices at 10050 Bandley Drive,
Cupertino, California 95014.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of the 2007 Annual Meeting of Stockholders and
Proxy Statement. Also included is a Proxy Card and postage paid envelope.
Whether you plan to attend the Annual Meeting or not, it is important that
you promptly complete, sign, date and return the enclosed Proxy Card, or vote in
accordance with the instructions set forth on the Proxy Card. This will ensure
your proper representation at the Annual Meeting.
Sincerely,
/s/ Carl E. Berg
------------------------------------
Carl E. Berg
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE REMEMBER TO PROMPTLY RETURN YOUR PROXY.
MISSION WEST PROPERTIES, INC.
10050 Bandley Drive
Cupertino, CA 95014
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2007
To the Stockholders of Mission West Properties, Inc.:
NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders (the
"Annual Meeting") of Mission West Properties, Inc., a Maryland corporation (the
"Company"), will be held at the Company's offices at 10050 Bandley Drive,
Cupertino, California 95014 on May 17, 2007 at 10:00 a.m., Pacific time, for the
following purposes:
1. To elect five members of the Board of Directors to hold office until
the next Annual Meeting of Stockholders or until their respective
successors have been elected and qualified. The nominees are Carl E.
Berg, John C. Bolger, William A. Hasler, Lawrence B. Helzel, and
Raymond V. Marino.
2. To ratify the appointment of the accounting firm of Burr, Pilger &
Mayer, LLP as the Company's independent registered public accounting
firm for the calendar year ending December 31, 2007.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment of the Annual Meeting.
The Board of Directors has fixed the close of business on March 23, 2007 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and at any adjournments thereof. A list of
such stockholders will be available for inspection at the principal office of
the Company.
All stockholders are cordially invited to attend the Annual Meeting.
However, to ensure your representation, you are requested to complete, sign,
date and return the enclosed proxy as soon as possible in accordance with the
instructions on the Proxy Card. A return addressed envelope is enclosed for your
convenience. Any stockholder attending the Annual Meeting may vote in person
even though the stockholder has returned a proxy previously. Your proxy is
revocable in accordance with the procedures set forth in the Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Raymond V. Marino
--------------------------------------
Raymond V. Marino
Corporate Secretary
Cupertino, California
April 19, 2007
MISSION WEST PROPERTIES, INC.
10050 Bandley Drive
Cupertino, California 95014
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Mission West Properties, Inc., a Maryland corporation
(the "Company"), of proxies, in the accompanying form, to be used at the 2007
Annual Meeting of Stockholders to be held at 10050 Bandley Drive, Cupertino,
California 95014 on May 17, 2007, at 10:00 a.m., Pacific time, and any
postponement or adjournments thereof (the "Annual Meeting").
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being mailed on or about April 26, 2007 to all stockholders of
the Company's common stock entitled to notice of and to vote at the Annual
Meeting.
SOLICITATION AND VOTING PROCEDURES
Shares represented by valid proxies in the form enclosed, received in time
for use at the Annual Meeting and not revoked at or before the Annual Meeting,
will be voted at the Annual Meeting, as discussed below. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of the
Company's common stock, par value $.001 per share ("common stock"), is necessary
to constitute a quorum at the Annual Meeting. Holders of common stock are
entitled to one vote per share on all matters.
Assuming the presence of a quorum, for Proposal No. 1 the affirmative vote
of a plurality of the votes cast at the Annual Meeting and entitled to vote is
required to elect the directors, and the five nominees who receive the most
votes will be elected to the Company's Board of Directors. An affirmative vote
of the holders of a majority of the votes cast affirmatively or negatively at
the Annual Meeting also is necessary for approval of Proposal No. 2 to ratify
the appointment of the Company's independent registered public accounting firm
for the fiscal year 2007 audit. All proxies will be voted as specified on the
proxy cards submitted by stockholders if the proxy is properly executed and is
received by the Company before the close of voting at the Annual Meeting or any
adjournment or postponement thereof. If no choice has been specified, a properly
executed and timely proxy will be voted for the Board's five nominees and for
Proposal No. 2, which are described in detail elsewhere in this Proxy Statement.
The Company will tabulate stockholder votes, and an officer of the Company
will tabulate votes cast in person at the Annual Meeting. With respect to the
tabulation of proxies for purposes of constituting a quorum, abstentions and
broker non-votes are treated as present. Abstentions will not be counted as
votes cast at the Annual Meeting with respect to any proposal and will have no
effect on the result of the vote. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner (i.e., in "street name") does not have
discretionary voting power with respect to a proposal and has not received
instructions from the beneficial owner. If the nominee broker properly and
timely requests instructions from the beneficial owner and does not receive
them, under applicable rules the broker has discretionary authority to vote on
certain routine matters such as the election of directors in Proposal No. 1 and
the ratification of the Company's independent registered public accounting firm
in Proposal No. 2.
The close of business on March 23, 2007 has been fixed as the record date
for determining the stockholders entitled to receive notice of and to vote at
the Annual Meeting. As of March 23, 2007, the Company had 19,625,587 shares of
common stock outstanding and entitled to vote at the Annual Meeting. Holders of
common stock outstanding as of the close of business on the record date will be
entitled to one vote for each share of common stock held.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of common stock for their expenses in forwarding
proxy material to such beneficial owners. Solicitation of proxies by mail may be
supplemented by telephone, telegram, telex and other electronic means, and
personal solicitation by the directors, officers or employees of the Company. No
additional compensation will be paid to directors, officers or employees for
such solicitation.
The Company's Annual Report on Form 10-K for the year ended December 31,
2006 is being mailed to the stockholders with this Proxy Statement.
- 1 -
VOTING ELECTRONICALLY OR BY TELEPHONE
A number of brokerage firms and banks are participating in a program
provided through ADP Investor Communication Services that offers telephone and
Internet voting options. If your shares are held in an account at a brokerage
firm or bank participating in the ADP program, you may authorize and direct
another person to act as a proxy or to appoint a proxy to vote your shares by
calling the telephone number which appears on your voting form or though the
Internet in accordance with instructions set forth on the voting form at
www.proxyvote.com. Any such authorization of a proxy to vote your shares through
the ADP program must be received by midnight on May 16, 2007.
The Internet and telephone voting authorization procedures are designed to
authenticate stockholders' identities, to allow stockholders to communicate
their authorization of a proxy to vote their shares and to confirm that their
instructions have been properly recorded. The Company has been advised by its
counsel that the procedures that have been put in place are consistent with the
requirements of applicable law. Stockholders communicating proxy authorization
via the Internet through ADP Investor Communication Services should understand
that there may be costs associated with electronic access, such as usage charges
from Internet access providers and telephone companies that would be borne by
the stockholder.
REVOCABILITY OF PROXIES
You can revoke your proxy at any time before the voting at the Annual
Meeting by sending a properly signed written notice of your revocation to the
Secretary of the Company, by submitting another proxy that is properly signed
and bears a later date or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not itself revoke an earlier submitted
proxy. You should direct any written notices of revocation, requests for
additional copies of the Annual Report and Proxy Statement, and related
correspondence to: Mission West Properties, Inc., 10050 Bandley Drive,
Cupertino, California 95014, Attention: Corporate Secretary. Requests for
additional copies of the Annual Report and Proxy Statement may also be made by
calling the Company at (408) 725-0700.
- 2 -
DIRECTORS AND EXECUTIVE OFFICERS
The names of the Company's executive officers and directors as of March 31,
2007 and certain information about them are set forth below:
Name Age Position with the Company
---- --- -------------------------
Carl E. Berg 69 Chairman of the Board, Chief Executive
Officer and Director
Raymond V. Marino 48 President, Chief Operating Officer and
Director
Wayne N. Pham 37 Vice President of Finance and Controller
John C. Bolger (1) 60 Director
William A. Hasler (1) 65 Director
Lawrence B. Helzel (1) 58 Director
(1) Member of the Audit Committee, the Compensation Committee and the
Independent Directors Committee.
The following is a biographical summary of the business experience of the
Company's executive officers and directors:
CARL E. BERG. Mr. Berg has served as Chairman of the Board and Chief
Executive Officer of the Company since September 1997. Since 1979, Mr. Berg has
been a general partner of Berg & Berg Developers and has been a director and
officer of Berg & Berg Enterprises, Inc. since its inception. Mr. Berg is a
private investor and also serves as a director of Monolithic System Technology,
Inc., Focus Enhancements, Inc., and Valence Technology, Inc.
RAYMOND V. MARINO. Mr. Marino joined the Company in June 2001 as President
and Chief Operating Officer and was appointed by the Board of Directors to fill
a newly created board seat in July 2001. From November 1996 to August 2000, he
was President, Chief Executive Officer and a member of the board of directors of
Pacific Gateway Properties, Inc.
WAYNE N. PHAM. Mr. Pham joined the Company in March 2000 as Controller and
was promoted to Vice President of Finance in October 2000. Mr. Pham was formerly
the Corporate Accountant and Accounting Manager at AvalonBay Communities, Inc.,
a multi-family apartment REIT.
JOHN C. BOLGER. Mr. Bolger became a director of the Company in March 1998.
Mr. Bolger is a private investor and certified public accountant. He is a
retired Vice President of Finance and Administration of Cisco Systems, Inc., a
manufacturer of computer networking systems, a position that he held from May
1989 to December 1992. Mr. Bolger also serves as a director of Integrated Device
Technology, Inc., Wind River Systems, Inc., Cogent Systems, Inc. and Mattson
Technology, Inc.
WILLIAM A. HASLER. Mr. Hasler became a director of the Company in December
1998. Mr. Hasler previously served as co-chief executive officer and Vice
Chairman of Aphton Corporation, an international biotechnology firm. For seven
years, Mr. Hasler was Dean of the Haas School of Business at the University of
California, Berkeley, and is a former vice chairman and director of KPMG LLP. In
1998, he retired as Dean Emeritus. Mr. Hasler is the Chairman of the Board of
Directors of Solectron Corporation and serves as a director of Technical Olympic
USA, Inc., Ditech Communications Corporation, Stratex Networks, Inc. and
Genitope Corporation. He is a trustee of the Schwab Funds.
LAWRENCE B. HELZEL. Mr. Helzel became a director of the Company in December
1998. Mr. Helzel is a private investor and a general partner of Helzel Kirshman,
L.P., a private investment partnership, a position which he has held for more
than five years.
CORPORATE GOVERNANCE
DIRECTOR INDEPENDENCE
The Company's Board of Directors has determined that Messrs. Bolger, Hasler
and Helzel are "independent," as defined under Section 121A of the AMEX Company
Guide. No director qualifies as independent unless the board of directors
determines that the director has no direct or indirect material relationship
with the Company. On an annual basis, each director and executive officer is
obligated to complete a Director and Officer Questionnaire which requires
disclosure of any transactions with the Company in which the director or
executive officer, or any member of his or her immediate family, have a direct
or indirect material interest. The Company also independently reviews the
relationship of the Company to any entity for whom one of our directors is an
employee or a member of the board of directors. The Company's Board of Directors
has determined that all directors who served during its 2006 fiscal year and all
of its director nominees, other than Messrs. Berg and Marino, are independent in
accordance with the SEC and AMEX Company Guide. The Board of Directors has
concluded that there are no business relationships that are material or that
would interfere with the exercise of independent judgment by any of these
directors in their service on the Board of Directors or its committees.
- 3 -
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a code of business conduct and ethics that applies
to all of its directors, officers and employees. The code of ethics is available
on the Company's website at www.missionwest.com. If the Company makes any
substantive amendments to the code of ethics or grants any waiver, including any
implicit waiver, from a provision of the code to the Company's Chief Executive
Officer, President and Chief Operating Officer, Vice President of Finance or
Controller, or persons performing similar functions, where such amendment or
waiver is required to be disclosed under applicable SEC rules, the Company
intends to disclose the nature of such amendment or waiver on its website.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders who desire to communicate with the Board of Directors, or to a
specific director, may do so by delivering the communication addressed to either
the Board of Directors or any director, c/o Mission West Properties, Inc., 10050
Bandley Drive, Cupertino, California 95014. These communications will be
delivered to the Board of Directors, or any individual director, as specified.
ANNUAL MEETING ATTENDANCE
The Board of Directors encourages each director to attend the Company's annual
meetings of stockholders, but attendance is not required. Mr. Berg and Mr.
Marino attended our 2006 annual meeting of stockholders.
NUMBER, TERM AND ELECTION OF DIRECTORS
The Company's Bylaws currently provide for a Board of Directors consisting
of five directors. Each director serves for a term of one year or until the next
annual meeting at which directors are elected and the director's successor is
elected and qualified.
DESIGNATION OF CERTAIN DIRECTORS
Under the Company's Articles of Amendment and Restatement, or its Charter,
Bylaws and contracts with the "Berg Group," which consists of Carl E. Berg,
Clyde J. Berg, the members of their respective immediate families, and
affiliated entities owning limited partnership interests, or O.P. Units, in any
of the Company's four operating partnerships, the Berg Group has special rights
with respect to meetings of the Board of Directors. A quorum for any meeting
requires the presence of Carl E. Berg, or in the event of his death, disability
or other event which results in his ceasing to be director, the presence of
someone who Mr. Berg has designated to replace him ("Berg Designee"). With
written consent from Mr. Berg or the Berg Designee, meetings of the Board of
Directors may be held without the presence of either of them. Mr. Berg is
obligated to submit a written statement identifying the Berg Designee to the
Company from time to time and may amend the statement at his sole discretion. In
addition, a majority of the Board of Directors, which must include Mr. Berg or
the Berg Designee, is required for approval of any amendment to the Charter or
Bylaws and any merger, consolidation or sale of all or substantially all of the
Company's assets or those of the Operating Partnerships. These special
provisions will remain in effect as long as the Berg Group collectively owns at
least 15% of the Company's voting stock computed on a diluted, or "Fully
Diluted," basis taking into account all voting stock issuable upon the exercise
of all outstanding warrants, options, convertible securities and other rights to
acquire voting stock of the Company, and all O.P. Units exchangeable or
redeemable for common stock or other voting stock of ours without regard to any
percentage ownership limit set forth in the Charter or Bylaws, or by agreement.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Company's Board of Directors has standing Independent Directors, Audit
and Compensation Committees. All three of these committees have the same three
members: John C. Bolger, William A. Hasler and Lawrence B. Helzel.
The Independent Directors Committee is responsible for reviewing and acting
upon proposed transactions between the Company and members of the Berg Group
under the terms of certain agreements between the Company and such Berg Group
members. See "Transactions with Related Persons" below. Generally, the meetings
of this committee occur at the same time as the Audit Committee meetings, unless
a special meeting is required.
The Audit Committee has been established in accordance with section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Audit Committee reviews, acts on and reports to the Board of
Directors with respect to various auditing and accounting matters. The Audit
Committee has the authority and responsibility to select, evaluate, and where
appropriate, replace the Company's independent registered public accounting
firm. The Board of Directors has determined that Mr. Bolger,
- 4 -
the Chairman of the Audit Committee, and Mr. Hasler each as an "audit committee
financial expert" in accordance with applicable SEC rules based upon their prior
business experience as described above under "Directors and Executive Officers."
The Audit Committee also approves the scope of the services provided and reviews
the annual audit fees to be paid to the Company's independent registered public
accounting firm, the performance of that firm, the audit report of the Company's
consolidated financial statements following completion of the audit and the
accounting practices of the Company with respect to internal accounting and
financial controls.
The Board of Directors has delegated to the Compensation Committee
responsibility for reviewing, recommending and approving its compensation
policies and benefits programs, including the compensation of Carl E. Berg,
Chairman of the Board and Chief Executive Officer, and the Company's other two
executive officers. The Compensation Committee also has the principal
responsibility for the administration of the Company's 2004 Equity Incentive
Plan (the "2004 Plan"), including approving stock option grants and awards to
executive officers.
During the year ended December 31, 2006, there were four meetings of the
Board of Directors and four meetings of the Audit Committee and Independent
Directors Committee. All five directors attended 100% of the Board of Directors
meetings. All five directors attended 100% of the meetings of the committees of
the Board of Directors of which he is a member. There were no meetings of the
Compensation Committee in 2006. The Board of Directors and Audit Committee also
acted by unanimous written consent periodically during the year 2006.
BOARD NOMINATIONS AND OTHER STOCKHOLDER PROPOSALS
The Board of Directors does not believe that a separate nominating
committee is necessary because all of the independent directors currently serve
on the Independent Directors, Audit and Compensation Committees, and any
additional committee of independent directors would consist of the same
individuals. The Berg Group has the right to designate two nominees to the Board
of Directors under the Company's Charter and Bylaws. Currently, Mr. Berg is the
only nominee proposed by the Berg Group. The three current independent
directors, Messrs. Bolger, Hasler and Helzel have been designated by the Board
to review the qualifications of all other candidates for director and to give
their recommendations to the entire Board of Directors, which reviews and
approves nominations for election to the Board of Directors at the next annual
meeting of stockholders. The independent directors will give director candidates
proposed by stockholders the same consideration as other proposed candidates.
When there is a need to identify or evaluate a prospective nominee, the
Independent Director Committee is authorized to undertake a careful review
process which may involve, among other things, candidate interviews, inquiries
of the person or persons recommending the candidate, engagement of an outside
firm to gather additional information and/or discussions with management and
incumbent directors. In evaluating candidates, including current directors
eligible for re-election, the Independent Director Committee considers various
factors that it considers necessary or appropriate, including the size and
composition of the Board of Directors and its committees, the needs of the Board
of Directors and its committees, the candidate's expertise and experience, the
candidate's independence and potential conflicts of interest, the candidate's
character and integrity, and the candidate's existing commitments. Upon
completion of its review and evaluation, the Independent Director Committee
makes its recommendations to the Board of Directors regarding the candidate(s).
After considering the Independent Director Committee's recommendations, the
Board of Directors determines and approves which candidate(s) shall be nominated
for election to the Board of Directors, subject to stockholder approval.
The Independent Directors Committee will consider candidates for nomination
as director who are recommended by the Company's stockholders and will not
evaluate such candidates differently than other nominations for director. The
submission deadline for next year's annual meeting is set forth under
"Stockholder Proposals for 2008 Annual Meeting" elsewhere in this proxy
statement. Stockholders may suggest qualified candidates for director by giving
timely notice in writing to the committee at the following address: Mission West
Properties, Inc., 10050 Bandley Drive, Cupertino, CA 95014, Attention: Corporate
Secretary, and must include the candidate's name, home and business contact
information, detailed biographical data and qualifications and an explanation of
the reasons why the stockholder believes this candidate is qualified for service
on the Company's Board of Directors. The stockholder must also provide the
stockholder's name and address as they appear on the Company's books, the number
of shares of Common Stock owned of record and beneficially by the stockholder,
and such other information about the candidate that would be required by the SEC
rules to be included in a proxy statement. In addition, the stockholder must
include the consent of the candidate and describe any arrangements or
undertakings between the stockholder and the candidate regarding the nomination.
The Corporate Secretary will then forward this information to the Independent
Directors Committee.
To date, the Company has not rejected or received any recommendations for
any candidate from any stockholder or group of stockholders owning more than
five percent of our common stock.
- 5 -
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in December
1998 and currently is comprised of Messrs. Bolger, Hasler and Helzel. None of
these individuals were at any time during 2006, or at any other time, an officer
or employee of the Company. No executive officer of the Company serves as a
member of the compensation committee or board of directors of any other entity
that has one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
COMPENSATION OF DIRECTORS
The Company pays each director who is not an officer or employee of the
Company a fee for serving as director. The annual fee is equal to $25,000 plus
$1,500 for attendance (in person or by telephone) at each meeting of the Board
of Directors, and $500 for attendance of each separate committee meeting.
Officers who are also directors do not receive any directors' fees.
Each non-employee member of the Board of Directors who became or becomes a
member of the Board of Directors after November 10, 1997, automatically receives
a grant of an option to purchase 50,000 shares of common stock at an exercise
price equal to 100% of the fair market value of the common stock at the date of
grant of such option upon joining the Board of Directors. Such options become
exercisable cumulatively with respect to 1/48th of the underlying shares on the
first day of each month following the date of grant. Generally, the options must
be exercised while the optionee remains a director. All of the current directors
received such an initial option grant, which has fully vested.
Under the 2004 Plan, the Board of Directors may authorize annual option
grants or awards to non-employee directors at the Board of Director's discretion
as long as the number of shares or equivalent number of underlying shares of
common stock, in the case of certain awards, does not exceed 50,000 per year.
Such option grants or awards become exercisable cumulatively with respect to
1/48th of the underlying shares on the first day of each month following the
date of grant. Generally, stock options must be exercised while the optionee
remains a director. In addition, the full Board of Directors, acting through a
disinterested majority, may authorize additional shares to a director who
performs significant additional tasks, such as chairing a Board of Directors
committee, or otherwise provides extraordinary service to the Board of
Directors. In the event of certain acquisitions representing the transfer of
more than 50% of the voting power of the Company's stock, all options and awards
to non-employee directors will fully vest under the 2004 Plan.
Although the Company considers option grants under the 2004 Plan to be an
adequate form of long-term compensation for directors, to provide regular
periodic compensation to the Company's independent directors, in 2005, each of
the Company's three non-employee directors was granted an award of 45,000
dividend equivalent rights ("DERs"). Each DER represents the right to receive
payment of the dividend declared with respect to one share of common stock at
the time the Company pays the dividend and continues in effect as to each
recipient as long as he continues to serve on the Board of Directors.
The following table sets forth the compensation for each independent
director during the year ended December 31, 2006.
Director Compensation Table
------------------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
and
Nonqualified
Fees Earned Non-Equity Deferred
or Paid in Incentive Plan Compensation All Other
Name Cash Stock Awards Option Awards (1) Compensation Earnings Compensation(2) Total
------------------- ------------- --------------- ------------------ ---------------- --------------- --------------- --------------
John C. Bolger $32,000 - $13,947 - - $28,800 $74,747
William A. Hasler 32,000 - 13,947 - - 28,800 74,747
Lawrence B. Helzel 32,000 - 13,947 - - 28,800 74,747
(1) Represents the amount of compensation cost related to option grants to
directors, recognized by the Company for financial statement reporting
purposes for the fiscal year ended December 31, 2006 calculated using
the Black-Scholes option pricing method under FAS 123(R), but
excluding any estimate of future forfeiture. This cost relates to
options to purchase shares of common stock that were granted on April
27, 2005. For further information on the Black-Scholes calculation,
please refer to Item 8, "Financial Statements and Supplementary Data -
Note 10" in the Company's Annual Report on Form 10-K for the year
ended December 31, 2006.
(2) Represents the amount of dividends paid and accrued in 2006 on DER
awards made in 2005, as discussed above.
No long-term equity incentive awards were granted to any of the Company's
independent directors in 2006. On January 12, 2007, however, each of the
Company's three independent directors was granted options to purchase 45,000
shares of common stock at an exercise price of $12.09 per share, which was the
closing price of a share of common stock on the AMEX on the date of grant. These
options were granted for their 2006 performance and their long-term service as
members of the Board of Directors.
- 6 -
COMPENSATION DISCUSSION AND ANALYSIS
The Company's Compensation Discussion and Analysis explains the material
elements of the Company's compensation arrangements for its three executive
officers, Carl E. Berg, Raymond V. Marino and Wayne N. Pham (the "Named
Executive Officers"), for the fiscal year ended December 31, 2006.
The Company's current executive compensation programs are determined and
approved by the Compensation Committee of the Board of Directors. None of the
Named Executive Officers is a member of the Compensation Committee. Mr. Berg,
the Company's Chief Executive Officer, recommends to the Compensation Committee
the base salary, annual bonus and long-term compensation levels for the other
Named Executive Officers. None of the other Named Executive Officers had any
role in determining the compensation of any Named Executive Officers in 2006.
Although Mr. Berg is a Named Executive Officer, in light of the Berg Group's
substantial financial interest in the Company, Mr. Berg never has received, and
the Compensation Committee does not expect to pay him, incentive compensation of
any kind.
EXECUTIVE COMPENSATION PROGRAM OVERVIEW AND OBJECTIVES
In connection with the Compensation Committee's responsibility of
determining the compensation for the Named Executive Officers, the Compensation
Committee seeks to:
- Attract, reward and retain highly qualified and motivated executives; and
- Ensure executive compensation is aligned with the Company's corporate
strategies, business objectives and the long-term interests of the
Company's stockholders;
EXECUTIVE COMPENSATION PROGRAM ELEMENTS
The material elements of the Company's current executive compensation
program for the Named Executive Officers, other than Mr. Berg, include the
following:
- a base salary,
- an annual cash bonus opportunity (at the discretion of the Compensation
Committee),
- long-term equity incentive awards,
- DERs and
- 401(k) retirement benefits.
The Company believes that each executive compensation element helps it to
achieve one or more of the Company's compensation objectives.
Compensation decisions are approved by the Compensation Committee. The
Company does not have a set date or period during the fiscal year as to when
compensation decisions are made. The evaluations of the Named Executive
Officers, not including Mr. Berg, are solely determined by the Compensation
Committee at the recommendation of the Chief Executive Officer. Accordingly, the
Compensation Committee makes all compensation decisions when necessary and
appropriate during the year.
BASE SALARIES
Each Named Executive Officer receives a base salary. Base salaries are
intended to provide the executive with a base level of annual income that is not
contingent on the Company's performance. Mr. Berg's base salary was set in 1998
not long after the Berg Group acquired control of the Company and has not been
modified since then. Initial base salaries paid to the Company's other executive
officers are intended to recognize each individual's scope of responsibilities,
past accomplishments, fundamental skills and experience within the industry. The
Compensation Committee may give different weight to each of these factors for
each executive officer, as it deems appropriate. None of the Company's Named
Executive Officers has a written employment agreement. The Company's policy is
to pay the Named Executive Officers' base salaries in cash. The base salaries
are reviewed annually by the Compensation Committee and may be adjusted from
time to time, at its discretion, to recognize increases in responsibility,
outstanding individual performance and promotions.
There were no increases to base salaries for any of the Named Executive
Officers for 2006. In January 2007, however, the Compensation Committee approved
increases in base salaries for the 2007 fiscal year to $250,000 for Mr. Marino
and $138,000 for Mr. Pham.
- 7 -
ANNUAL CASH INCENTIVE
The Company did not have a cash incentive program in place for 2006. The
Compensation Committee may decide to grant bonuses in its discretion for
outstanding individual performance and contributions to the Company. For
example, in January 2007, the Compensation Committee approved a $75,000 cash
bonus to Mr. Marino in recognition of his accomplishments in 2006, which
included leasing several significant properties and renewing several leases that
were scheduled to expire during 2006. This bonus was paid in February 2007.
LONG-TERM EQUITY INCENTIVE AWARDS
The objectives of the Company's long-term incentive compensation program
are to:
- reward achievement over a multi-year period,
- align the interests of executives with those of stockholders by focusing
executives on the stockholder return performance of the Company, and
- provide a retention mechanism through multi-year vesting.
The 2004 Plan allows for long-term equity incentive awards to executives
and key employees of, and consultants and other service providers to, the
Company, its subsidiaries and advisors through grants of stock option rights and
other equity awards, including restricted stock, stock grants, restricted stock
units, performance units, other stock-based compensation, including O.P. Units
exchangeable for shares of common stock, and dividend equivalent rights.
Generally, awards are granted in the form of options to purchase shares of
common stock of the Company. The awards align the recipient's interest with the
interests of stockholders by providing him with an ownership interest in the
Company and a stake in the Company's success. The 2004 Plan is administered by
the Compensation Committee, which has the discretion to determine those
individuals or entities to whom awards will be granted, the number of shares
subject to such rights and awards and other terms and conditions of the grants.
Each stock option award has a vesting period that is tied to each employee's
continued service to the Company.
STOCK OPTION RIGHTS
The Compensation Committee determines and approves all stock option grants
and other equity awards to executive officers and has authorized the Company's
Chief Executive Officer to determine stock option grants and other equity awards
for all other employees, subject to the Compensation Committee's approval of
total share allocations from the 2004 Plan. The Company's policy has been to
grant options to purchase shares upon hiring an executive and periodically
thereafter as part of the annual performance reviews, presented to the
Compensation Committee by Mr. Berg. No options to purchase common stock have
ever been granted to Mr. Berg, or any member of the Berg Group, under any
compensation arrangement. In determining the initial size of stock option
grants, the Compensation Committee considers the executive position with and
responsibilities to the Company, potential for increased responsibility and
promotion over the option term. In making additional option grants pursuant to
performance reviews, the Compensation Committee bases its decision upon a
subjective evaluation of the executive officers' performance in meeting the
Company's corporate objectives. Generally, each stock option grant allows the
executive officer to purchase shares of the Company's common stock at a price
per share equal to the market value on the date of grant, but the Compensation
Committee has the power to grant options at a lower price if considered
appropriate under the circumstances.
Each stock option grant generally becomes exercisable, or vests, in
installments over time (typically over four to six years), or contingent upon
the executive's continued employment with the Company. The stock option grants
generally expire on the sixth anniversary of the grant date.
The Company has established a policy and procedure on stock option grants
that includes the following provisions governing the timing of such grants:
- The Compensation Committee determines and approves all stock option awards;
- The grant date of stock option awards is always the date of the approval of
the grants;
- Management has no control over selecting the date;
- The exercise price of the stock options is equal to fair market value,
which under the 2004 Plan is the closing price of a share of common stock
on the date of grant on the American Stock Exchange, or AMEX; and
- Stock option awards are promptly reported on Form 4 with the Securities and
Exchange Commission for all Named Executive Officers.
The Company grants options infrequently at the Compensation Committee's
discretion. The Company does not have a policy providing for the coordination of
option grants with the release of material non-public information.
- 8 -
No long-term equity incentive awards were granted to any Named Executive
Officers or other employee in 2006. On January 12, 2007, however, the
Compensation Committee approved and granted options to purchase 250,000 and
100,000 shares of common stock to Mr. Marino and Mr. Pham, respectively, at an
exercise price of $12.09 per share, which was the closing price of a share of
common stock on the AMEX on the date of grant. These options were approved by
the Compensation Committee, with respect to their 2006 individual performance.
DIVIDEND EQUIVALENT RIGHTS
In April 2005, the Compensation Committee approved awards of 80,000 DERs to
Mr. Marino and 20,000 DERs to Mr. Pham under the 2004 Plan. Each such DER
represents the current right to receive the dividend paid on one share of the
Company's common stock when paid by the Company, for as long as the recipient
remains employed by the Company. The DERs were awarded to enable these
executives to participate in distributions to stockholders without having to
exercise their stock options, which may not have significant value in the short
run.
The dividend rate declared for each quarter in 2006 was $0.16 per share of
common stock, which is equivalent to $0.64 per share of common stock for the
year. Consequently, in 2006, the Company paid $51,200 and $12,800 to Messrs.
Marino and Pham, respectively, with respect to their DERs.
401(K) RETIREMENT BENEFITS
The Company provides retirement benefits to all of its Named Executive
Officers under the terms of its tax-qualified 401(k) defined contribution
retirement plan. Each year, the Company makes an automatic matching contribution
on behalf of each participant equal to 15% of the participant's compensation,
regardless of whether the participant contributes to the plan. The Named
Executive Officers participate in the plan on substantially the same terms as
the Company's other participating employees.
For 2006, the Company made 401(k) plan contributions in the amounts of
$22,500, $30,000 and $16,875 for Messrs. Berg, Marino and Pham, respectively.
TAX CONSIDERATIONS
The Compensation Committee endeavors to award compensation that will be
deductible for income tax purposes. Section 162(m) of the Internal Revenue Code
generally disallows a tax deduction to publicly-held companies for compensation
paid to "covered" executive officers, to the extent that compensation paid to
such an officer exceeds $1 million during the taxable year. None of the
compensation paid to our covered executive officers for the year ended December
31, 2006 that would be taken into account in determining a Section 162(m)
limitation exceeded the $1 million limit. The Company's 2004 Plan and awards to
executives under that plan have been structured so that any compensation deemed
paid to an executive officer in connection with the exercise of options with an
exercise price equal to the fair market value the shares on the grant date will
qualify as performance-based compensation that will not be subject to the $1
million limitation. The Compensation Committee does not expect to take any
action at this time to modify cash compensation payable to the executive
officers that would result in the application of Section 162(m).
- 9 -
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis included in this Proxy Statement. Based on
this review and discussion, the Compensation Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be included in this
Proxy Statement and in the Company's Annual Report on Form 10-K filed with the
SEC for the fiscal year ended December 31, 2006.
The Compensation Committee of the Board of Directors:
John C. Bolger, Chairman
William A. Hasler
Lawrence B. Helzel
- 10 -
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation received by the Company's
Named Executive Officers for the fiscal year ended December 31, 2006.
Change in
Pension
Value and
Nonqualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation All Other
Name and Principal Position Year Salary Bonus Awards Awards(1) Compensation Earnings Compensation(2) Total
----------------------------- ----- -------- ------- -------- ---------- ---------------- -------------- ---------------- ---------
Carl E. Berg 2006 $100,000 - - - - - $22,500 $122,500
Chairman and Chief
Executive Officer
Raymond V. Marino 2006 200,000 - - $93,151 - - 81,200 374,351
President and Chief
Operating Officer
Wayne N. Pham 2006 112,500 - - 30,993 - - 29,675 173,168
Vice President of Finance
and Controller
(1) Represents the amount of compensation cost related to option grants to the
Named Executive Officers recognized by the Company for financial statement
reporting purposes for the fiscal year ended December 31, 2006 calculated
using the Black-Scholes option pricing method under FAS 123(R), but
excluding any estimate of future forfeiture. This cost relates to option
awards granted on April 27, 2005. For further information on the
Black-Scholes calculation, please refer to Item 8, "Financial Statements
and Supplementary Data - Note 10" in the Company's Annual Report on Form
10-K for the year ended December 31, 2006.
(2) Represents matching contributions to the Company's defined contribution
retirement plan (401(k) Plan) and payments received from DERs, which
amounts are discussed above under "Compensation Discussion and Analysis."
GRANTS OF PLAN-BASED AWARDS FOR 2006
The Company did not grant any plan-based awards to the Named Executive
Officers or any other employees during the fiscal year ended December 31, 2006.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about outstanding stock options
held by the Named Executive Officers as of December 31, 2006.
Option Awards
-----------------------------------------------------------------------------------------------------------
Number of Securities Number of Securities
Underlying Unexercised Underlying Unexercised
Options (#) Options (#) Option Exercise
Named Executive Officer Exercisable Unexercisable Price ($)(1) Option Expiration Date
------------------------ -------------------------- -------------------------- -------------------------- --------------------------
Carl E. Berg - - - -
Raymond V. Marino 357,167 17,833 $11.33 (2) 4/23/2009
166,658 83,342 $10.00 (3) 4/26/2011
Wayne N. Pham 66,671 33,329 $10.00 (4) 4/26/2011
(1) The exercise price for each of the stock option grants was based on the
closing price of the Company's common stock on the AMEX on the date the
Compensation Committee approved the grant.
(2) Represents options to purchase 375,000 shares granted on April 24, 2001,
which vest and become exercisable as follows: approximately 8.33% of the
total number of shares granted six months after the date of grant and
approximately 1.39% of the shares each month thereafter for 66 months.
(3) Represents options to purchase 250,000 shares granted on April 27, 2005,
which vest and become exercisable as follows: approximately 11.11% of the
total number of shares on the date of grant and approximately 1.39% of the
shares each month thereafter for 32 months.
(4) Represents options to purchase 100,000 shares granted on April 27, 2005,
which vest and become exercisable as follows: approximately 11.11% of the
total number of shares on the date of grant and approximately 1.39% of the
shares each month thereafter for 32 months.
- 11 -
OPTION EXERCISES IN LAST FISCAL YEAR
The following table provides information regarding the number of shares
acquired and value realized on the exercise of option awards by the Named
Executive Officers during the year December 31, 2006.
Option Awards
--------------------------------
Number of
Shares Value
Acquired on Realized on
Named Executive Officer Exercise (#) Exercise ($)(1)
---------------------------- --------------- ----------------
Carl E. Berg -- --
Raymond V. Marino -- --
Wayne N. Pham 80,000 $267,396
(1) The amount is equal to the excess of the closing price of a share of common
stock on the AMEX on the date of exercise over the exercise price,
multiplied by the number of shares acquired on exercise.
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
The Company does not have any written employment agreements or any
arrangements or commitments with regard to the payment of compensation upon
termination of employment or a change in control of the Company with any of its
Named Executive Officers.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
The following table provides information as of December 31, 2006 regarding
equity compensation plans approved by the Company's security holders. The
Company does not have any equity compensation plans that have not been approved
by its security holders.
Number of Shares Number of Shares of Common
of Common Stock Remaining Available
Stock to be Issued Weighted-Average for Future
Upon Exercise of Exercise Price of Issuance Under Equity
Plan Category Outstanding Options Outstanding Options Compensation Plans
------------- ------------------- ------------------- ------------------
Equity Compensation plans approved by security holders 1,037,100 $10.48 3,553,089
Total 1,037,100 $10.48 3,553,089
- 12 -
SHARE OWNERSHIP
The following table sets forth certain information as of April 15, 2007,
concerning the ownership of common stock by (i) each stockholder of the Company
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each current member of the Board of
Directors of the Company, (iii) each Named Executive Officer and (iv) all
current directors and executive officers of the Company as a group.
The Company has relied on information supplied by its officers, directors
and certain stockholders and on information contained in filings with the SEC.
Percent of All
Shares of
Common Stock
(Assuming
Number of Shares Percent of Exchange of Percent of All
Name and Address (16) of Common Stock All Shares of Number of O.P. Holder's O.P. Shares of Common
Beneficially Owned(1) Common Stock Units Units)(2) Stock/O.P. Units(1)(2)
------------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS:
Carl E. Berg - * 44,703,561(3)(10) 68.62% 42.39%
Chairman of the Board, Chief Executive
Officer and Director
Raymond V. Marino 617,140(4) 3.02% - 3.02% *
President, Chief Operating Officer and Director
Wayne N. Pham 103,894(5) * - * *
Vice President of Finance and Controller
John C. Bolger, Director 40,000(6) * - * *
William A. Hasler, Director 54,000(7) * - * *
Lawrence B. Helzel, Director 224,500(8) 1.10% - 1.10% *
5% STOCKHOLDERS
Cohen & Steers Capital Management, Inc. 2,887,900(12) 14.12% - 14.12% 2.74%
757 Third Avenue
New York, NY 10017
Neuberger Berman, LLC 1,613,382(13) 7.89% - 7.89% 1.53%
Neuberger Berman, Inc.
605 Third Avenue
New York, NY 10158
Ingalls & Snyder, LLC 3,256,933(14) 15.93% - 15.93% 3.09%
61 Broadway
New York, NY 10006
Teachers Advisors, Inc. 1,306,600 6.39% - 6.39% 1.24%
730 Third Avenue
New York, NY 10017
Clyde J. Berg - * 43,478,470(9)(10) 68.02% 41.23%
Berg & Berg Enterprises, Inc. (10) - * 10,789,383 34.54% 10.23%
Thelmer G. Aalgaard - * 1,854,225 8.31% 1.76%
All Directors and Officers as a group (6 persons)1,039,534(11) 5.08% 44,703,561(3) 70.21% 43.38%
* Less than 1%.
- 13 -
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities and include
securities which such person has the right to acquire within 60 days of
April 15, 2007. Unless otherwise indicated, the persons or entities
identified in this table have sole voting and investment power with respect
to all shares shown as beneficially owned by them. Common stock percentage
ownership interest calculations are based on 19,640,087 shares outstanding
as of April 15, 2007 and exclude all shares of common stock issuable upon
the exercise of outstanding options other than the shares so issuable
within 60 days under options held by the named person. Common stock/O.P.
Units percentage ownership interest calculations are based on 104,649,786
shares of common stock and O.P. Units exchangeable for common stock as of
April 15, 2007.
(2) Assumes O.P. Units are exchanged for shares of common stock without regard
to (i) whether such O.P. Units may be exchanged for shares of common stock
within 60 days of April 15, 2007, and (ii) certain ownership limit
provisions set forth in the Company's Articles of Amendment and
Restatement, including the overall ownership limit of 20% applicable to all
members of the Berg Group by agreement with the Company.
(3) Includes O.P. Units in which Mr. Carl E. Berg has a pecuniary interest
because of his status as a limited partner in the operating partnerships.
Also includes an additional 10,789,383, 196,428 and 169,131 shares of
common stock held by or issuable on exchange of O.P. Units beneficially
owned by Berg & Berg Enterprises, Inc., Berg & Berg Enterprises, LLC and
West Coast Venture Capital, Inc., respectively. Mr. Berg disclaims
beneficial interest in any shares or O.P. Units deemed beneficially owned
by Kara Ann Berg, his adult daughter, and the 1981 Kara Ann Berg Trust.
(4) Includes 597,211 shares of common stock issuable on exercise of options.
Does not include 277,789 unvested shares of common stock issuable on
exercise of options that are not exercisable within 60 days.
(5) Includes 88,894 shares of common stock issuable on exercise of options.
Does not include 111,106 unvested shares of common stock issuable on
exercise of options that are not exercisable within 60 days.
(6) Includes 40,000 shares of common stock issuable on exercise of options.
Does not include 50,000 unvested shares of common stock issuable on
exercise of options that are not exercisable within 60 days.
(7) Includes 40,000 shares of common stock issuable on exercise of options.
Does not include 50,000 unvested shares of common stock issuable on
exercise of options that are not exercisable within 60 days.
(8) Includes 40,000 shares of common stock issuable on exercise of options.
Does not include 50,000 unvested shares of common stock issuable on
exercise of options that are not exercisable within 60 days.
(9) Includes O.P. Units in which Mr. Clyde J. Berg has a pecuniary interest
because of his status as a limited partner in the operating partnerships.
Also includes L.P. Units held by Mr. Berg as trustee of the 1981 Kara Ann
Berg Trust and an additional 10,789,383 shares of common stock held by or
issuable on exchange of O.P. Units beneficially owned by Berg & Berg
Enterprises, Inc. This does not include any shares deemed beneficially
owned by Sonya L. Berg and Sherri L. Berg, his adult daughters, as to which
he disclaims beneficial ownership.
(10) Carl E. Berg is an executive officer and director and Clyde J. Berg is a
director of Berg & Berg Enterprises, Inc. With members of their immediate
families, the Messrs. Berg beneficially owns, directly and indirectly, all
of the O.P. Units of Berg & Berg Enterprises, Inc. Amounts are reported
separately based on the Schedule 13G/A filed on behalf of certain members
of the Berg Group under common control reporting shared voting and
dispositive power for 77,392,648 O.P. Units representing the right to
acquire the same number of shares of common stock, subject to certain
conditions, including ownership limits.
(11) Current officers and directors include Carl E. Berg, Raymond V. Marino,
Wayne N. Pham, John C. Bolger, William A. Hasler, and Lawrence B. Helzel.
See Notes 3 through 8.
(12) Cohen & Steers Capital Management, Inc. is the beneficial owner on behalf
of other persons including unrelated account holders. Cohen & Steers
Capital Management, Inc. has sole voting power of 2,799,600 shares and sole
dispositive power for 2,887,900 shares. Amount based on the filing of
Schedule 13G filed on February 13, 2007.
(13) Neuberger Berman, LLC & Neuberger Berman, Inc. is the beneficial owner on
behalf of other persons. Neuberger Berman LLC and Neuberger Berman, Inc.
have sole voting power for 735,132 of the reported number of shares and
shared dispositive power for all of the reported number of shares. No other
person is known to have an interest in more than 5% of the common stock
reported. Amount based on the filing of Schedule 13G filed on February 13,
2007.
(14) Ingalls & Snyder, LLC is the beneficial owner on behalf of other persons,
including unrelated account holders. Ingalls & Snyder LLC has sole
dispositive power and no voting power for the reported number of shares. No
such person is known to have an interest in more than 5% of the common
stock reported. Amount based on the filing of Schedule 13G filed on
February 13, 2007.
(15) Teachers Advisors, Inc. is the beneficial owner on behalf of other persons.
TIAA-CREF Investment Management, LLC has sole voting and dispositive power
for 252,600 of the reported number of shares. Amount based on the filing of
Schedule 13G filed on February 14, 2007.
(16) Unless otherwise indicated, the address for each of the person listed is
c/o Mission West Properties, Inc. 10050 Bandley Drive, Cupertino, CA 95014.
- 14 -
CONTRACTUAL AND OTHER CONTROL ARRANGEMENTS
SPECIAL BOARD VOTING PROVISIONS. The Charter and Bylaws provide substantial
control rights for the Berg Group. These rights include a requirement that Mr.
Berg or his designee as director approve certain fundamental corporate actions,
including amendments to the Charter and Bylaws and any merger, consolidation or
sale of all or substantially all of the Company's assets. In addition, the
Bylaws provide that a quorum necessary to hold a valid meeting of the Board of
Directors must include Mr. Berg or his designee. The rights described in the two
preceding sentences apply only as long as the Berg Group members and their
affiliates, other than the Company and the Operating Partnerships, beneficially
own, in the aggregate, at least 15% of the outstanding shares of common stock on
a Fully Diluted basis. In addition, directors representing more than 75% of the
entire Board of Directors must approve other significant transactions, such as
incurring debt above certain amounts, acquiring assets and conducting business
other than through the Operating Partnerships.
BOARD OF DIRECTORS REPRESENTATION. The Berg Group members have the right to
designate two of the director nominees submitted by the Board of Directors to
stockholders for election, as long as the Berg Group members and their
affiliates, other than the Company and the Operating Partnerships, beneficially
own, in the aggregate, at least 15% of the Company's outstanding shares of
common stock on a Fully Diluted basis. If the Fully Diluted ownership of the
Berg Group members and their affiliates is less than 15% but is at least 10% of
the common stock, the Berg Group members have the right to designate one of the
director nominees submitted by the Board of Directors to stockholders for
election. Its right to designate director nominees affords the Berg Group
substantial control and influence over the management and direction of the
Company.
SUBSTANTIAL OWNERSHIP INTEREST. The Berg Group currently owns O.P. Units
representing approximately 74.0% of the equity interests in the operating
partnerships. The O.P. Units may be converted into shares of common stock,
subject to limitations set forth in the Charter (including an overall 20%
ownership limitation for the Berg Group), and other agreements with the Berg
Group. Upon conversion these shares would represent voting control of the
Company. The Berg Group's ability to exchange its O.P. Units for common stock
permits it to exert substantial influence over the management and direction of
the Company.
LIMITED PARTNER APPROVAL RIGHTS. Mr. Berg and other limited partners of the
Operating Partnerships, including other members of the Berg Group, may restrict
the Company's operations and activities through rights provided under the terms
of the Amended and Restated Agreement of Limited Partnership which governs each
of the Operating Partnerships and the Company's legal relationship to each
Operating Partnership as its general partner. Matters requiring approval of the
holders of a majority of the O.P. Units, which necessarily would include the
Berg Group, include (i) the amendment, modification or termination of any of the
Operating Partnership Agreements; (ii) the transfer of any general partnership
interest in the Operating Partnerships, including, with certain exceptions,
transfers attendant to any merger, consolidation or liquidation of the Company;
(iii) the admission of any additional or substitute general partners in the
Operating Partnerships; (iv) any other change of control of the Operating
Partnerships; (v) a general assignment for the benefit of creditors or the
appointment of a custodian, receiver or trustee of any of the assets of the
Operating Partnerships; and (vi) the institution of any bankruptcy proceeding
for any Operating Partnership.
In addition, as long as the Berg Group members and their affiliates,
beneficially own, in the aggregate, at least 15% of the outstanding shares of
common stock on a Fully Diluted basis, the consent of the limited partners
holding the right to vote a majority of the total number of O.P. Units
outstanding is also required with respect to (i) the sale or other transfer of
all or substantially all of the assets of the Operating Partnerships and certain
mergers and business combinations resulting in the complete disposition of all
O.P. Units; (ii) the issuance of limited partnership interests senior to the
O.P. Units as to distributions, assets and voting; and (iii) the liquidation of
the Operating Partnerships.
- 15 -
TRANSACTIONS WITH RELATED PERSONS
PROPERTY ACQUISITIONS AND FINANCIAL TRANSACTIONS BETWEEN THE COMPANY AND THE
BERG GROUP
In the past, including fiscal year 2006, the Company has entered into
agreements and engaged in transactions with Carl E. Berg, the Company's Chief
Executive Officer, Chairman and a Director, and with other members of the Berg
Group. The Company expects to enter into additional agreements and transactions
with the Berg Group and Mr. Berg in the future. All such transactions and
agreements must be approved for the Company by the Independent Directors
Committee, as described above under "Corporate Governance." The Independent
Directors Committee is responsible for reviewing, evaluating and authorizing
action with respect to any transaction between the Company and any member of the
Berg Group.
The following transactions with the Berg Group occurred or effected the
Company's operations or financial condition in fiscal year 2006:
FORMATION OF THE COMPANY. Through a series of transactions in 1997 and
1998, the Company became the vehicle for substantially all of the Silicon Valley
R&D property activities of the Berg Group, which includes Mr. Berg, his brother
Clyde J. Berg, members of their families and a number of entities in which they
have controlling or substantial ownership interests. The Company owns these
former Berg Group properties, as well as the rest of its properties, through the
Operating Partnerships, of which the Company is the sole general partner.
Through various property acquisition agreements with the Berg Group, the Company
has the right to purchase, on pre-negotiated terms, R&D and other types of
office and light industrial properties that the Berg Group develops in the
future in the states of California, Oregon and Washington the details of which
are set forth above. Since September 1998, the Company has acquired a total of
approximately 3,177,000 million rentable square feet of R&D buildings under the
Pending Projects Acquisition Agreement and the Berg Land Holdings Option
Agreement. The total cost of these properties was approximately $481 million.
The Company issued a total of 27,962,025 O.P. Units and assumed debt totaling
approximately $209 million to acquire them.
ACQUISITION OF PROPERTY FROM THE BERG GROUP. On April 1, 2006, the Company
acquired an approximately 42,000 square foot fully leased office/R&D building at
1875 Charleston Road in Mountain View, California by purchasing Mission West
Charleston, LLC, an entity controlled by Carl E. Berg. The total acquisition
price for this entity was approximately $2.6 million, which is subject to a
ground lease with an unrelated party for the underlying property that runs
through June 2057. The acquisition was paid in cash.
RELATED PARTY DEBT. As of December 31, 2006, debt in the amount of
approximately $9.7 million was due the Berg Group under a mortgage note
established May 15, 2000 in connection with the acquisition of a 50% interest in
Hellyer Avenue Limited Partnership, the obligor under the mortgage note. The
mortgage note bears interest at 7.65%, and is due in ten years with principal
payments amortized over 20 years. Interest expense incurred in connection with
the Berg Group mortgage note was approximately $0.8 million for the year ended
December 31, 2006.
If the Company is unable to repay its debt to the Berg Group when due, the
Berg Group could take action to enforce the Company's payment obligations.
Potential actions by the Berg Group to enforce these obligations could result in
the foreclosure in one or more of the Company's properties and a reduction in
the amount of cash distributions to its stockholders. In turn, if the Company
fails to meet the minimum distributions test because of a loan default or
another reason, it could lose its REIT classification for federal income tax
purposes.
TRANSFER OF INTEREST TO BERG GROUP IN CONSOLIDATED JOINT VENTURE. In July
2000, the Hellyer Avenue Limited Partnership ("Hellyer LP") was formally
organized as a California limited partnership between Mission West Properties,
L.P. ("MWP"), of which the Company is the managing general partner, and Republic
Properties Group ("RPC"), an unaffiliated third party, as a general partner and
limited partner. MWP was designated as the managing general partner of Hellyer
LP. For a 50% ownership interest in Hellyer LP, RPC agreed to cause Stellex
Microwave Systems, Inc. ("Stellex") to provide a 15-year lease on an approximate
160,000 square foot R&D building to be constructed by Berg & Berg Enterprises,
Inc. ("BBE") on land owned by another Berg Group member.
As part of the transaction, MWP acquired the underlying land pursuant to
the Berg Land Holdings Option Agreement for a price of $5.7 million by issuing
659,223 O.P. Units to the Berg Group entity that owned the property. Further,
under the terms of the Hellyer LP partnership agreement MWP then contributed the
land to the partnership at an agreed value of $9.6 million which amount was to
be amortized and paid to MWP in the form of income and cash flow preferences.
The transaction was reviewed and approved by the Independent Directors
Committee.
In connection with the transaction, BBE built and paid for all improvements
on the land. The total cost of the R&D building, exclusive of specified tenant
improvements obligations, was approximately $11.4 million. Hellyer LP issued a
note for the amount of those construction costs to BBE, which note was secured
by the buildings.
- 16 -
Because RPC's interest in Hellyer LP was attributable solely to its
commitment to obtain Stellex as a tenant for the property, the partnership
agreement provided that if a payment default occurred within the first five
years of the Stellex lease, RPC would lose 100% of its interest in the
partnership, and if a payment default occurred during the second five year
period under the lease, RPC would lose 50% of its interest in Hellyer LP.
Pursuant to RPC's commitment to Hellyer LP, Stellex executed a lease
agreement obligating Stellex, among other things, to pay monthly rent starting
at $1.60 per square foot on a triple net basis for 15 years and to reimburse BBE
for the tenant improvement obligations, which ultimately totaled approximately
$10.5 million.
Under the lease terms, Stellex was obligated to reimburse BBE in full for
the tenant improvement costs no later than August 25, 2000. Several days before
the due date, representatives of Stellex met with representatives of the Company
and informed them that Stellex could not pay the balance due BBE. Stellex
requested the Company immediately to draw down the letter of credit as a result
of a default on the tenant improvement payment required under the lease.
On September 1, 2000, MWP, as the general partner of Hellyer LP, ceased all
allocations of income and cash flow to RPC and exercised the right under the
partnership agreement to cancel RPC's entire interest in the partnership.
Following discussions with and approval by the Independent Directors Committee,
the Company authorized the transfer of RPC's interest in Hellyer LP to BBE.
Under the Berg Land Holdings Option Agreement and the Acquisition Agreement
dated as of May 14, 1998, the Independent Directors Committee had the right, but
not the obligation, to reacquire the property interest and the related
distributions related to the property interest at any time. The transfer was
effective as of September 1, 2000.
Stellex filed for bankruptcy protection on September 12, 2000. On November
20, 2000, RPC filed suit in the Circuit Court of Maryland for Baltimore City to
recover past distributions and its interest in the Hellyer LP., and the Company
counter-sued on behalf of MWP and itself in Superior Court of California for the
County of Santa Clara in February 2001.
In January 2002, Stellex was acquired through its bankruptcy proceeding by
a division of Tyco Corporation. In connection with the acquisition of Stellex,
the purchaser assumed the lease with Hellyer LP, agreed to comply with all terms
of the lease and reimbursed BBE for the tenant improvements, as required under
the lease agreement and the Bankruptcy Court order.
Since the inception of Hellyer LP, the Company has accounted for the
properties owned by the partnership on a consolidated basis, with reductions for
the minority interest held by the minority partner (first RPC and then BBE). In
each period, the Company has accrued amounts payable by Hellyer LP to the
minority interest partner, including BBE, prior to payment. Through December 31,
2006, accumulated cash flow distributions from Hellyer LP totaling approximately
$3.9 million were accrued, of which $3.7 million was distributed to BBE, which
has been classified on the Company's consolidated balance sheets as an account
receivable from BBE with an offsetting account payable to BBE. The Company did
not object to that proposed classification.
On November 20, 2000, RPC commenced a lawsuit against MWP in the Circuit
Court of Maryland for Baltimore City. After lengthy litigation, which included a
trial on the merits and subsequent appeals, in April 2006 Maryland's highest
Court upheld an earlier Maryland Appeals Court ruling in favor of MWP, finding
that the Circuit Court of Maryland could not assert personal jurisdiction over
MWP in the RPC suit. The Court vacated the judgment and decision in the trial
court and dismissed the entire Maryland suit. In February 2001, while the
Maryland case was pending, MWP filed a suit against RPC in the Superior Court of
the State of California for the County of Santa Clara, Case No. CV 796249. The
case was stayed pending resolution of the Maryland case, and the Company
dismissed its suit on March 4, 2005. In April 2005, RPC submitted a motion
asking the Superior Court to reinstate the case, which the Court granted on May
25, 2005. On July 5, 2006, RPC filed a cross-complaint in the case seeking
partnership distributions to which we demurred. The Court sustained the
Company's demurrer with leave to amend. Subsequently, RPC filed an amended
complaint, and the Company submitted another demurrer seeking dismissal of the
claims on statute of limitations grounds. On February 20, 2007, the Court
overruled the Company's demurrer. The Company is in the process of seeking a
writ from the California State Court of Appeals for the Sixth District directing
the Superior Court to sustain the demurrer.
If the litigation is ultimately decided in favor of the Company, the
Independent Directors Committee of the Board of Directors has the right, but not
the obligation, to acquire on behalf of the Company the former RPC interest and
related distributions from BBE under the terms of the Berg Land Holdings Option
Agreement and the Acquisition Agreement between the Company and the Berg Group.
BERG COMMITMENT TO COMPLETE FUTURE IMPROVEMENTS AND BUILDING IN CONNECTION
WITH CERTAIN ACQUISITIONS FROM THE BERG GROUP UNDER THE BERG LAND HOLDINGS
OPTION AGREEMENT. The Berg Group has an approximately $7.5 million commitment to
complete an approximately 75,000 to 90,000 rentable square foot building in
connection with the Company's 2001 acquisition of 245 Caspian in Sunnyvale,
which consisted of approximately three acres of unimproved land zoned for
commercial development. The Berg Group has an approximately $2.5 million
commitment to complete certain tenant improvements in connection with the
Company's 2002 acquisition of 5345 Hellyer Avenue in San Jose.
- 17 -
BERG CONTROLLED ENTITIES HAVE FINANCIAL INTERESTS IN CERTAIN TENANTS THAT
LEASE SPACE FROM THE COMPANY. During the year ended December 31, 2006, Carl E.
Berg or entities controlled by Mr. Berg held financial interests in several
companies that lease space from the operating partnerships, which include
companies where Mr. Berg has a greater than 10% ownership interest. These
related tenants occupy a total of approximately 97,500 square feet and
contributed approximately $1.9 million in rental revenue in 2006.
LEASING AND OVERHEAD REIMBURSEMENTS PROVIDED BY BERG CONTROLLED ENTITY. The
Company currently leases office space owned by Berg & Berg Enterprises, Inc., an
affiliate of Carl E. Berg and Clyde J. Berg. Rental amounts and overhead
reimbursements paid to Berg & Berg Enterprises, Inc. were $90,000 for the year
ended December 31, 2006.
LAND LEASE RENT REIMBURSEMENT TO CARL E. BERG. One tenant is currently
leasing four R&D buildings from the Company and is also leasing raw land from
Carl E. Berg. Total rent from the tenant is paid directly to the Company, which
includes the land rent. The Company reimburses Carl E. Berg $85,000 per month
for the land rent portion.
LEASE RESTORATION COSTS REIMBURSEMENTS. In March 2006, the Company and
Fujitsu Limited, or Fujitsu, agreed to the termination of a lease for one
building consisting of approximately 125,000 square feet. Fujitsu is responsible
for repairing damage to the building and with the Company's approval has hired
Berg & Berg Enterprises, LLC to perform the restoration work for a total of
approximately $4.5 million.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than 10% of
a registered class of the Company's equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of ours. Directors, executive officers and greater
than 10% holders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) reports they file
To the Company's knowledge, based solely on review of the copies of the
above-mentioned reports furnished to the Company and written representations
regarding all reportable transactions, during the fiscal year ended December 31,
2006, all Section 16(a) filing requirements applicable to its directors,
officers and greater than ten percent holders were complied with on time.
- 18 -
AUDIT COMMITTEE REPORT
The Board of Directors adopted an amended Audit Committee Charter on April
28, 2004, which sets forth the responsibilities of the Audit Committee. The
Company notes, however, that management has primary responsibility for its
consolidated financial statements and the overall financial reporting process,
including its system of internal controls. Furthermore, the Company's
independent registered public accounting firm audits management's assessment of
the effectiveness of internal control over financial reporting and the
consolidated financial statements prepared by management, expresses an opinion
on whether those consolidated financial statements fairly present the financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States of America, and discusses
with the Audit Committee any issues they believe should be raised with the
Company.
The Audit Committee has reviewed and discussed the audited consolidated
financial statements of the Company for fiscal year 2006 and management's
assessment of the effectiveness of internal control over financial reporting
with management and the Company's independent registered public accounting firm,
Burr, Pilger & Mayer, LLP ("BPM"). The Audit Committee discussed with BPM
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Audit Committee was also provided by
BPM the written disclosures required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and the Audit Committee
discussed with BPM that firm's independence.
Based on the discussions with BPM concerning the audits, the independence
discussions, the financial statement review and such other matters deemed
relevant and appropriate by the Audit Committee, the Company recommended to the
Board of Directors that the Company's consolidated financial statements for the
fiscal year ended December 31, 2006 be included in its 2006 Annual Report on
Form 10-K filed with the SEC.
The Audit Committee of the Board of Directors:
John C. Bolger, Chairman
William A. Hasler
Lawrence B. Helzel
- 19 -
-------------------------------------------
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
-------------------------------------------
At the Annual Meeting, five directors (constituting the entire Board of
Directors) are to be elected to serve until the next annual meeting of
Stockholders and until each director's successor is elected and qualified, or
until the death, resignation or removal of such director. There are five
nominees, all of whom are currently directors of the Company.
NOMINEES
Set forth below is information regarding the nominees for election to the
Board of Directors:
Name Position(s) with the Company First Elected Director
--------------------------------- --------------------------------------------------------------- ----------------------------
Carl E. Berg Chairman of the Board, Chief Executive Officer and Director 1997
John C. Bolger Director 1998
William A. Hasler Director 1998
Lawrence B. Helzel Director 1998
Raymond V. Marino President, Chief Operating Officer and Director 2001
In accordance with the Company's Bylaws, it is a qualification of two
directors that they be nominated by the Berg Group and that one such director be
Carl E. Berg, or the Berg Designee as long as the Berg Group and its affiliates
(other than the Company and the Operating Partnership) own at least 15% of the
Fully Diluted number of shares. The Company has been advised by Mr. Berg, who
represents the Berg Group, that he will be the only Berg Group nominee for
election at this meeting.
A plurality of the votes cast at the Annual Meeting is required to elect
each nominee as a director. Unless authority to vote for any of the nominees
named above is withheld, the shares represented by the enclosed proxy will be
voted "FOR" the election as directors of such nominees. Each person nominated
has agreed to serve if elected, and the Board of Directors has no reason to
believe that any nominee will be unavailable or will decline to serve. In the
event, however, that any nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who is
designated by the current Board of Directors to fill the vacancy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF ALL OF THE NOMINEES NAMED ABOVE FOR DIRECTOR.
- 20 -
-----------------------------------------------------------
PROPOSAL NO. 2:
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-----------------------------------------------------------
The Audit Committee has appointed Burr, Pilger & Mayer, LLP as the
Company's independent registered public accounting firm to audit the financial
statements of the Company for the year ending December 31, 2007. The Board of
Directors proposes that the stockholders ratify this appointment.
The Company expects that representatives of Burr, Pilger & Mayer, LLP will
be present at the Annual Meeting, will have the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
In the event that stockholders fail to ratify the appointment, the Audit
Committee will reconsider its selection. Even if the selection is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during the year if the
Audit Committee determines that such a change would be in the Company's best
interests.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
On April 4, 2006, the Audit Committee determined not to renew its
engagement of BDO Seidman, LLP ("BDO") as the Company's independent registered
public accounting firm ("auditors"), as discussed below, and decided to engage
Burr, Pilger & Mayer, LLP ("BPM") to serve as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2006.
The aggregate fees billed to the Company by BPM for professional services
rendered with respect to 2006 fiscal year are as follows:
Burr, Pilger & Mayer, LLP 2006
----
Audit Fees (1) $207,487
(1) Includes the aggregate fees billed for the audit and review of the
Company's annual and quarterly financial statements and the audit of
internal controls over financial reporting in 2006.
There were no other audit related, tax or other fees or any fees for
non-audit services accrued by or billed to the Company by BPM in 2006.
The aggregate fees billed to the Company by BDO for professional services
rendered with respect to 2006 and 2005 fiscal years are as follows:
BDO Seidman, LLP 2006 2005
---- ----
Audit Fees (1) - $373,140
Audited-Related Fees (2) $28,971 -
(1) Includes the aggregate fees billed for the audit and review of the
Company's annual and quarterly financial statements and the audit of
internal controls over financial reporting in 2005 and 2004.
(2) Fees billed for the review of the Company's S-3 filing with the SEC and the
re-issuance of opinion on the 2005 and 2004 financial statements and
issuance of consent.
There were no audit fees accrued by or billed to the Company by BDO in
2006, and there were no other audit related, tax or other fees or any fees for
non-audit services accrued by or billed to the Company by BDO in 2005.
The Audit Committee pre-approves all annual audit engagement services and
fees and all fees for non-audit services (other than non-audit services that are
de minimus within the meaning of section 10A(i)(l)(B) of the Securities Exchange
Act and non-audit services that the independent accountants are prohibited from
providing to the Company). The Audit Committee requires the independent
accountants to submit a detailed proposal and budget for each engagement prior
to the commencement of the engagement. Additional services must be pre-approved
by the Audit Committee or the Chairman of the Audit Committee to whom
pre-approval authority has been delegated. All services of the independent
registered public accountants relating to review and attestation of internal
controls and procedures are pursuant to section 404 of the Sarbanes Oxley Act.
- 21 -
There were no fees paid to independent accountants in the past three fiscal
years that were for non-audit services that the Audit Committee or Chairman did
not pre-approve.
CHANGE OF ACCOUNTANTS
On April 4, 2006, the Audit Committee determined not to renew its
engagement of BDO as the Company's independent registered public accounting firm
("auditors"), and decided to engage BPM to serve as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2006.
BDO's audit reports on the Company's consolidated financial statements and
management's assessment of the effectiveness of internal control over financial
reporting and the effectiveness of internal control over financial reporting as
of and for the years ended December 31, 2005 and 2004 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with the audits
of the Company's consolidated financial statements for each of the two most
recent fiscal years ended December 31, 2005 and 2004 and through March 31, 2006,
there were no disagreements between the Company and BDO on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
BDO, would have caused BDO to make reference in connection with their opinion to
the subject matter of the disagreement. During the two most recent fiscal years
and through March 31, 2006, there have been no "reportable events" as defined in
Regulation S-K, Item 304(a)(1)(v).
During the Company's fiscal years ended December 31, 2005 and 2004 and
through March 31, 2006, BPM had not been engaged as an independent registered
public accountant to audit the Company's consolidated financial statements, nor
had BPM been consulted regarding the application of the Company's accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's consolidated financial
statements, or matters that was either the subject of a disagreement as that
term is defined in Item 304(a)(1)(iv) or a reportable event as described in Item
304(a)(1)(v) of Regulation S-K.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF BURR, PILGER & MAYER, LLP TO SERVE
AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CALENDAR
YEAR ENDING DECEMBER 31, 2007.
- 22 -
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING
To be considered for inclusion in the Company's proxy card and proxy
statement relating to the 2008 Annual Meeting of Stockholders, proposals subject
to SEC Rule 14a-8 must be received at the Company's principal office no later
than December 21, 2007.
In addition, if you desire to bring other business, including director
nominations, for the 2008 Annual Meeting that will not be included in the
Company's proxy card and proxy statement, your notice must be delivered to the
Company no earlier than February 17, 2008 and no later than March 18, 2008.
For additional requirements, a stockholder should refer to the Company's
Bylaws, Article II, Section 12, "Nominations and Proposals by Stockholders," a
current copy of which may be obtained from the Company's Secretary. If the
Company does not receive timely notice pursuant to the Company's Bylaws, any
proposal will be excluded from consideration at the 2008 Annual Meeting.
All stockholder proposals should be addressed to the attention of the
Secretary at the principal office of the Company.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters do properly
come before the Annual Meeting or any adjournments or postponements thereof, the
Board of Directors intends that the persons named in the proxies will vote upon
such matters in accordance with the best judgment of the proxy holders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Raymond V. Marino
-----------------------------------
Raymond V. Marino
Corporate Secretary
Cupertino, California
April 19, 2007
- 23 -
MISSION WEST PROPERTIES, INC.
------------------
------------------------
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 2007 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Carl E. Berg and Raymond V. Marino, each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote all shares of common stock of Mission West Properties,
Inc. (the "Company") held of record by the undersigned in favor of each proposal
designated on this Proxy Card and to vote the shares of the undersigned in their
discretion with respect to other matters that properly come before the 2007
Annual Meeting of Stockholders (the "Annual Meeting") to be held May 17, 2007
and any adjournment of the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR EACH OF THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE UNITED STATES.
--------------------------------------------------------------------------------
DETACH HERE
[X] Please mark vote as in
thisexample
1. Election of Directors 2. Ratify the selection of Burr, Pilger & Mayer, LLP as our
NOMINEES: 01 Carl E. Berg 02 John C. Bolger independent registered public accounting firm for the fiscal
03 William A. Hasler 04 Lawrence B. Helzel year ending December 31, 2007.
05 Raymond V. Marino
FOR AGAINST ABSTAIN
[ ]Vote FOR [ ]Vote WITHHELD [ ] [ ] [ ]
all nominees from all nominees
(except as marked)
Instructions: To withhold authority to vote for any 3. In their discretion, the proxies are authorized to vote
indicated nominee, write the number(s) of the nominee(s) upon any other business that may properly come before the meeting.
in the box provided below.
MARK HERE FOR
---------------------------------------------------- ADDRESS CHANGE [ ]
Name AND NOTE AT LEFT
----------------------------------------------------
Street Address Please sign exactly as name appears hereon. Joint owners
should each sign. Executors, administrators, trustees,
---------------------------------------------------- guardians or other fiduciaries should give full title as
City State Country Zip Code such. If signing for a corporation or other entity, please
sign in full corporate or other entity name by a duly
authorized officer.
[ ] Please check here if you plan on attending
the 2007 Annual Stockholders Meeting.
Signature: Date: Signature: Date:
------------------------- ---------- ------------------------- ----------
- 24 -