Exhibit 99.3
CLASS II. DIRECTORS
Edward R. Allen was, for the five years preceding the formation of the
Company, Chairman and Chief Executive Officer of InterCoastal Communities, Inc.,
a Florida corporation which was engaged in operating seven manufactured home
communities in Florida. Mr. Allen is a graduate of Cornell University.
C.G. "Jeff" Kellogg has been President and Chief Executive Officer and a
Director of the Company since its incorporation. For the five years preceding
the formation of the Company, Mr. Kellogg was President and Chief Operating
Officer of Chateau Estates. He is a past President of the Michigan Manufactured
Housing Association and served on the Manufactured Housing Institute's Community
Operations Committee. Mr. Kellogg is a graduate of Michigan Technological
University with a B. S. degree in Civil Engineering.
BOARD MEETINGS
The Board of Directors held five meetings during fiscal 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Audit Committee of the Board of Directors, consisting of
Messrs. Lane, Myers and Rudolph, held two meetings during fiscal 1995. The Audit
Committee reviews and acts or reports to the Board with respect to various
auditing and accounting matters, including the selection and fees of the
Company's independent auditors, the scope of audit procedures, the nature of
services to be performed for the Company by the independent auditors, and the
accounting practices of the Company.
Executive Committee. The Executive Committee of the Board of Directors,
consisting of Messrs. Boll and Kellogg, which may act on certain matters between
board meetings, held two meetings during fiscal 1995.
Executive Compensation Committee. The Executive Compensation Committee of the
Board of Directors, consisting of Messrs. Anton, Lane and Allen, held five
meetings during fiscal 1995. The Executive Compensation Committee administers
the Company's 1993 Long-Term Incentive Stock Plan, as amended. See "Compensation
Committee Report on Executive Compensation".
The Board of Directors has not established a separate committee of its
members to nominate candidates for election as directors of the Company.
DIRECTOR COMPENSATION
Each director is reimbursed for travel and other expenses related to
attendance at Board and committee meetings and, other than Mr. Kellogg who is an
officer of the Company, receives an annual director's fee of $12,000. Beginning
in 1996, the annual director's fee will be $14,000, plus a fee of $500 for each
Audit Committee and Executive Compensation Committee meeting attended, up to two
meetings per year. The directors also receive an annual grant of 5,000 options
to purchase the Company's Common Stock. On May 18, 1995 each of the Directors of
the Company, other than Mr. Kellogg, received an option on 5,000 shares of
common stock at an exercise price of $21.63 per share. On August 23, 1995 Mr.
Rudolph received an option on 5,000 shares of common stock at an exercise price
of $21.75 per share. Mr. Rudolph was elected to the Board after the other
members of the Board had received an option on 5,000 shares at an exercise price
of $20.00 per share. The options expire after 10 years and become exercisable at
a rate of 25 percent per year.
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EXECUTIVE COMPENSATION
The following table sets forth the summary compensation for the period
since the Company's public offering for the Chief Executive Officer and the
other Executive Officers of the Company whose salary and bonus compensation for
the year ended December 31, 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
NAME AND PRINCIPAL ------------------- STOCK ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------------------- ---- -------- -------- ------------ ------------
C.G. Kellogg............................ 1995 $164,712 $160,000 90,000(1) $12,760(2)
President and Chief Executive Officer 1994 $147,135 $120,000 -- $18,499(2)
1993(3) $ 16,733 -- 36,000 $31,920(4)
Tamara D. Fischer....................... 1995 $109,887 $ 62,000 45,000(1) $12,760(2)
Executive Vice President, Treasurer & 1994 $ 99,987 $ 60,000 -- $12,619(2)
Chief Financial Officer 1993(3) $ 10,600 -- 24,000 $15,040(4)
Lori A. Palazzolo....................... 1995 $ 87,864 $ 17,000 15,000(1) $ 6,673(2)
Vice President Controller(5) 1994 -- -- -- --
1993 -- -- -- --
Darrel D. Swain......................... 1995 $ 74,907 $ 29,000 20,000(1) $ 7,741(2)
Regional Vice President 1994 $ 67,593 $ 25,000 -- $ 8,542(2)
1993(3) $ 10,448 -- 12,000 $10,989(4)
Michael V. Campbell..................... 1995 $112,335 -- 24,000 --
Executive Vice President -- Florida 1994 $128,184 $ 30,000 -- --
Operations(6) 1993(3) $ 14,576 18,000 $15,040(4)
- ---------------------
(1) On February 28, 1996, options on 45,000, 23,000, 10,000 and 10,000
additional shares were granted to Mr. Kellogg, Ms. Fischer, Ms. Palazzolo
and Mr. Swain, respectively, as part of their 1995 compensation review.
(2) Amount represents a contribution under the Company's 401(K)/Profit Sharing
Plan.
(3) Represents salary paid during the partial year following the Company's
public offering. No bonuses with respect to 1993 were paid.
(4) Amount represents a contribution of $2,200 and $949 under the Company's
profit sharing plan with respect to Mr. Kellogg and Mr. Swain, respectively,
and $29,720, $15,040, $10,040 and $15,040 for Mr. Kellogg, Ms. Fischer, Mr.
Swain and Mr. Campbell, respectively, in value of limited partnership
interests allocated to these officers by persons forming the Company.
(5) Ms. Palazzolo commenced employment with the Company during 1994 and was
elected Vice President -- Controller of the Company in May 1995.
(6) Mr. Campbell resigned from the Company effective September 29, 1995.
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OPTION/SAR GRANTS DURING 1995
The following table sets forth information with respect to options granted
during 1995 to the Executive Officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ----------------------------------------------------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) 1995 ($/SH) DATE 5% ($) 10% ($)
- --------------------------- ------------ ------------ ----------- ---------- ---------- ----------
C.G. Kellogg............... 90,000 32% $ 19.50 02/23/05 $1,103,706 $2,797,018
Tamara D. Fischer.......... 45,000 16% $ 19.50 02/23/05 $ 551,853 $1,398,509
Lori A. Palazzolo.......... 15,000 5% $ 19.50 02/23/05 $ 183,951 $ 466,170
Darrel D. Swain............ 20,000 7% $ 19.50 02/23/05 $ 245,268 $ 621,560
Michael V. Campbell(1)..... 24,000 8% $ 19.50 02/23/05 (1) (1)
- ---------------------
(1) Mr. Campbell resigned from the Company effective September 29, 1995. In
connection with Mr. Campbell's resignation from the Company, these options
were forfeited.
AGGREGATED OPTION/SAR EXERCISES DURING 1995
AND OPTION/SAR VALUES AT DECEMBER 31, 1995
The following table provides information with respect to the option
exercises during 1995 and the unexercised options held as of December 31, 1995
by the Executive Officers named in the Summary Compensation Table.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
DECEMBER 31, 1995 SARS AT DECEMBER 31, 1995
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- -------- ----------- ------------- ----------- -------------
C.G. Kellogg............. -- -- 18,000 108,000 $45,000 $ 315,000
Tamara D. Fischer........ -- -- 12,000 57,000 $30,000 $ 165,000
Lori A. Palazzolo........ -- -- -- 15,000 -- $ 45,000
Darrel D. Swain.......... -- -- 6,000 26,000 $15,000 $ 75,000
Michael V. Campbell(1)... 4,500 $9,000 -- -- -- --
- ---------------------
(1) Mr. Campbell resigned from the Company effective September 29, 1995. In
connection with Mr. Campbell's resignation from the Company, his unexercised
options were forfeited.
Indebtedness of Management. The following table sets forth the Executive
Officers of the Company to whom loans in excess of $60,000 were made for
purchase of shares of the common stock of the Company, which were evidenced by
separate promissory notes in the amount of the purchase price for such shares.
These notes provide for interest, payable quarterly, at a rate of 7%, with the
principal balance payable on the earlier of the termination of the officer's
employment with the Company, other than by reason of death or disability,
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or November 16, 2003. These notes are recourse to the respective officers and
collateralized by a pledge of the shares of common stock purchased.
NUMBER HIGHEST LOAN
OF SHARES BALANCE BALANCE AT
NAME PURCHASED DURING 1995 MARCH 31, 1996
- ---------------------------------------------------------- --------- ------------ --------------
C.G. Kellogg.............................................. 13,750 $273,134 $267,575
President and Chief Executive Officer
Tamara D. Fischer......................................... 6,875 $136,452 $133,841
Executive Vice President, Treasurer and CFO
Darrel D. Swain........................................... 4,500 $ 89,449 $ 87,733
Regional Vice President
Raymond R. Seigneurie..................................... 4,500 $ 89,449 $ 87,733
Regional Vice President
Michael V. Campbell....................................... 6,875 $136,674 --(1)
Executive Vice President -- Florida Operations
- ---------------------
(1) Mr. Campbell paid the entire balance of his loan in 1995 following his
resignation.
Employment and Consulting Agreements. Mr. Kellogg has an employment
agreement with the Company pursuant to which he serves as President and Chief
Executive Officer. The initial term of the agreement extends until November 30,
1996 and is automatically extended thereafter on a year to year basis (unless
notice of non-renewal is given by either the Company or Mr. Kellogg), subject to
termination by the Board of Directors for cause as defined in the agreement.
Mr. Newman, Executive Vice President -- North Central Operations,
beneficially owns approximately sixty percent of the shares in Newman, Herfurth
and Durand, Inc., which has a Consulting Agreement with the Company until
November 1997 pursuant to which it will be paid approximately $234,000 per year
in consulting fees for 1996 and thereafter may earn up to 120,000 OP units
depending on how many additional sites the Company acquires during the term in a
specific area of responsibility. This Consulting Agreement was entered into at
the time of the Company's acquisition of seven communities from partnerships of
which Mr. Newman was a general partner. During 1995 the Company paid
approximately $310,000 in consulting fees to Newman, Herfurth and Durand, Inc.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee was formed in February 1995 by
broadening the responsibilities of the existing Incentive Stock Committee, which
is comprised of directors who are not employees of the Company. The Committee
annually reviews and approves recommendations from senior management and makes
recommendations to the Board of Directors, other than with respect to the
Company's Incentive Stock Plan (which the Committee administers directly),
regarding the policies and procedures that govern the various compensation
programs for the CEO and executives of the Company. It is the philosophy of the
Committee that the executive compensation program should align the financial
interests of the Company's executives with the long term interests of the
Company and its shareholders. The Committee believes that a material portion of
the Executive Officers' pay should be linked to the Company's stated and
pre-determined goals. The Committee also believes that the Company should have a
sound and competitive compensation program to attract and retain key executives
to lead the Company toward the fulfillment of its goals. The key elements of the
Company's current program include a base salary, a bonus plan linked to the
individual and Company's financial performance and equity participation through
stock options.
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Although the Company does not believe compensation of any Executive Officer
will exceed $1,000,000 in any year, should it appear likely that this
compensation amount would be exceeded, the Company would seek shareholder
approval and/or a restructuring of the compensation in order to preserve the
deductibility of this compensation under new provisions of Internal Revenue Code
Section 162(m).
BASE SALARY
The Committee's policy with respect to salaries is to establish base
compensation levels for executives which are competitive in relation to other
companies of similar size within the Company's industry. The Committee will also
take into consideration the executive's responsibilities, experience level, and
individual performance. To ensure that base salary is competitive, the Company's
salary structure is periodically benchmarked against other salaries for key
positions in other companies of similar size in the Company's industry. Salaries
normally are increased annually, based on market conditions and individual and
company performance factors. Salaries of the Executive Officers were increased
on January 1, 1996.
BONUS
In 1995, the Company initiated an annual bonus program for key executives
with the objective of providing a more direct link between executive
compensation and the individual and Company's overall performance. Eligible
executives were those determined to have a material effect on the Company's
performance. The bonus program has been designed so that an executive's share of
the bonus pool will be based on that executive's performance measured against
specific objectives such as per share growth in the Company's Funds from
Operations, growth in net operating income for a given area of responsibility,
acquisitions of properties, or a combination of these objectives. Each
executives' performance relative to those specific objectives is evaluated by
the Committee. The Committee reserves the right to award only a portion of the
total bonus pool should individual objectives not be met. The bonuses for 1995
reflected in the Cash Compensation Table were awarded on February 28, 1996.
STOCK OPTIONS
Under the Company's Long-Term Incentive Stock Plan, the Committee may grant
options to purchase Common Stock to employees of the Company (including
executive officers). Option grants become exercisable over a period of time
determined by the Committee and generally have an exercise price equal to the
fair market value of the Common Stock on the grant date, creating long term
incentives to enhance the value of the Company's Common Stock. All of the
executive officers received grants in December 1993, February 1995 and February
1996. No grants were made in 1994 to executive officers. The 1995 and 1996
option grants were awarded as part of the annual compensation review for 1994
and 1995, respectively. The awards were determined based on the executive
officer's performance of specific individual and Company objectives. The
Committee also considered the equity ownership by Executive Officers of similar
companies. The levels of these awards reflected the Committee's belief that
increasing management equity ownership will create long term incentives to
enhance the value of the Company's Common Stock.
THE CHIEF EXECUTIVE OFFICER'S 1995 COMPENSATION
The Committee's approach to Mr. Kellogg's compensation is consistent with
the Committee's approach to all other executive officers. Mr. Kellogg receives a
base salary based upon his responsibilities and experience and which the
Committee believes is somewhat lower than the base salaries of other chief
executive officers at similar companies based on a survey performed for the
Committee by an independent compensation consultant. Accordingly, the Committee
increased Mr. Kellogg's base salary by approximately 10 percent in 1995 in an
effort to bridge the gap between Mr. Kellogg's base salary and the average base
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salary for CEO's in comparable companies in the industry. Mr. Kellogg is
eligible for the Company's 1996 bonus and stock option programs. Mr. Kellogg's
bonus is primarily tied to per share growth in the Company's funds from
operations. He is eligible to receive a bonus of up to 80 percent of the
average base salary for his position, as described above. Mr. Kellogg's 1995
bonus was paid in 1996. Given the Company's strong financial performance and
its accomplishments in 1995, the Committee believes the compensation package
for Mr. Kellogg is appropriate and consistent with pay practices in the
industry.
The Committee believes that the above elements assist the Company in
meeting its short-term and long-term objectives and appropriately relate
executive compensation to the Company's performance.
CHATEAU PROPERTIES, INC. EXECUTIVE COMPENSATION COMMITTEE
James M. Lane
Gebran S. Anton, Jr.
Edward R. Allen
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on Company Common Stock with the cumulative total return of the S&P 500
Stock Index and the NAREIT Equity REIT Total Return Index for the period
commencing November 16, 1993 (the date the Company completed its public offering
of common stock) and ending December 31, 1995. The NAREIT Equity REIT Total
Return Index included 178 companies with a total market capitalization of $49.9
billion. The graph assumes that a shareholder invested $100 on November 16, 1993
in the Company Common Stock, the S&P Stock Index and the NAREIT Equity REIT
Total Return Index, and reinvestment of dividends.
Measurement Period NAREIT EQUITY
(Fiscal Year Covered) Chateau S&P 500 Index
Nov. 16, 1993 100.00 100.00 100.00
Dec. 31, 1993 109.38 99.94 99.83
Dec. 31, 1994 117.34 101.56 103.00
Dec. 31, 1995 129.73 140.31 118.72
The table below sets forth the value as of each of the dates indicated of
$100 investments made on November 16, 1993 in the Company Common Stock, the S&P
Stock Index and the NAREIT Equity REIT Total Return Index, assuming reinvestment
of dividends.
Chateau
Measurement Period Properties, NAREIT EQUITY
(Fiscal Year Covered) Inc. S&P 500 Index
November 16, 1993 100.00 100.00 100.00
December 31, 1993 109.38 99.94 99.83
December 31, 1994 117.34 101.56 103.00
December 31, 1995 129.73 140.31 118.72
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HOLDERS OF COMMON STOCK
The following table sets forth certain information, with respect to the
beneficial ownership of shares of the Company's Common Stock as of March 31,
1996 by each person or entity known to the Company to be the beneficial owner of
more than 5% of the Common Stock. See the information presented in the table
under the heading "Election of Directors" with respect to the beneficial
ownership of shares by the Company's Directors and Executive Officers.
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK
OF BENEFICIAL OWNERS BENEFICIALLY OWNED AT MARCH 31, 1996
- ------------------------------------------------------------ ------------------ -----------------
John A. Boll................................................ 1,027,018(1) 14.42%
19500 Hall Road
Clinton Township, MI 48038
Edward R. Allen............................................. 766,076(2) 11.16%
1760 S.E. 10th Street
Fort Lauderdale, FL 33316
J. Peter Ministrelli........................................ 490,846(1) 7.45%
50445 Mountain Shadow Road
LaQuinta, CA 92253
Richard O. Kearns........................................... 759,826(2) 11.08%
2540 Del Lago Drive
Fort Lauderdale, FL 33316
LaSalle Advisors Limited Partnership ("LaSalle")............ 662,742(3) 10.87%
ABKB/LaSalle Securities Limited Partnership
("ABKB LaSalle")
11 S. LaSalle Street
Chicago, IL 60603
- ---------------------
(1) 1,019,958 of Mr. Boll's shares of Common Stock and all of Mr. Ministrelli's
shares of Common Stock shown as beneficially owned are OP Units which became
exchangeable for shares of Common Stock on December 1, 1994. Not included in
this number for Mr. Boll are 2,358,948 OP Units and for Mr. Ministrelli
1,870,073 OP Units ("Non-exchangeable OP Units") which are beneficially
owned by Messrs. Boll and Ministrelli respectively, but which will become
exchangeable for shares of Common Stock of Chateau only upon the receipt by
Chateau of a favorable ruling by the Internal Revenue Service that such
right to exchange will not affect Chateau's REIT election. Chateau requested
such a ruling on June 17, 1994. Upon receipt of a favorable ruling from the
Internal Revenue Service, the Non-Exchangeable OP Units will only be
exchangeable pursuant to a formula which would not allow the deemed
ownership percentage of Mr. Boll and Mr. Ministrelli in Chateau to increase
beyond the present level. Also included as shares of Common Stock
beneficially owned by Mr. Boll are 6,250 shares pursuant to options which
are currently exercisable or which become exercisable in the next sixty
days. These shares, although not outstanding, have been treated as
outstanding for purposes of calculating the ownership percentages set forth
in the table for each of these individuals. By virtue of his significant
beneficial ownership of common stock and position as a director and chairman
of the Board, Mr. Boll may be deemed to be a controlling person of the
Company.
(2) Includes 551,047 shares beneficially owned by certain affiliates of these
stockholders by virtue of their ownership of the same number of OP Units and
deemed beneficially owned by each of Mr. Allen and
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Mr. Kearns. All shares shown as beneficially owned by Mr. Kearns and
759,826 shares shown as beneficially owned by Mr. Allen are OP Units which
became exchangeable for shares of Common Stock on December 1, 1994. These
shares, although not outstanding, have been treated as outstanding for
purposes of calculating the ownership percentages set forth in the table
for each of these individuals. Also included as shares of common stock
beneficially owned by Mr. Allen are 6,250 shares pursuant to options which
are currently exercisable or which become exercisable in the next sixty
days.
(3) Based on the combined Form 13G, filed by LaSalle and ABKB LaSalle, LaSalle
has sole voting and investment power over 195,200 shares, shared voting
power over 86,042 shares and shared investment power over 210,542 shares.
ABKB LaSalle has sole voting and investment power over 46,500 shares,
shared voting power over 115,250 shares and shared investment power over
210,500 shares. LaSalle is the limited partner of ABKB LaSalle and the
stockholder of the general partner of ABKB LaSalle. LaSalle and ABKB
LaSalle, investment advisors, disclaim any beneficial interest in these
shares.
CERTAIN TRANSACTIONS
The Company leases its executive offices from a partnership of which
Messrs. Boll, J. Peter Ministrelli and Kellogg, among others, are partners.
These offices consist of approximately 6,200 square feet in a building in
Clinton Township, Michigan. The Company paid rent of $107,000 and $93,000 for
the years ended December 31, 1995 and December 31, 1994, respectively. This
lease continues for a current term ending November 2001 and may continue beyond
that date pursuant to available options or negotiated extensions. The terms of
this lease will be approved by Chateau's independent directors prior to renewal
or extension. Although not negotiated at arms-length, Chateau believes that the
terms and conditions of the lease were substantially the same as those then
available in this market.
Certain operations conducted by predecessors of the Company have not been
conducted by the Company since the IPO but the real estate constituting these
operations has been leased to GC Properties Inc. ("GCI"), a corporation wholly
owned by Mr. Boll, in order to permit Chateau's qualification as a REIT under
the Code. Prior to the IPO, these operations were made available to the tenants
of certain of the Properties, as well as to other persons, directly by such
predecessors. These operations include the following amenities and facilities:
four golf courses and one marina (the "Sports Facilities"). Following the IPO
and the acquisitions of certain communities in 1994, the Sports Facilities were
leased in accordance with separate ground leases between GCI and the Company.
Rent to the Company under these ground leases for 1995 was approximately
$695,000. For 1995, GCI bore all costs associated with the management and
operation of the Sports Facilities.
As a result of the acquisition of seven manufactured home communities on
November 1, 1994, from certain partnerships affiliated with Mr. Graydon K.
Newman, Jr., these partnerships were indebted to the Company during 1995. The
maximum amount of such indebtedness during 1995 was approximately $168,000,
which amount was repaid in 1995. No interest was paid or charged on this
indebtedness in 1995. The Company, through the operating partnership, reacquired
and retired 43,333 OP Units at approximately $20 per unit pursuant to the terms
of certain acquisition agreements entered into in 1994 (which was the same price
at which these OP units were issued). Following this acquisition, Mr. Newman was
elected an executive officer of the Company.
SECTION 16(A) COMPLIANCE
Directors and Executive Officers of the Company and beneficial owners of
more than 10% of its Common Stock are required to file initial reports of
ownership and reports of changes in ownership of Company securities pursuant to
Section 16(a) of the Securities Exchange Act of 1934 and to provide the Company
with copies of such reports. The Company has reviewed all such report copies as
it has received from persons
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