[COVER]
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Gables Residential Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
of 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:
GABLES RESIDENTIAL TRUST
2859 Paces Ferry Road
Overlook III, Suite 1450
Atlanta, Georgia 30339
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1998
Atlanta, Georgia 30339
_________________________
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the "Annual
Meeting") of Gables Residential Trust (the "Company") will be held on Tuesday,
May 19, 1998 at 9:00 a.m. at the Vinings Club located in the office building of
the Company's headquarters at 2859 Paces Ferry Road, Atlanta, Georgia 30339 for
the following purposes:
1. To elect two Class I Trustees of the Company to serve until the 2001 Annual
Meeting of Shareholders and until their respective successors are duly
elected and qualified and two Class II Trustees of the Company to serve
until the 1999 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified;
2. To consider and act upon a proposal to approve an amendment to the
Company's Second Amended and Restated 1994 Share Option and Incentive Plan,
as amended;
3. To consider and act upon a proposal to approve an amendment to the
Company's Amended and Restated Declaration of Trust increasing the number
of authorized preferred shares of beneficial interest, par value $.01 per
share, from 10,000,000 to 20,000,000; and
4. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Trustees has fixed the close of business on March 20, 1998 as the
record date for determining the shareholders entitled to notice of and to vote
at the Annual Meeting and at any adjournments or postponements thereof. Only
shareholders of record of the Company's common shares of beneficial interest,
par value $.01 per share, at the close of business on that date will be entitled
to notice of and to vote at the Annual Meeting and at any adjournments or
postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is being
solicited by the Board of Trustees, and to mail it promptly in the enclosed
postage-prepaid envelope. Any proxy may be revoked by delivery of a later dated
proxy. Shareholders of record who attend the Annual Meeting may vote in person,
even if they have previously delivered a signed proxy.
By Order of the Board of Trustees
MARVIN R. BANKS, JR.
Secretary
Atlanta, Georgia
March 31, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
GABLES RESIDENTIAL TRUST
2859 Paces Ferry Road
Overlook III, Suite 1450
Atlanta, Georgia 30339
__________________________
PROXY STATEMENT
__________________________
FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 19, 1998
March 31, 1998
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Trustees of Gables Residential Trust (the "Company") for use at
the 1998 Annual Meeting of Shareholders of the Company to be held on Tuesday,
May 19, 1998, and at any adjournments or postponements thereof (the "Annual
Meeting"). At the Annual Meeting, shareholders will be asked to vote upon the
election of two Class I Trustees of the Company and two Class II Trustees of the
Company, to consider and act upon a proposal to approve an amendment (the "Plan
Amendment") to the Company's Second Amended and Restated 1994 Share Option and
Incentive Plan, as amended (the "1994 Share Option Plan" or "Plan"), to consider
and act upon a proposal to approve an amendment (the "Charter Amendment") to the
Company's Amended and Restated Declaration of Trust (the "Declaration of Trust")
increasing the number of authorized preferred shares of beneficial interest, par
value $.01 per share ("Preferred Shares"), from 10,000,000 to 20,000,000 and to
act upon any other matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to shareholders on or about March 31, 1998. The Board
of Trustees has fixed the close of business on March 20, 1998 as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only shareholders of record of the Company's
common shares of beneficial interest, par value $.01 per share ("Common
Shares"), at the close of business on the Record Date will be entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, there were
22,072,205 Common Shares outstanding and entitled to vote at the Annual Meeting.
Holders of Common Shares outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of the
total number of outstanding Common Shares entitled to vote is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. Both
abstentions and broker non-votes (as defined below) will be counted in
determining the presence of a quorum. A plurality of votes cast shall be
sufficient for the election of trustees. Abstentions and broker non-votes will
be disregarded in determining the "votes cast" for purposes of electing trustees
and will not affect the election of the candidates receiving a plurality of
votes.
The affirmative vote of a majority of the votes cast shall be sufficient to
approve the proposed Plan Amendment to the 1994 Share Option Plan. Abstentions
and broker non-votes will be disregarded in determining the "votes cast" for
purposes of approving the Plan Amendment, and thus will not affect the outcome
of such vote. Notwithstanding this approval requirement, the vote on the Plan
Amendment will not be effective unless, in accordance with rules of the New York
Stock Exchange (the "NYSE"), at least 50% of all outstanding Common Shares are
votes "for" or "against" the Plan Amendment. The affirmative vote of the holders
of at least a majority of the total number of outstanding Common Shares entitled
to vote is required to approve the Charter Amendment, and therefore abstentions
and broker non-votes will have the effect of votes against the Charter
Amendment. A broker "non-vote" is a proxy from a broker or other nominee
indicating that such person has not received instructions from the beneficial
owner or other person entitled to vote the shares which are the subject of the
proxy on a particular matter with respect to which the broker or other nominee
does not have discretionary voting power.
Page-2
SHAREHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE VOTE AT
THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING AS
DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED "FOR" THE ELECTION OF THE TWO
NOMINEES FOR CLASS I TRUSTEES OF THE COMPANY AND THE TWO NOMINEES FOR CLASS II
TRUSTEES OF THE COMPANY NAMED IN THIS PROXY STATEMENT, "FOR" THE PROPOSAL TO
APPROVE THE PLAN AMENDMENT AND "FOR" THE PROPOSAL TO APPROVE THE CHARTER
AMENDMENT. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN
THE PROXY STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS
ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE
PROXY HOLDERS.
A shareholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any shareholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a shareholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1997 Annual Report, including a copy of the Company's annual
report to the Securities and Exchange Commission on Form 10-K for the fiscal
year ended December 31, 1997, is being mailed to shareholders concurrently with
this Proxy Statement. The Annual Report, however, is not part of the proxy
solicitation material. A copy of the Company's Form 10-K may also be obtained by
writing to the Secretary of the Company.
PROPOSAL 1: ELECTION OF TRUSTEES
Introduction
- ------------
In October, 1997, D. Raymond Riddle was appointed by the Board of Trustees of
the Company to fill a vacancy on the Board created by the resignation of Perry
M. Parrott, Jr. in October, 1996. Additionally, in February, 1998, the Board of
Trustees approved the appointment of Chris D. Wheeler to the Board, which
appointment shall be effective upon and subject to the consummation of the
Company's acquisition of the business and properties of Trammell Crow
Residential's South Florida operations (the "South Florida Transaction"). Mr.
Wheeler will fill the vacancy on the Board created by the resignation of Peter
D. Linneman in December, 1997. Although the consummation of the South Florida
Transaction has not occurred as of the date of this Proxy Statement, the Company
expects that it will occur prior to the date of the Annual Meeting (whereupon
Mr. Wheeler will immediately become a member of the Board of Trustees). Maryland
law requires that a trustee elected by the Board of Trustees to fill a vacancy
serves until the next annual meeting of shareholders and until his successor is
elected and qualified. Consequently, both Mr. Riddle and Mr. Wheeler (if his
appointment is effective prior to the Annual Meeting) are subject to election at
the Annual Meeting. In the event the consummation of the South Florida
Transaction does not occur prior to the Annual Meeting, Mr. Wheeler will not be
a nominee at the Annual Meeting for election to the Board of Trustees, but if he
is appointed thereafter as a result of the consummation of the South Florida
Transaction, he will be a nominee for election at the 1999 Annual Meeting of
Shareholders.
The Board of Trustees of the Company ordinarily consists of seven members who
are divided into three classes (there are currently only six members due to a
vacancy in Class II; such vacancy, however, will be filled by Mr. Wheeler upon
the consummation of the South Florida Transaction). At the Annual Meeting, two
Class I Trustees will be elected to serve until the 2001 Annual Meeting and
until their successors are duly elected and qualified and two Class II Trustees
will be elected to serve until the 1999 Annual Meeting and until their
successors are duly elected and qualified (subject, in the case of Mr. Wheeler,
to the consummation of the South Florida Transaction, as discussed above). The
Board of Trustees has nominated Marcus E. Bromley and David M. Holland to serve
as Class I Trustees and D. Raymond Riddle and Chris D. Wheeler to serve as Class
II Trustees (the "Nominees"). Each of the Nominees (other than, as of the date
of this Proxy Statement, Mr. Wheeler) is currently serving as a trustee of the
Company. The Board of Trustees anticipates that each of the Nominees will serve,
if elected, as a trustee. However, if any person nominated by the Board of
Page-3
Trustees is unable to accept election, the proxies will be voted for the
election of such other person or persons as the Board of Trustees may recommend.
The Board of Trustees will consider a nominee for election to the Board of
Trustees recommended by a shareholder of record if the shareholder submits the
nomination in compliance with the requirements of the Company's Second Amended
and Restated Bylaws (the "Bylaws"). See "Other Matters--Shareholders Proposals"
for a summary of these requirements.
RECOMMENDATION
- --------------
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE NOMINEES.
INFORMATION REGARDING NOMINEES, OTHER TRUSTEES AND EXECUTIVE OFFICERS
The following biographical descriptions set forth certain information with
respect to the four Nominees for election as trustees at the Annual Meeting,
each trustee who is not up for election and the executive officers who are not
trustees, based on information furnished to the Company by each trustee and
officer. Prior to the Company's initial public offering in January, 1994 (the
"IPO"), each executive officer was associated in the capacities described below
with one of the Atlanta, Houston or Dallas Divisions of Trammell Crow
Residential, which Divisions, collectively, were the predecessor to the Company
(the "Predecessor"). The following information is as of February 28, 1998.
Nominees for Election as Trustees - Term Expiring 2001
- ------------------------------------------------------
MARCUS E. BROMLEY. Mr. Bromley is the Chairman of the Board of Trustees and
Chief Executive Officer and has been since the Company's IPO. Mr. Bromley also
served as President of the Company from the time of the Company's IPO until
December, 1995, when Mr. Rippel was named President and Chief Operating Officer
of the Company. Mr. Bromley joined the Company's Predecessor in 1982 and was
responsible for overseeing the development and lease-up of multifamily
properties in the Southeastern United States. Prior to joining the Company's
Predecessor, Mr. Bromley was chief financial officer for a large engineering
firm from 1976 to 1982, and assistant treasurer for the Amelia Island Company
from 1973 to 1976. Mr. Bromley received his master of business administration
degree from the University of North Carolina at Chapel Hill. He earned a
bachelor's degree in economics from Washington and Lee University. Mr. Bromley
is a former president of the Atlanta Apartment Association. He currently serves
on the board of directors of the National Multi-Housing Council, as well as the
Board of Advisors for The School of Commerce, Economics and Politics at
Washington and Lee University, and the Investment Committee of The Westminster
Schools. He is 48 years old.
DAVID M. HOLLAND. Mr. Holland is a trustee of the Company. Mr. Holland is Senior
Vice President and the assistant to the chairman of the board of DSC
Communications Corporation, a communications equipment company listed on the
NYSE, and formerly served as Senior Vice President, Sales, Marketing & Service,
as well as Corporate Planning and Development. Prior to joining DSC
Communications Corporation, Mr. Holland held various positions, including
executive vice president and chief marketing officer at Sprint Communication
Company, and executive positions at Datapoint Corporation and Xerox Corporation.
Mr. Holland received his bachelor's degree in business from Michigan State
University. He is 61 years old.
Nominees for Election as Trustees - Term Expiring 1999
- ------------------------------------------------------
D. RAYMOND RIDDLE. Mr. Riddle is a trustee of the Company. Mr. Riddle is a
retired chairman of the board and Chief Executive Officer of National Service
Industries, Inc., a diversified manufacturing and service company. Mr. Riddle
served in an executive capacity with National Service Industries, Inc. from
January, 1993 until his retirement in February, 1996. Prior to that, Mr. Riddle
served as President and Chief Executive Officer of Wachovia Bank of Georgia,
N.A., and of Wachovia Corporation of Georgia, the parent of Wachovia Bank of
Georgia, N.A. Mr. Riddle was employed by these organizations for more than five
years. He serves as a director of AMC, Inc., Atlanta Gas Light Company, Atlantic
American Corporation, Equifax, Inc., and Munich American Reassurance Company. He
is 64 years old.
Page-4
CHRIS D. WHEELER. Upon consummation of the South Florida Transaction, Mr.
Wheeler will serve as a trustee and as Senior Vice President of the Company. He
is currently Group Managing Partner responsible for all Trammell Crow
Residential multifamily residential development and management in South Florida,
the South Central United States and the Mid-Atlantic and Northeast United
States. Mr. Wheeler has had 16 years of real estate experience with various
Trammell Crow entities. Mr. Wheeler graduated with honors in 1978 from the
California Institute of Technology with a major in applied physics. He received
his master of business administration from Harvard Graduate School of Business
in 1980. He is 41 years old.
Incumbent Trustee - Term Expiring 1999
- --------------------------------------
JOHN W. MCINTYRE. Mr. McIntyre is a trustee of the Company. Mr. McIntyre is
former vice chairman of the board of directors of Citizens and Southern
Corporation, a bank holding company, and former chairman of the board of
directors and CEO of Citizens and Southern Georgia Corporation and Citizens and
Southern National Bank. Mr. McIntyre is a director or trustee of a number of
organizations, including the Invesco Global Health Science Fund, the Invesco
Mutual Funds and affiliated entities, and the Kaiser Foundation Health Plan of
Georgia. Mr. McIntyre received his bachelor's degree in business administration
from Emory University School of Business, and attended the Business Executive
Management Program at Stanford University Graduate School of Business. He is 67
years old.
Incumbent Trustees - Term Expiring 2000
- ---------------------------------------
JOHN T. RIPPEL. Mr. Rippel is a trustee, President and Chief Operating Officer
of the Company. Prior to becoming President and Chief Operating Officer in
December, 1995, Mr. Rippel served as Senior Vice President, responsible for the
development and acquisition of multifamily properties in Houston, San Antonio
and Austin. Mr. Rippel joined the Company's Predecessor in 1982 as the chief
financial officer for the Predecessor's start-up operation in Houston and later
led the expansion of the organization into the Southwestern United States. Prior
to joining the Company's Predecessor, Mr. Rippel was a CPA with Kenneth
Leventhal Company, a national public accounting firm recognized for its
expertise in the real estate industry. Mr. Rippel is a graduate of The
University of Texas at Austin where he received a bachelor's degree in
accounting. He is 43 years old.
LAURALEE E. MARTIN. Ms. Martin is a trustee of the Company. Since 1996, Ms.
Martin has served as chief financial officer of Heller Financial Inc., an
international commercial finance company. Ms. Martin oversees the treasury
operations, tax, information technology and controllership functions. In
addition, Ms. Martin serves on the Heller International Corporation board of
directors and reports directly to the chairman. From 1993 to 1996, Ms. Martin
served as Senior Group President of Heller. Prior to joining Heller Financial
Inc., she held various positions at General Electric Credit Corporation,
including president, General Electric Mortgage, and manager of Construction
Lending Operations. Ms. Martin received her master of business administration
from the University of Connecticut and her bachelor's degree from Oregon State
University. She is 47 years old.
Executive Officers Who Are Not Trustees
- ---------------------------------------
C. JORDAN CLARK. Since the IPO, Mr. Clark has served as Senior Vice President
and, since 1997, has served as Chief Investment Officer in charge of the
Company's development and acquisition efforts. Mr. Clark joined the Company's
Predecessor in 1986 as a development associate. Prior to joining the Company's
Predecessor, Mr. Clark was the curator of the 3M art collection in Minnesota.
Mr. Clark received his master of business administration from the University of
North Carolina at Chapel Hill. He also holds a master's degree in art history
from the University of Virginia and an undergraduate degree in English from
Davidson College. He is 42 years old.
MARVIN R. BANKS, JR. Mr. Banks is Senior Vice President, Secretary and Chief
Financial Officer and has been since the Company's IPO. He is responsible for
all corporate financings, financial reporting and all accounting and tax issues.
Mr. Banks joined the Company's Predecessor in 1987 and, since 1990, was the
chief financial officer for certain divisions. Prior to joining the Company's
Predecessor, he was a CPA with Ernst & Young, where he specialized in the
financial services and construction industries. Mr. Banks is a graduate of the
University of Texas at Austin with a bachelor's degree in accounting and is a
member of the Urban Land Institute. He is 36 years old.
Page-5
BOARD OF TRUSTEES AND COMMITTEES
The Company is managed by a seven member Board of Trustees, a majority of whom
are independent of the Company's management (the "Independent Trustees").
Following the resignation of Peter D. Linneman as a trustee on December 26,
1997, the Board has been comprised of six trustees. Upon consummation of the
South Florida Transaction, Mr. Wheeler will be appointed to fill the vacancy
created by Dr. Linneman's resignation. The Company's Board of Trustees is
divided into three classes, and the members of each class of trustees serve for
staggered three-year terms. The Board is composed of two Class I Trustees
(Messrs. Bromley and Holland), three Class II Trustees (consisting at present of
Messrs. McIntyre and Riddle only, but which will include Mr. Wheeler upon
consummation of the South Florida Transaction) and two Class III Trustees (Mr.
Rippel and Ms. Martin). All of the Class I Trustees and two of the Class II
Trustees (Messrs. Riddle and Wheeler) are up for election at the Annual Meeting.
The terms of the Class II and Class III Trustees will expire upon the election
and qualification of trustees at the annual meetings of shareholders held
following the fiscal years ending December 31, 1998 and 1999, respectively. At
each annual meeting of shareholders, trustees will be reelected or elected for a
full term of three years to succeed those trustees whose terms are expiring.
Gables GP, Inc. ("GGPI") is a wholly-owned subsidiary of the Company and is the
sole general partner of Gables Realty Limited Partnership, a Delaware limited
partnership and the entity through which the Company principally conducts its
business operations (the "Operating Partnership"). The Board of Directors of
GGPI and the Board of Trustees of the Company each have the same members.
During 1997, the Board of Trustees met ten times. Each trustee attended at least
75% of the aggregate of the total number of meetings of the Board of Trustees
and meetings of the committees of the Board of Trustees of which he or she was a
member.
AUDIT COMMITTEE. The Board of Trustees has established an Audit Committee
consisting of Mr. McIntyre, as Chairperson, and Ms. Martin and Mr. Riddle. The
Audit Committee is responsible for making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
public accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants, reviewing
the independence of the independent public accountants, considering the range of
audit and non-audit fees and reviewing the adequacy of the Company's internal
accounting controls. During 1997, the Audit Committee met two times.
COMPENSATION COMMITTEE. The Board of Trustees has also established a
Compensation Committee consisting of Mr. Holland, as Chairperson, and Messrs.
Riddle and McIntyre and Ms. Martin. The Compensation Committee exercises all
powers of the Board of Trustees in connection with the compensation of executive
officers of the Company, including incentive compensation and benefit plans. The
Compensation Committee also has authority to grant awards under the 1994 Share
Option Plan and cash bonuses under the Company's Incentive Compensation Plan.
During 1997, the Compensation Committee met three times.
INVESTMENT COMMITTEE. Each of the Board of Directors of GGPI and the Board of
Trustees of the Company has established an Investment Committee of its
respective Board currently consisting of Ms. Martin, as Chairperson, and Messrs.
Bromley and Rippel. In general, the Investment Committee of GGPI has authority
to cause GGPI, as general partner of the Operating Partnership, to make
investment decisions on behalf of the Operating Partnership, provided, however,
that the general subject matter of any such decision must have been previously
approved by the full Board of GGPI. The Investment Committee of the Company has
authority to enable the Company to guarantee indebtedness with respect to duly
approved transactions entered into or to be entered into by GGPI and the
Operating Partnership. During 1997, the Investment Committees of GGPI and the
Company met ten times.
NOMINATING COMMITTEE. The Board of Trustees has also established a Nominating
Committee consisting of Mr. Bromley, as Chairperson, and Mr. McIntyre and Ms.
Martin. The Nominating Committee is primarily responsible for making
recommendations to the Board with respect to (i) the size, composition,
structure, functions, policies and practices of the Board and its committees;
(ii) the qualifications to be sought in the selection of persons to be
considered for election to the office of Trustee and each committee of the
Board; (iii) the procedures for identifying and recruiting qualified candidates
Page-6
for election to the office of Trustee; (iv) the candidates for election to fill
vacancies in the office of Trustee and each committee of the Board; (v) the
slate of nominees for election to the office of Trustee at each annual meeting
of shareholders; and (vi) the evaluation of the Board's performance, of its
relationship with management and of individual trustees. During 1997, the
Nominating Committee met four times.
COMPENSATION OF TRUSTEES AND EXECUTIVE OFFICERS
-----------------------------------------------
TRUSTEES. Trustees of the Company who are also employees receive no additional
compensation for their services as trustees. During 1997, each Independent
Trustee received for his or her service as a trustee (i) a quarterly trustee's
fee of $4,600; (ii) $1,200 per day for personal attendance at any meetings of
the full Board of Trustees; and (iii) $500 per day for personal attendance at
any committee meetings held on days on which no meetings of the full Board of
Trustees were held. Such fees will remain the same in 1998. Independent Trustees
may elect to waive part or all of such fees in exchange for Common Share grants
under the 1994 Share Option Plan, and each Independent Trustee has elected to
receive 50% of such fees in the form of Common Share grants.
Under the 1994 Share Option Plan, following each annual meeting of shareholders,
each of the Company's Independent Trustees automatically receives an option to
purchase 5,000 Common Shares at the market price of the Common Shares on the
date of grant. Pursuant to this provision, following the 1997 Annual Meeting,
each Independent Trustee was granted an option to purchase 5,000 Common Shares
at $25.50 per share. All options granted to Independent Trustees vest one year
after the date of grant.
EXECUTIVE OFFICERS. The following table sets forth the compensation awarded to
each of the five most highly compensated executive officers of the Company whose
total salary and bonus exceeded $100,000 during each of the fiscal years ended
December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation Awards
-------------------------
Annual Compensation Restricted
------------------- Share All Other
Salary Bonus Awards Options Compensation(1)
Name and Principal Position Year ($) ($) ($) (#) ($)
- --------------------------- ---- --- --- --- --- ---
Marcus E. Bromley .................................. 1997 $180,000 $112,025(2) $ 96,075(3) 0 $ 5,110
Chairman of the Board of Trustees and Chief 1996 180,000 188,500(4) 207,000(5) 0 6,585
Executive Officer 1995 160,000 115,000(6) 0 20,000 6,303
John T. Rippel ..................................... 1997 160,000 101,688(7) 80,062(8) 0 6,742
President and Chief Operating Officer 1996 160,000 160,388(9) 170,775(10) 0 6,068
1995 145,000 102,000(6) 0 15,000 6,225
C. Jordan Clark ..................................... 1997 152,000 118,713(11) 176,137(12) 0 3,448
Senior Vice President and Chief Investment 1996 152,000 137,625(13) 155,250(14) 0 4,750
Officer 1995 145,000 103,000(6) 0 15,000 4,539
Marvin R. Banks, Jr. ................................ 1997 152,000 81,688(15) 80,062(16) 0 5,938
Senior Vice President and Chief Financial Officer 1996 152,000 137,625(17) 155,250(18) 0 7,360
1995 145,000 97,000(6) 0 15,000 7,188
William M. Hammond (19) 1997 152,000 15,000(20) 0 0 3,986
Senior Vice President 1996 152,000 88,988(21) 87,975(22) 0 2,721
1995 145,000 92,000(6) 0 10,000 4,225
<FN>
(1) 1997 amounts include the Company's matching contribution under its 401(k)
plan ($3,115 for Mr. Bromley, $3,617 for Mr. Rippel, $2,018 for Mr. Clark,
$3,328 for Mr. Banks and $2,771 for Mr. Hammond) and the Company's cost of
life insurance for 1997 ($1,995 for Mr. Bromley, $3,125 for Mr. Rippel,
$1,430 for Mr. Clark, $2,610 for Mr. Banks and $1,215 for Mr. Hammond).
Page-7
(2) Amount consists of (i) $80,000 which was paid in cash in 1998 and (ii)
1,200 unrestricted Common Shares ("Unrestricted Shares") awarded on
February 12, 1998 under the 1994 Share Option Plan valued at $26.6875 per
share.
(3) Consists of 3,600 restricted Common Shares ("Restricted Shares") awarded on
February 12, 1998 under the 1994 Share Option Plan valued at $26.6875 per
share. These Restricted Shares vest in three equal annual installments
beginning on January 1, 1999. Dividends are payable on these Restricted
Shares.
(4) Amount consists of (i) $85,000 which was paid in cash in 1997 and (ii)
4,000 Unrestricted Shares awarded on February 21, 1997 under the 1994 Share
Option Plan valued at $25.875 per share.
(5) Consists of 8,000 Restricted Shares awarded on February 21, 1997 under the
1994 Share Option Plan valued at $25.875 per share. These Restricted Shares
vest in two equal annual installments beginning on January 1, 1998. The
value of such Restricted Shares (both vested and unvested) as of December
31, 1997 was $221,000. Dividends are payable on these Restricted Shares.
(6) Amounts reflect bonuses which were paid in cash in 1996.
(7) Amount consists of (i) $75,000 which was paid in cash in 1998 and (ii)
1,000 Unrestricted Shares awarded on February 12, 1998 valued at $26.6875
per share.
(8) Consists of 3,000 Restricted Shares awarded on February 12, 1998 valued at
$26.6875 per share. These Restricted Shares vest in three equal annual
installments beginning on January 1, 1999. Dividends are payable on these
Restricted Shares.
(9) Amount consists of (i) $75,000 which was paid in cash in 1997 and (ii)
3,300 Unrestricted Shares awarded on February 21, 1997 valued at $25.875
per share.
(10) Consists of 6,600 Restricted Shares awarded on February 21, 1997 valued at
$25.875 per share. These Restricted Shares vest in two equal annual
installments beginning on January 1, 1998. The value of such Restricted
Shares (both vested and unvested) as of December 31, 1997 was $182,325.
Dividends are payable on these Restricted Shares.
(11) Amount consists of (i) $60,000 which was paid in cash in 1998 and (ii)
2,200 Unrestricted Shares awarded on February 12, 1998 valued at $26.6875
per share.
(12) Consists of 6,600 Restricted Shares awarded on February 12, 1998 valued at
$26.6875 per share. These Restricted Shares vest in three equal annual
installments beginning on January 1, 1999. Dividends are payable on these
Restricted Shares.
(13) Amount consists of (i) $60,000 which was paid in cash in 1997 and (ii)
3,000 Unrestricted Shares awarded on February 21, 1997 valued at $25.875
per share.
(14) Consists of 6,000 Restricted Shares awarded on February 21, 1997 valued at
$25.875 per share. These Restricted Shares vest in two equal annual
installments beginning on January 1, 1998. The value of such Restricted
Shares (both vested and unvested) as of December 31, 1997 was $165,750.
Dividends are payable on these Restricted Shares.
(15) Amount consists of (i) $55,000 which was paid in cash in 1998 and (ii)
1,000 Unrestricted Shares awarded on February 12, 1998 valued at $26.6875
per share.
(16) Consists of 3,000 Restricted Shares awarded on February 12, 1998 valued at
$26.6875 per share. These Restricted Shares vest in three equal annual
installments beginning on January 1, 1999. Dividends are payable on these
Restricted Shares.
Page-8
(17) Amount consists of (i) $60,000 which was paid in cash in 1997 and (ii)
3,000 Unrestricted Shares awarded on February 21, 1997 valued at $25.875
per share.
(18) Consists of 6,000 Restricted Shares awarded on February 21, 1997 valued at
$25.875 per share. These Restricted Shares vest in two equal annual
installments beginning on January 1, 1998. The value of such Restricted
Shares (both vested and unvested) as of December 31, 1997 was $165,750.
Dividends are payable on these Restricted Shares.
(19) Effective March 27, 1998, Mr. Hammond resigned as Senior Vice President.
See "Employment and Severance Agreements."
(20) Amount reflects a bonus paid in cash in 1998.
(21) Amount consists of (i) $45,000 which was paid in cash in 1997 and (ii)
1,700 Unrestricted Shares awarded on February 21, 1997 valued at $25.875
per share.
(22) Consists of 3,400 Restricted Shares awarded on February 21, 1997 valued at
$25.875 per share. These Restricted Shares vest in two equal annual
installments beginning on January 1, 1998. The value of such Restricted
Shares (both vested and unvested) as of December 31, 1997 was $93,925.
Dividends are payable on these Restricted Shares. In accordance with a
severance agreement dated February 10, 1998 by and between the Company and
Mr. Hammond, all such Restricted Shares that were unvested as of March 27,
1998 were forfeited. See "Employment and Severance Agreements."
</FN>
OPTION EXERCISES AND YEAR-END HOLDINGS. The following table sets forth the
aggregate number of options exercised in 1997 and the value of options held at
the end of 1997 by the Company's Chief Executive Officer and four other most
highly compensated executive officers.
Aggregated Option Exercises in Fiscal Year 1997 and
Fiscal Year-End 1997 Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-money
Options Options
at Fiscal at Fiscal
Year-End(#) Year-End($)
Shares ---------- ----------
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
---- ----------- ----------- ------------- -------------
Marcus E. Bromley................... 0 0 60,332/6,668 337,532/48,343
John T. Rippel...................... 0 0 57,000/5,000 313,375/36,250
C. Jordan Clark..................... 0 0 42,900/5,000 241,113/36,250
Marvin R. Banks, Jr................. 0 0 38,200/5,000 217,025/36,250
William M. Hammond (1)............... 20,000 94,540 33,666/3,334 172,538/24,172
<FN>
(1) In accordance with a severance agreement dated February 10, 1998 by and
between the Company and Mr. Hammond, all of Mr. Hammond's options became
exercisable as of March 27, 1998. See "Employment and Severance
Agreements."
</FN>
Employment and Severance Agreements
- -----------------------------------
The Company has entered into employment agreements (each an "Employment
Agreement") with each of Messrs. Bromley, Rippel, Clark and Banks (the
"Executive Officers") that will continue in effect until January 1, 1999. Such
employment agreements automatically renew for additional one year terms unless a
notice to the contrary effect is given by either party. Pursuant to their
Employment Agreements, Mr. Bromley is serving as Chairman of the Board of
Trustees and Chief Executive Officer of the Company, Mr. Rippel is serving as
Page-9
President and Chief Operating Officer of the Company, Mr. Clark is serving as
Senior Vice President and Chief Investment Officer of the Company and Mr. Banks
is serving as Senior Vice President and Chief Financial Officer of the Company.
Base salaries for 1997 were as follows: $180,000 for Mr. Bromley, $160,000 for
Mr. Rippel and $152,000 for each of Messrs. Clark and Banks. The Board of
Trustees has set base salaries for 1998 as follows: $220,000 for Mr. Bromley,
$200,000 for Mr. Rippel and $160,000 for each of Messrs. Clark and Banks. Each
Employment Agreement provides for an annual review of base salary. In addition,
the Compensation Committee of the Board may provide for additional compensation
as a bonus should it determine that such compensation is appropriate in its
discretion based on merit, the Company's financial performance and other
criteria. See "Incentive Compensation Plan" for a more detailed description of
bonus compensation. Pursuant to their Employment Agreements, the Company is, in
general, required to purchase policies of life insurance for the benefit of each
of the Executive Officers in the amount of $1,000,000 per policy. The related
annual premium cost of the life insurance policies was $10,375 in total for
1997. The Company maintains a comprehensive medical plan for the benefit of the
Executive Officers and that of their immediate families and pays or reimburses
each of the Executive Officers for the cost of disability insurance and provides
them with a car allowance currently equal to approximately $570 per month. Each
of the Executive Officers has agreed to devote substantially all of their
working time to the business of the Company. Pursuant to their Employment
Agreements, the Company has also agreed to indemnify each of the Executive
Officers to the full extent permitted by law and subject to the Company's
Declaration of Trust and Bylaws with respect to any actions commenced against
such executive officer in his capacity as an officer or trustee or former
officer or trustee of the Company, or any affiliate thereof for which he may
serve in such capacity, and to advance any expenses incurred by such executive
officers and trustees in defending such actions.
If the employment of an Executive Officer is terminated during the year (i) by
the Company without "good reason" (as defined in the relevant Employment
Agreement), (ii) within six (6) months following a "change of control" (as
defined in the relevant Employment Agreement) or (iii) upon the occurrence of
certain other events, the terminated employee will be entitled (a) to
immediately vest in any outstanding share options and grants of Restricted
Shares and (b) to receive a severance payment (the "Severance Amount") equal to
his base salary and the higher of (x) his bonus for the preceding year or (y)
any approved bonus for any period that has closed prior to the date of
termination but has not yet been paid. Upon the termination of the employment of
an Executive Officer by reason of death, his estate will be entitled to receive
a payment equal to the Severance Amount, except that the amount of such benefit
shall be zero if the proceeds of life insurance payable in connection with the
Employment Agreement equal or exceed $1,000,000. The Employment Agreements
provide that if an Executive Officer is terminated for "good reason" or
voluntarily terminates his employment (other than termination which occurs
within six (6) months following a "change of control"), no Severance Amount will
be payable and such individual will not, without the prior written consent of
the Board of Trustees, directly or indirectly, compete with the Company with
respect to any multifamily apartment residential real estate property
development, construction, acquisition or management activities then undertaken
or being considered by the Company for a period of twelve months following the
termination of employment with the Company.
During the term of the Employment Agreement and for a period of twelve months
following the termination of employment (other than termination which occurs
within six (6) months following a "change of control"), the Executive Officer
will not, directly or indirectly, (i) solicit or induce any present or future
employee of the Company to accept employment with the Executive Officer or any
person or entity associated with the Executive Officer, (ii) employ, or cause
any person or entity associated with the Executive Officer to employ, any
present or future employee of the Company without providing the Company with
prior written notice of such proposed employment or (iii) either for himself or
for any other person or entity, compete for or solicit the third party owners
with whom the Company has an existing property management agreement.
Pursuant to an Employment Agreement between the Company and Mr. Hammond dated
January 1, 1997, Mr. Hammond served as Senior Vice President of the Company and
his annual base salary was $152,000. Mr. Hammond resigned as an executive
officer of the Company effective March 27, 1998. Under the terms of a severance
agreement dated February 10, 1998 between the Company and Mr. Hammond (the
"Severance Agreement"), Mr. Hammond continued to receive his base salary and
benefits through March 27, 1998 and received a lump sum payment of $230,000
(less all normal deductions) representing Mr. Hammond's bonus for 1997 of
$15,000, as well as severance of $215,000. In addition, all of Mr. Hammond's
stock options that had not already vested according to their terms as of March
27, 1998 immediately became vested as of such date. Mr. Hammond's Restricted
Shares that had not already vested as of March 27, 1998 were forfeited. Pursuant
to the Severance Agreement, the Company also released Mr. Hammond from the terms
of the non-competition provisions set forth in Mr. Hammond's employment
agreement with the Company dated January 1, 1997, with certain exceptions as
provided for in the Severance Agreement. Additionally, the Company agreed that
Page-10
in the event Mr. Hammond is sued in his capacity as a former Senior Vice
President of the Company, (i) Mr. Hammond would be entitled to coverage under
the Trustees' and Officers' errors and omissions insurance to the extent
applicable and (ii) the Company would indemnify Mr. Hammond for all reasonable
expenses incurred and any judgments against him to the extent that the Company,
in its discretion, determines that his actions as a Senior Vice President were
proper.
SHARE PERFORMANCE GRAPH
The following graph provides a comparison of cumulative total shareholder return
for the period from January 19, 1994 (the date on which the Common Shares were
first publicly traded) through December 31, 1997, among the Company, the
Standard & Poor's ("S&P") 500 Index, the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") Equity REIT Total Return Index (the "Equity
REIT Index"), an industry index of 176 equity REITs (including the Company), and
the NAREIT Equity Residential REIT Total Return Index (the "Equity Residential
REIT Index"), an industry index of 35 equity residential REITs (including the
Company). The Share Performance Graph assumes an investment of $100 in each of
the Company and the three indexes, and the reinvestment of any dividends. Equity
REITs are defined as those with 75% or more of their gross invested book value
of assets invested directly or indirectly in the equity ownership of real
estate. Upon written request, the Company will provide any shareholder with a
list of the REITs included in the Equity REIT Index and the Equity Residential
REIT Index. The historical information set forth below is not necessarily
indicative of future performance. Data for the S&P 500 Index, the Equity REIT
Index and the Equity Residential REIT Index were provided to the Company by
NAREIT.
This is the first year the Company has included the Equity Residential REIT
Index in the Share Performance Graph. In the future, the Company intends to use
such index in lieu of the Equity REIT Index. The Company believes that the
Equity Residential REIT Index is more applicable and provides a better basis for
comparison with the Company because it is comprised solely of residential REITs.
MEASUREMENT PERIOD EQUITY RESIDENTIAL
(FISCAL YEAR COVERED) THE COMPANY S&P 500 EQUITY REIT REIT
JAN. '94 $100.00 $100.00 $100.00 $100.00
DEC. '94 100.86 98.02 100.25 101.21
DEC. '95 117.18 134.71 115.56 113.62
DEC. '96 161.07 165.64 156.31 146.49
DEC. '97 168.32 220.92 187.98 169.99
Page-11
1994 SHARE OPTION PLAN AND INCENTIVE COMPENSATION PLAN
The Company adopted the 1994 Share Option Plan to provide incentives to
officers, employees and non-employee trustees. The Plan provides for the grant
of options to purchase a specified number of Common Shares or the grant of
Restricted Shares or Unrestricted Shares. The total number of options and Common
Shares that may be issued under the Plan is currently limited to 8% of the sum
of (i) the total number of Common Shares outstanding at the time of any grant
under the 1994 Share Option Plan and (ii) the total number of Common Shares
issuable upon the exchange of units of limited partnership ("Units") in the
Operating Partnership that are outstanding at any such time (other than Units
held by the Company or its subsidiaries). There is, however, a proposal in this
Proxy Statement to increase such percentage to 9%. See "Proposal 2: Approval of
an Amendment to the Second Amended and Restated 1994 Share Option and Incentive
Plan, as Amended."
Each year, the Company establishes an incentive compensation plan (the
"Incentive Compensation Plan") for certain executive officers of the Company.
This plan provides for the maximum bonus officers may receive if certain Company
and business unit performance objectives established for each individual are
achieved. The bonus paid to each officer is based primarily upon improvement in
Funds from Operations, computed on a per share basis, and secondarily on an
evaluation of individual performance based on specific qualitative criteria.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Introduction
- ------------
The Company's executive compensation program is intended to attract, retain and
reward experienced, highly motivated executives who contribute to the Company's
growth. The Compensation Committee of the Board of Trustees is currently
composed of all four Independent Trustees. The Compensation Committee is
responsible for setting base salaries for executive officers, administering the
Incentive Compensation Plan and determining awards to executive officers under
the Company's 1994 Share Option Plan. In addition to administering executive
compensation, the Compensation Committee also administers the Company's 1994
Share Option Plan, reviews and makes recommendations regarding benefit plans and
reviews from time to time succession planning for senior management.
Compensation Committee Procedures During 1997
- ---------------------------------------------
The Compensation Committee believes that at present the Company will be best
served if:
- - Executive base salaries are kept at amounts approximating the median levels
prevailing within the industry.
- - A part of each executive officer's compensation is contingent on the award
of a cash bonus following a year-end review, which bonus will be based on
growth of the Company's Funds from Operations and on the executive's
performance of direct functional responsibilities as well as Company-wide
responsibilities.
- - Executive officers are given significant equity-based awards as an
incentive both to perform effectively and to remain with the Company.
- - The combination of base salary, annual cash bonus and equity-based awards
is targeted to provide the executive officers with compensation that is at
or approximates the median level for the industry if the Company performs
at a level of performance that is targeted each year by the Compensation
Committee and at a higher level than the median industry level if the
Company's performance exceeds such target.
The Compensation Committee believes that at present this arrangement will serve
to motivate the Company's executive officers and to align the incentives of the
executive officers with the interest of the Company's shareholders in long-term
growth of Funds from Operations and increases in share value.
Page-12
Base Salary
- -----------
Following the completion of the 1997 year, the Compensation Committee reviewed
the Company's growth and financial performance during 1997 as well as each
executive officer's performance, tenure with the Company and its predecessors,
and industry experience. The Committee also reviewed surveys of compensation in
relevant industry categories. Based on its evaluation of these factors and
guidelines, and the continuing determination of the Committee and senior
management that the Company would be best served if total compensation
(including bonuses and equity-based awards) of executive officers remained at
amounts approximating the median level for the industry for target performance
by the Company, the Compensation Committee determined to increase 1998 base
salaries for executive officers from their 1997 levels. The 1998 base salary for
Mr. Bromley is $220,000, for Mr. Rippel is $200,000 and for Messrs. Clark and
Banks is $160,000. Each executive officer has entered into an employment
agreement with the Company. See "Compensation of Trustees and Executive Officers
- --Employment and Severance Agreements." While such employment agreements
automatically renew for additional one year terms unless a notice to the
contrary effect is given by either party, the employment agreements do not
provide for annual automatic increases in base salary.
Bonuses
- -------
The Committee previously established an Incentive Compensation Plan that
outlined the criteria by which cash bonuses for service in 1997 would be
determined. The Incentive Compensation Plan provided that each executive officer
could achieve a cash bonus based on the achievement of a targeted rate of growth
in the Company's Funds from Operations and the Committee's subjective evaluation
of such executive officer's individual performance as judged against specific
goals based on business function and Company-wide responsibilities.
In 1998, the Compensation Committee applied the criteria it had established in
the 1997 Incentive Compensation Plan by (i) evaluating the growth in the
Company's Funds from Operations, and (ii) evaluating each executive officer's
performance against the criteria established for his position. Based on such
evaluation, the Committee awarded the bonuses described in "Compensation of
Trustees and Executive Officers -- Summary Compensation Table."
The Compensation Committee has established the terms of the 1998 Incentive
Compensation Plan. The 1998 Incentive Compensation Plan provides that executive
officers will be eligible to receive a cash bonus which is targeted to be in the
range of 40% to 50% of base salary if targeted financial performance is achieved
but which can be as much as 80% to 100% of base salary if financial performance
significantly exceeds this target. For each executive officer, a portion of such
bonus (determined in advance by the Committee) will be determined by the
achievement of a Funds from Operations target and the remaining portion by an
evaluation of performance within the officer's business unit or function. Each
officer's evaluation will be made against specific criteria that the Committee
will develop with the aid, where appropriate, of the Chief Executive Officer.
Equity-based Awards
- -------------------
The Committee continues to believe that the possibility to earn grants of Common
Shares under the 1994 Share Option Plan will be a motivating award and an
effective tool for retaining experienced and talented executives. Last year, the
Committee announced its intention to award Common Shares following the end of
1997 if the growth of the Company's Funds from Operations warranted, in the
opinion of the Committee, such awards. Based on the Company achieving Funds from
Operations growth in excess of the target set by the Committee, the Committee
awarded 21,600 Common Shares to executive officers and 31,720 Common Shares to
other employees. The total number of shares awarded was significantly less than
the maximum number that the Committee had authorized for issuance upon
establishment of the program based on the Committee's review of overall total
return on Common Shares for 1997. One-fourth of each award consisted of
Unrestricted Shares and three-fourths consisted of Restricted Shares that vest
in three equal annual installments beginning on January 1, 1999. As stated
above, the Committee believes the grant of the Unrestricted Shares and the
benefit from the vesting of the Restricted Shares will motivate officers and
promote the retention of executives.
No option grants were made to executive officers in 1997 or following the year
end in respect of 1997. Options with respect to 215,225 Common Shares were
granted on May 30, 1997 to other employees.
Page-13
Compensation of Chief Executive Officer
- ---------------------------------------
In determining the compensation of the chief executive officer, the Compensation
Committee applies the same philosophy and procedures as are applied to other
executive officers. The Committee evaluated the Company's financial performance
during 1997 as well as Mr. Bromley's tenure with the Company and its
Predecessor, his industry experience, and his performance during the 1997 fiscal
year. As discussed above, the Committee decided to raise executive officer base
salaries for 1998 and, accordingly, Mr. Bromley's base salary was increased to
$220,000.
In accordance with the cash incentive criteria established in the 1997 Incentive
Compensation Plan described above, the Committee awarded Mr. Bromley a cash
bonus of $80,000 in respect of Company-wide and individual performance during
1997. On February 12, 1998, Mr. Bromley was granted 1,200 Unrestricted Shares
and 3,600 Restricted Shares which vest in three equal installments on January 1,
1999, January 1, 2000 and January 1, 2001 (subject, in general, to continued
service by Mr. Bromley with the Company and other terms and conditions set forth
in a Restricted Share Agreement).
Other
- -----
The Securities and Exchange Commission (the "SEC") requires that this report
comment upon the Company's policy with respect to Section 162(m) of the Internal
Revenue Code, which limits the deductibility on the Company's tax return of
compensation over $1 million to any of the named executive officers of the
Company unless the compensation is paid pursuant to a plan which is
performance-related, non-discretionary and has been approved by the Company's
shareholders. The Company did not pay any compensation during 1997 that would be
subject to Section 162(m). The Company believes that, because it qualifies as a
REIT under the Internal Revenue Code and therefore is not subject to Federal
income taxes on its income to the extent distributed, the payment of
compensation that does not satisfy the requirements of Section 162(m) will not
generally affect the Company's net income, although to the extent that
compensation does not qualify for deduction under Section 162(m) a larger
portion of shareholder distributions may be subject to Federal income taxation
as dividend income rather than return of capital. The Company does not believe
that Section 162(m) will materially affect the taxability of shareholder
distributions, although no assurance can be given in this regard due to the
variety of factors that affect the tax position of each shareholder. For these
reasons, the Compensation Committee's compensation policy and practices are not
directly governed by Section 162(m).
David M. Holland
Lauralee E. Martin
John W. McIntyre
D. Raymond Riddle
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee consists of Messrs. Holland, McIntyre and Riddle and
Ms. Martin. None of them has served as an officer of the Company or has any
other business relationship or affiliation with the Company, except his or her
service as a trustee.
Page-14
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth the beneficial ownership of Common Shares as of
February 28, 1998 (unless otherwise noted) for (i) trustees and executive
officers of the Company, (ii) each person who beneficially owns more than 5% of
the outstanding Common Shares of the Company and (iii) the trustees (including
Independent Trustees) and executive officers of the Company as a group. Unless
otherwise indicated in the footnotes, all of such interests are owned directly,
and the indicated person or entity has sole voting and investment power. The
number of shares represents the number of Common Shares and Units held by the
person. Each Unit may be presented to the Operating Partnership for redemption
at a cash price equal to the market value of one Common Share, except that the
Company may acquire any Unit so presented for such cash price or for one Common
Share. The Company has publicly disclosed its intention to acquire Units
presented for redemption for Common Shares. The extent to which the persons hold
Common Shares as opposed to Units is set forth in the footnotes. Under the 1994
Share Option Plan, following the 1998 Annual Meeting each Independent Trustee
will be granted an option to purchase 5,000 Common Shares at an exercise price
equal to the fair market value of a Common Share on the date of grant; such
grant is not reflected in the information set forth below.
Number of
Name and Business Address Shares and Units Percent of Percent of
of Beneficial Owners Beneficially Owned All Shares(1) All Shares and Units(2)
-------------------- ------------------ ------------- -----------------------
Trustees and Executive Officers
- -------------------------------
Marcus E. Bromley(3)..................... 330,545 1.5% 1.3%
John T. Rippel(4)........................ 414,207 1.9% 1.6%
C. Jordan Clark(5)....................... 184,258 * *
Marvin R. Banks, Jr.(6).................. 101,413 * *
William M. Hammond(7).................... 105,512 * *
David M. Holland(8)...................... 15,072 * *
Lauralee E. Martin(9).................... 13,349 * *
John W. McIntyre(10)..................... 14,349 * *
D. Raymond Riddle (11)................... 1,000 * *
2859 Paces Ferry Road,
Overlook III, Suite 1450
Atlanta, GA 30339
All trustees and executive officers as a
group (9 persons)...................... 1,179,705 5.2% 4.5%
5% Holders
- ----------
Stichting Pensioenfonds ABP (12)......... 1,435,000 6.5% 5.5%
Oude Lindestraat 70; post bus
2889, 6401 DL Heerlen,
The Netherlands
The Prudential Insurance Company of
America(13)............................ 1,011,700 4.6% 3.9%
751 Broad Street
Newark, New Jersey 07102
_________________
* Less than 1%
<FN>
(1) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for Common Shares.
The total number of shares outstanding used in calculating this percentage
assumes that none of the Units held by other persons are presented to the
Operating Partnership for redemption and acquired by the Company for Common
Shares.
Page-15
(2) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for Common Shares.
In addition, the total number of shares used in calculating this percentage
assumes that all of the Units outstanding held by all persons other than
the Company are presented to the Operating Partnership for redemption and
acquired by the Company for Common Shares.
(3) The indicated ownership includes 68,332 Common Shares (including 7,600
Restricted Shares), 155,009 Units, options to purchase 60,332 Common Shares
which are currently exercisable or exercisable within 60 days of February
28, 1998 and 46,872 Common Shares owned by Mr. Bromley's minor children,
with respect to which Common Shares Mr. Bromley disclaims beneficial
ownership. The indicated ownership does not include 4,415 shares donated by
Mr. Bromley to the Metropolitan Atlanta Community Foundation, Inc. in which
Common Shares Mr. Bromley does not have a pecuniary interest.
(4) The indicated ownership includes 109,793 Common Shares (including 6,300
Restricted Shares), 247,414 Units and options to purchase 57,000 Common
Shares which are currently exercisable or exercisable within 60 days of
February 28, 1998.
(5) The indicated ownership includes 32,578 Common Shares (including 9,600
Restricted Shares), 105,165 Units, options to purchase 42,900 Common Shares
which are currently exercisable or exercisable within 60 days of February
28, 1998, 2,614 Common Shares owned by Mr. Clark's minor children, with
respect to which Common Shares Mr. Clark disclaims beneficial ownership and
1,001 Common Shares owned by Mr. Clark's spouse, with respect to which
Common Shares Mr. Clark disclaims beneficial ownership.
(6) The indicated ownership includes 20,546 Common Shares (including 6,000
Restricted Shares), 42,667 Units and options to purchase 38,200 Common
Shares which are currently exercisable or exercisable within 60 days of
February 28, 1998.
(7) The indicated ownership includes 3,400 Common Shares, 65,112 Units and
options to purchase 37,000 Common Shares which are currently exercisable or
exercisable within 60 days of February 28, 1998.
(8) The indicated ownership includes 1,872 Common Shares, options to purchase
13,000 Common Shares which are currently exercisable or exercisable within
60 days of February 28, 1998 and 200 Common Shares owned by Mr. Holland's
spouse, with respect to which Common Shares Mr. Holland disclaims
beneficial ownership.
(9) The indicated ownership includes 349 Common Shares and options to purchase
13,000 Common Shares which are currently exercisable or exercisable within
60 days of February 28, 1998.
(10) The indicated ownership includes 1,349 Common Shares and options to
purchase 13,000 Common Shares which are currently exercisable or
exercisable within 60 days of February 28, 1998.
(11) The indicated ownership includes 1,000 Common Shares.
(12) The indicated ownership is as of September 26, 1996 and is based solely on
a Schedule 13D provided by this entity to the Company.
(13) The indicated ownership is as of December 31, 1997 and is based solely on a
Schedule 13G provided by this entity to the Company.
</FN>
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers and trustees, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the SEC and the NYSE.
Officers, trustees and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
Page-16
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its executive officers, trustees
and greater than 10% beneficial owners were satisfied.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE SECOND AMENDED AND RESTATED
1994 SHARE OPTION AND INCENTIVE PLAN, AS AMENDED
As currently written, the 1994 Share Option Plan provides that the total number
of share options and Common Shares that may be issued under the Plan is limited
to 8% of the sum of (i) the total number of Common Shares outstanding at the
time of any grant under the 1994 Share Option Plan and (ii) the total number of
Common Shares issuable upon the exchange of Units that are outstanding at any
such time (other than Units held by the Company or its subsidiaries)
("Outstanding Units"). As currently written, the Plan does not limit the number
of Common Shares for which share options may be granted to any one individual
participant during any one calendar year period.
On March 16, 1998, the Board of Trustees authorized and approved, subject to
shareholder approval, an amendment to the 1994 Share Option Plan (i) increasing
the percentage discussed in the preceding paragraph to 9% and (ii) limiting the
number of Common Shares for which share options may be granted to any one
individual participant during any one calendar year period to 200,000 Common
Shares.
The Board of Trustees continues to believe that the Company's growth and
long-term success depend in large part upon retaining and motivating key
management personnel and that this can be achieved in part through design and
implementation of effective compensation policies and practices. The Board of
Trustees believes that share options and other share-based incentive awards
(e.g., Restricted Share awards and Unrestricted Share awards) can play an
important role in the success of the Company by encouraging and enabling the
officers and other employees of the Company, upon whose judgment, initiative and
efforts the Company largely depends for sustained growth and profitability, to
acquire a proprietary interest in the long term performance of the Company. The
Board of Trustees anticipates that providing such persons with a direct stake in
the Company will assure a closer identification of the interests of participants
in the 1994 Share Option Plan with those of the Company, thereby stimulating
their efforts to promote the Company's future success and strengthen their
desire to remain with the Company. The Board of Trustees believes that the
proposed increase in the number of shares issuable under the 1994 Share Option
Plan will help the Company to accomplish these goals and will keep the Company's
share-based incentive compensation competitive with that of its competitors.
The purpose of the proposed limitation on the number of Common Shares for which
share options may be granted to any one individual participant during any one
calendar year period is to enable the Company to take advantage of the
"performance-based compensation" exception to Section 162(m) of the Code.
Section 162(m) limits the deductibility on the Company's tax return of
compensation over $1 million to any of the named executive officers of the
Company unless the compensation is paid pursuant to a plan which is
performance-based, non-discretionary and has been approved by the Company's
shareholders. In order for share options to qualify as "performance-based
compensation" under Section 162(m), the plan, among other things, must include a
per-employee limitation on the number of shares for which options may be granted
during a specified time period. For a discussion of the Company's policy with
respect to Section 162(m) of the Code, see "Compensation Committee Report on
Executive Compensation--Other."
The closing price of each Common Share as reported on the NYSE on February 27,
1998 was $26.4375.
RECOMMENDATION
- --------------
THE BOARD OF TRUSTEES RECOMMENDS THAT THE PLAN AMENDMENT BE APPROVED, AND
THEREFORE RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Page-17
Summary of the 1994 Share Option Plan, as Amended
- -------------------------------------------------
The following description of certain features of the 1994 Share Option Plan is
intended to be a summary only and reference is made to the full text of the 1994
Share Option Plan which has been filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Number of Shares Issuable. Subject to adjustment for share splits, share
dividends and similar events, the total number of Common Shares that may be
issued under the 1994 Share Option Plan is currently 8% of the sum of the total
number of Common Shares and Outstanding Units outstanding at the time of any
grant under the 1994 Share Option Plan. Additionally, at any time the maximum
number of Common Shares issued or available for issuance under the 1994 Share
Option Plan as Restricted Share awards or Unrestricted Share awards is equal to
50% of the total number of Common Shares available for issuance under the Plan
at such time. Common Shares underlying any awards under the 1994 Share Option
Plan which are forfeited, canceled, reaquired by the Company, satisfied without
the issuance of Common Shares or otherwise terminated (other than by exercise)
shall be added back to the Common Shares available for issuance under the 1994
Share Option Plan.
If adopted, the Plan Amendment would increase the number of Common Shares
issuable under the 1994 Share Option Plan from 8% to 9% of the sum of the total
number of Common Shares and Outstanding Units outstanding at the time of any
grant under the Plan. Additionally, the Plan Amendment, if adopted, would limit
to 200,000 the number of Common Shares for which share options may be granted to
any one individual participant during any one calendar year period.
PLAN ADMINISTRATION; ELIGIBILITY. The 1994 Share Option Plan is administered by
the Compensation Committee of the Board of Trustees of the Company. All members
of the Committee must be non-employee directors as that term is defined under
the rules promulgated by the SEC and outside directors as defined in Section 162
of the Code and the regulations promulgated thereunder.
The Committee has full power to select, from among the employees eligible for
awards, the individuals to whom awards will be granted, to make any combination
of awards to participants, and to determine the specific terms of each award,
subject to the provisions of the 1994 Share Option Plan. Persons eligible to
participate in the 1994 Share Option Plan are those employees of the Company and
its subsidiaries who are responsible for or contribute to the management, growth
or profitability of the Company and its subsidiaries, as selected from time to
time by the Committee.
SHARE OPTIONS. The 1994 Share Option Plan permits the granting of (i) options to
purchase Common Shares intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Options") and (ii) options that do not so
qualify ("Non-Qualified Options"). The option exercise price of each option will
be determined by the Committee but, except as described below, may not be less
than 100% of the fair market value of the shares on the date of grant. In the
case of grants of Non-Qualified Options in lieu of cash compensation, however,
the exercise price may not be less than 50% of the fair market value of the
Common Shares on the date of grant.
The term of each option is fixed by the Committee and may not exceed ten years
from date of grant in the case of an Incentive Option. The Committee determines
at what time or times each option may be exercised and, subject to the
provisions of the 1994 Share Option Plan, the period of time, if any, after
retirement, death, disability or termination of employment during which options
may be exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Committee. Independent
Trustees are also eligible to receive certain awards under the 1994 Share Option
Plan.
Upon exercise of options, the option exercise price must be paid in full either
in cash or by certified or bank check or other instrument acceptable to the
Committee or, if the Committee so permits, by delivery of Common Shares already
owned by the optionee that are not then subject to restrictions under any
Company plan and that have been held by the optionee for at least six months.
Additionally, the exercise price may be delivered to the Company by a broker
pursuant to irrevocable instructions to the broker from the optionee. Finally,
the option exercise price may also be paid by the optionee delivering to the
Page-18
Company a full recourse promissory note, provided that the Committee has
authorized the loan to the optionee and has established the terms of the
promissory note. At the Company's discretion, such note shall be accompanied by
a pledge agreement with respect to the underlying Common Shares.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including limits on value of shares subject to Incentive Options
which first become exercisable in any one year, and a shorter term and higher
minimum exercise price in the case of certain large shareholders.
At the discretion of the Committee, options granted under the 1994 Share Option
Plan may include a so-called "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of Common Shares in accordance
with the 1994 Share Option Plan would automatically be granted an additional
option (with an exercise price equal to the fair market value of a Common Share
on the date the additional option is granted and with the same expiration date
as the original option being exercised, and with such other terms as the
Committee may provide) to purchase that number of Common Shares equal to the
number delivered to exercise the original option.
Under the 1994 Share Option Plan, following each annual meeting of shareholders,
each of the Company's Independent Trustees automatically receives an option to
purchase 5,000 Common Shares at the market price of the Common Shares on the
date of grant.
RESTRICTED SHARES. The Committee may award Common Shares (at no cost or for a
purchase price determined by the Committee) to officers and other employees
subject to such conditions and restrictions as the Committee may determine
("Restricted Shares"). These conditions and restrictions may include the
achievement of certain performance goals and/or continued employment with the
Company through a specified restricted period. The purchase price, if any, of
Restricted Shares will be determined by the Committee. If the performance goals
and other restrictions are not attained, the employees may forfeit their
Restricted Share awards. There is a limitation on the number of Restricted
Shares which may be granted by the Committee under the 1994 Share Option Plan.
See "--Number of Shares Issuable" for a summary of this limitation.
UNRESTRICTED SHARES. The Committee may grant shares (at no cost or for a
purchase price determined by the Committee) which are free from any restrictions
under the 1994 Share Option Plan ("Unrestricted Shares"). Unrestricted Shares
may be issued to employees in recognition of past services or other valid
consideration, and may be issued in lieu of cash bonuses to be paid to such
employees under the Company's Incentive Compensation Plan upon the request of
such employees and with the consent of the Committee. In addition, the
Independent Trustees may elect to waive part or all of their fees in exchange
for Unrestricted Shares. There is a limitation on the number of Unrestricted
Shares which may be granted by the Committee under the 1994 Share Option Plan.
See "--Number of Shares Issuable" for a summary of this limitation.
ADJUSTMENTS FOR SHARE DIVIDENDS, MERGERS, ETC. The Committee will make
appropriate adjustments in outstanding awards to reflect share dividends, share
splits and similar events. In the event of a merger, liquidation, sale of the
Company or similar event, the Committee, in its discretion, may provide for
substitution or adjustments of outstanding options, or may terminate all
unexercised options with or without payment of cash consideration.
AMENDMENTS AND TERMINATION. The Board of Trustees may at any time amend or
discontinue the 1994 Share Option Plan, and the Committee may at any time amend
or cancel outstanding awards for the purpose of satisfying changes in the law or
any other lawful purpose. However, no such action may be taken which adversely
affects any rights under outstanding awards without the holder's consent.
Further, amendments shall be subject to approval by the Company's shareholders
to the extent required by the Code to ensure that options granted under the 1994
Share Option Plan qualify as Incentive Options.
CHANGE OF CONTROL PROVISIONS. Upon the occurrence of a Change of Control (as
defined) each outstanding, unexercisable share option shall automatically become
fully exercisable. In addition, any restrictions and conditions on Restricted
Shares issued pursuant to the 1994 Share Option Plan shall automatically be
deemed waived, and the recipients of such awards shall become entitled to
receipt of the shares subject to such awards, unless otherwise expressly
provided at the time of grant.
Page-19
Tax Aspects Under the U.S. Internal Revenue Code
- ------------------------------------------------
The following is a summary of the principal Federal income tax consequences of
option grants under the 1994 Share Option Plan. It does not describe all Federal
tax consequences under the 1994 Share Option Plan, nor does it describe state or
local tax consequences.
INCENTIVE OPTIONS. Under the Code, an employee will not realize taxable income
by reason of the grant or the exercise of an Incentive Option. If an employee
exercises an Incentive Option and does not dispose of the shares until the later
of (a) two years from the date the option was granted or (b) one year from the
date the shares were transferred to the employee, the entire gain, if any,
realized upon disposition of such shares will be taxable to the employee as
long-term capital gain and the Company will not be entitled to any deduction. If
an employee disposes of the shares within such one-year or two-year period in a
manner so as to violate the holding period requirements (a "disqualifying
disposition"), the employee generally will realize ordinary income in the year
of disposition, and the Company will receive a corresponding deduction, in an
amount equal to the excess of (1) the lesser of (x) the amount, if any, realized
on the disposition and (y) the fair market value of the shares on the date the
option was exercised over (2) the option price. Any additional gain realized on
the disposition will be long-term, mid-term or short-term capital gain and any
loss will be long-term, mid-term or short-term capital loss. The employee will
be considered to have disposed of his shares if he sells, exchanges, makes a
gift of or transfers legal title to the shares (except by pledge or by transfer
on death). If the disposition of shares is by gift and violates the holding
period requirements, the amount of the employee's ordinary income (and the
Company's deduction) is equal to the fair market value of the shares on the date
of exercise less the option price. If the disposition is by sale or exchange,
the employee's tax basis will equal the amount paid for the shares plus any
ordinary income realized as a result of the disqualifying distribution. The
exercise of an Incentive Option may subject the employee to the alternative
minimum tax.
An employee who surrenders Common Shares in payment of the exercise price of his
Incentive Option generally will not, under proposed Treasury Regulations,
recognize any gain or loss upon the surrender of such shares. The surrender of
Common Shares previously acquired upon exercise of an Incentive Option in
payment of the exercise price of another Incentive Option is, however, a
"disposition" of such shares of common stock. If the Incentive Option holding
period requirements described above have not been satisfied with respect to such
Common Shares, such disposition will be a disqualifying disposition that may
cause the employee to recognize ordinary income as discussed above.
Under proposed Treasury Regulations, all of the Common Shares received by an
employee upon exercise of an Incentive Option by surrendering Common Shares will
be subject to the Incentive Option holding period requirements. Of those shares,
a number of shares (the "Exchange Shares") equal to the number of Common Shares
surrendered by the employee will have the same tax basis for capital gains
purposes (increased by any ordinary income recognized as a result of any
disqualifying disposition of the surrendered shares if they were Incentive
Option shares) and the same capital gains holding period as the shares
surrendered. For purposes of determining ordinary income upon a subsequent
disqualifying disposition of the Exchange Shares, the amount paid for such
shares will be deemed to be the fair market value of the shares surrendered. The
balance of the shares received by the employee will have a tax basis (and a
deemed purchase price) of zero and a capital gains holding period beginning on
the date of exercise. The Incentive Option holding period for all shares will be
the same as if the option had been exercised for cash.
An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for Federal income tax purposes. In the case of an employee who is
disabled, the three-month period is extended to one year and in the case of an
employee who dies, the three-month employment rule does not apply.
NON-QUALIFIED OPTIONS. There are no Federal income tax consequences to either
the optionee or the Company on the grant of a Non-Qualified Option. On the
exercise of a Non-Qualified Option, the optionee has taxable ordinary income
equal to the excess of the fair market value of the Common Shares received on
the exercise date over the option price of the shares. The optionee's tax basis
for the shares acquired upon exercise of a Non-Qualified Option is increased by
the amount of such taxable income. The Company will be entitled to a Federal
income tax deduction in an amount equal to such excess. Upon the sale of the
shares acquired by exercise of a Non-Qualified Option, optionees will realize
long-term, mid-term or short-term capital gain or loss depending upon their
holding period for such shares.
Page-20
An optionee who surrenders Common Shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss on the surrender of such
shares. (Such an optionee will recognize ordinary income on the exercise of the
Non-Qualified Option as described above.) Of the shares received in such an
exchange, that number of shares equal to the number of shares surrendered will
have the same tax basis and capital gains holding period as the shares
surrendered. The balance of the shares received will have a tax basis equal to
their fair market value on the date of exercise, and the capital gains holding
period will begin on the date of exercise.
PARACHUTE PAYMENTS. The exercise of any portion of any option that is
accelerated due to the occurrence of a change of control may cause a portion of
the payments with respect to such accelerated options to be treated as
"parachute payments" as defined in the Code. Any such parachute payments may be
non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% Federal excise tax on all or portion of such
payment (in addition to other taxes ordinarily payable).
For transactions occurring after July 28, 1997, the Taxpayer Relief Act of 1997
has created three different types of capital gains for individuals: short-term
gains (on assets held for one year or less) which are taxed at ordinary income
rates; mid-term capital gains (from the sale of assets held more than a year but
not more than 18 months) which are taxed at a maximum rate of 28%; and long-term
capital gains (from the sale of assets held more than 18 months) which are taxed
at a maximum rate of 20%.
SECTION 162(M) OF THE CODE. As a result of Section 162(m) of the Code, the
Company's deduction for Non-Qualified Options and other awards under the Plan
may be limited to the extent that a "covered employee" (i.e., the Chief
Executive Officer or other executive officer whose compensation is required to
be reported in the summary compensation table of this Proxy Statement) receives
compensation in excess of $1,000,000 in such taxable year.
1994 Share Options Plan Benefits
- --------------------------------
The benefits or amounts that will be received by or allocated to any individual
or group of individuals under the 1994 Share Option Plan are not determinable,
except that each Independent Trustee will automatically receive an option to
purchase 5,000 Common Shares following each Annual Meeting. All option grants to
Independent Trustees are at a per share exercise price equal to the fair market
value of the Common Shares at the time of grant.
Page-21
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED
DECLARATION OF TRUST
The Declaration of Trust, as currently in effect, authorizes the issuance of one
hundred and sixty-one million (161,000,000) shares of beneficial interest,
consisting of (i) ten million (10,000,000) preferred shares of beneficial
interest, par value $.01 per share ("Preferred Shares"), (ii) one hundred
million (100,000,000) Common Shares and (iii) fifty-one million (51,000,000)
excess shares of beneficial interest, par value $.01 per share. Of the
10,000,000 Preferred Shares currently authorized, as of the date of this Proxy
Statement there were 4,600,000 Series A Cumulative Redeemable Preferred Shares
issued and outstanding. On March 16, 1998, the Board of Trustees authorized and
approved, subject to shareholder approval, an amendment to Section 4.1 of the
Declaration of Trust increasing the authorized number of Preferred Shares to
twenty million (20,000,000). In accordance with Section 4.2 of the Declaration
of Trust, the Board of Trustees may issue such Preferred Shares in one or more
series consisting of such numbers of shares and having such preferences,
conversion or other rights, voting powers, restrictions, and limitations as to
dividends, qualifications and terms and conditions of redemption as the Board of
Trustees may from time to time determine when designating such series.
The Board of Trustees believes it to be in the best interest of the Company and
its shareholders to have additional Preferred Shares authorized which would be
available for issuance in connection with future financings, investment
opportunities or acquisitions. If authorization of any increase in the Preferred
Shares is postponed until a specific need arises, the delay and expense incident
to obtaining shareholder approval at that time could impair the Company's
ability to meet its objectives. The Company does not now have any agreement,
understanding, arrangement or commitment which would result in the issuance of
any additional Preferred Shares to be authorized and no assurance can be given
at this time that additional Preferred Shares will, or as to the circumstances
under which such Preferred Shares might, in fact be issued. The additional
Preferred Shares would be available for issuance without further action by the
shareholders, unless required by Maryland law, the Declaration of Trust, the
Bylaws or applicable NYSE requirements.
Because the Board of Trustees has the ability to set the various rights and
restrictions of Preferred Shares, the issuance of Preferred Shares may, among
other things, have a dilutive effect on earnings per share and equity and voting
power of existing shareholders. As noted above, Preferred Shares could also be
issued which rank prior to Common Shares as to dividend rights, liquidation
preference or both. The issuance of additional Preferred Shares could also be
used to impede an unsolicited bid for control of the Company which the Board of
Trustees believed was not in the best interests of the Company or its
shareholders. Accordingly, an effect of the increase in the number of authorized
Preferred Shares may be to defer a future takeover attempt which a holder of
Common Shares may deem to be in such holder's best interest. The availability of
additional Preferred Shares as a defensive response to a takeover attempt was
not a motivating factor in the Board's approval of the Charter Amendment, and
the Board is not aware of any effort to obtain control of the Company.
If the proposed Charter Amendment is approved by the shareholders, such
amendment will be effective upon filing of Articles of Amendment with the State
Department of Assessments and Taxation of Maryland.
RECOMMENDATION
- --------------
THE BOARD OF TRUSTEES RECOMMENDS THAT THE CHARTER AMENDMENT BE APPROVED, AND
THEREFORE RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Page-22
OTHER MATTERS
Independent Auditors
- --------------------
The accounting firm of Arthur Andersen LLP has served as the Company's
independent auditors since the Company's formation in October, 1993. A
representative of Arthur Andersen LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement if he so desires and will be
available to respond to appropriate questions.
Expenses of Solicitation
- ------------------------
The cost of solicitation of proxies will be borne by the Company. In an effort
to have as large a representation at the meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy material to
their principals who are beneficial owners of the Company's Common Shares. In
addition, Corporate Investor Communications, Inc. has been engaged by the
Company to act as proxy solicitors and will receive a fee of $6,500 plus
expenses.
Shareholder Proposals
- ---------------------
Any shareholder proposals submitted pursuant to Exchange Act Rule 14a-8 and
intended to be presented at the Company's 1999 Annual Meeting must be received
by the Company on or before December 1, 1998 to be eligible for inclusion in the
proxy statement and form of proxy to be distributed by the Board of Trustees in
connection with such meeting.
Any shareholder proposals intended to be presented at the Company's 1999 Annual
Meeting, other than a shareholder proposal submitted pursuant to Exchange Act
Rule 14a-8, must be received in writing at the principal executive office of the
Company no later than March 5, 1999, nor prior to November 20, 1998, together
with all supporting documentation required by the Company's Bylaws.
Other Matters
- -------------
The Board of Trustees does not know of any matters other than those described in
this Proxy Statement which will be presented for action at the Annual Meeting.
If other matters are presented, proxies will be voted in accordance with the
best judgment of the proxy holders.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
Page-23
DETACH HERE
P R O X Y
GABLES RESIDENTIAL TRUST
2859 PACES FERRY ROAD, OVERLOOK III, SUITE 1450
ATLANTA, GA 30339
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints John T. Rippel and Marvin R. Banks, Jr., and
each of them, proxies with full power of substitution to vote for and on behalf
of the undersigned at the Annual Meeting of Shareholders of Gables Residential
Trust, to be held at the Vinings Club located in the office building of the
Company's headquarters at 2859 Paces Ferry Road, Atlanta, Georgia, 30339 on
Tuesday, May 19. 1998 at 9:00 a.m., and at any adjournments thereof, hereby
granting full power and authority to act on behalf of the undersigned at said
meeting or an adjournments thereof. The undersigned hereby revokes any proxy
previously given in connection with such meeting and acknowledges receipt of the
Notice of Annual Meeting of Shareholders and Proxy Statement and the 1997 Annual
Report to Shareholders.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
Page-24
[X] Please mark votes
as in this example.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no instruction is indicated with respect to
Items 1,2 and 3 below, the undersigned's votes will be cast in favor of such
matters. PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
1. To elect two Class I Trustees 3. To approve the amendment to the
to hold office until the 2001 Amended and Restated Declaration
Annual Meeting of Shareholders of Trust of Gables Residential
and until their successors are Trust increasing the number of
duly elected and qualified and authorized Preferred Shares from
two Class II Trustees to hold 10,000,000 to 20,000,000
office until the 1999 Annual
Meeting of Shareholders and FOR AGAINST ABSTAIN
until their successors are duly [ ] [ ] [ ]
elected and qualified.
Class I Nominees: Marcus E. Bromley and
David M. Holland 4. To consider and act upon any
Class II Nominees:D. Raymond Riddle and matters incidental to the
Chris D. Wheeler foregoing or any other matters
which may properly come before
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES the meeting or any adjournments
[ ] [ ] thereof.
[ ]
---------------------------------------
For all nominees except as noted above
2. To approve the amendment to the Gables
Residential Trust Second Amended and
Restated 1994 Share Option and Incentive
Plan described in the Proxy Statement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR [ ]
ADDRESS CHANGE
AND NOTE AT LEFT
For joint accounts, each owner should
sign. Executors, administrators,
trustees, corporate officers and
others acting in a representative
capacity should give full title or
authority.
Signature: Date: Signature: Date:
------------------- ----- ------------------ ------