<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
Homestead Village Incorporated
- --------------------------------------------------------------------------------
(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)(4) 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, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
2030 POWERS FERRY ROAD
ATLANTA, GEORGIA 30339
----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
To the shareholders:
The 1997 annual meeting of shareholders of Homestead Village Incorporated
("Homestead") will be held on May 28, 1997, at The Renaissance Waverly Hotel,
2450 Galleria Parkway, Atlanta, Georgia, at 11:00 a.m. (Eastern Daylight Time)
for the following purposes:
1. To elect two Class I Directors to serve until the annual meeting of
shareholders in 2000, one Class II Director to serve until the annual
meeting of shareholders in 1998, and two Class III Directors to serve until
the annual meeting of shareholders in 1999, and until their successors are
duly elected and qualify; and
2. To transact such other business as properly may come before this
meeting and any adjournment or postponement thereof.
Further information regarding the business to be transacted at the meeting
is given in the accompanying Proxy Statement.
Shareholders of record at the close of business on April 21, 1997 are
entitled to notice of, and to vote at, the meeting.
Please help Homestead by promptly marking, dating, signing and returning the
enclosed proxy card in the envelope provided for your convenience. If you
attend the meeting and decide to vote in person, you may revoke your proxy.
Jeffrey A. Klopf
Secretary
April 30, 1997
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
2030 POWERS FERRY ROAD
ATLANTA, GEORGIA 30339
----------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
----------------
GENERAL INFORMATION
The Board of Directors (the "Board") of Homestead Village Incorporated
("Homestead") is soliciting the accompanying proxy for use at the 1997 annual
meeting of shareholders to be held on May 28, 1997 and at any and all
adjournments or postponements thereof. Any shareholder giving a proxy has the
right to revoke it at any time before it is voted by giving written notice to
the Secretary of Homestead, by delivering to the Secretary of Homestead a duly
executed proxy bearing a later date, or by attending and voting in person at
the meeting. The designated proxy holders will vote shares of Common Stock,
$.01 par value per share (the "Shares"), represented by a proxy which is
received and not revoked. Where the shareholder specifies a choice with
respect to any matter to be acted upon and for which a ballot is provided in
the proxy, the Shares will be voted in accordance with his or her
specifications. If the proxy card is signed and returned without specifying
choices, the Shares will be voted as recommended by the persons appointed as
proxies on the proxy card.
This Proxy Statement and the accompanying proxy card are first being mailed
to shareholders on or about April 30, 1997.
If you are a registered owner and plan to attend the meeting in person,
please detach and retain the admission ticket which is attached to your proxy
card. Beneficial owners who plan to attend the meeting in person may obtain
admission tickets in advance by sending written requests, along with proof of
ownership, such as a bank or brokerage firm account statement, to: Lucinda G.
Marker, Assistant Secretary, Homestead Village Incorporated, 125 Lincoln
Avenue, Santa Fe, New Mexico 87501. Record owners and beneficial owners
(including the holders of valid proxies therefrom) who do not present
admission tickets at the meeting will be admitted upon verification of
ownership at the admissions counter at the annual meeting.
The cost of soliciting proxies will be borne by Homestead. In addition to
solicitation by mail, and without additional compensation for such services,
proxies may be solicited personally, or by telephone or telegraph, by officers
or employees of Homestead. Homestead will also request banking institutions,
brokerage firms, custodians, trustees, nominees, fiduciaries and other like
parties to forward the solicitation material to the beneficial owners of
Shares held of record by such persons, and Homestead will upon request of such
record holders reimburse forwarding charges and expenses.
SHARES OUTSTANDING AND VOTE REQUIRED
At the close of business on April 21, 1997, approximately 21,203,651 Shares
were outstanding. Each whole Share outstanding on April 21, 1997, the record
date for determination of shareholders entitled to notice of, and to vote at,
the meeting, is entitled to one vote. There is no right to cumulative voting.
A majority of the outstanding Shares represented in person or by proxy will
constitute a quorum at the meeting.
Assuming the existence of a quorum, the affirmative vote of a majority of
the Shares entitled to vote and represented in person or by proxy at the
meeting is required to approve the election of the nominees for Directors.
Representatives of Homestead's transfer agent will assist Homestead in the
tabulation of the votes. Abstentions and broker non-votes are counted as
Shares represented at the meeting for purposes of determining a quorum. An
abstention has the effect of a vote "withheld" with respect to the election of
the Directors.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 22, 1997, certain information
concerning the beneficial ownership of Shares for (i) each person known to
Homestead to be the beneficial owner of more than 5% of such Shares, (ii) each
director of Homestead, (iii) each Named Executive Officer (defined below) of
Homestead and (iv) the directors and executive officers of Homestead as a
group. Unless otherwise indicated, all of such Shares are owned directly, and
the indicated person or entity has sole voting and investment power and the
address for each such person is Homestead Village Incorporated, 2030 Powers
Ferry Road, Atlanta, Georgia 30339.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF SHARES(2)
------------------- --------------------- --------------------
<S> <C> <C>
Security Capital Group
Incorporated ("Security
Capital")................... 42,424,011(3) 81.4%
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Security Capital Pacific
Trust ("PTR")............... 19,246,402(4) 47.6
7777 Market Center Avenue
El Paso, Texas 79912
Security Capital Atlantic
Incorporated ("ATLANTIC")... 8,524,215(4) 28.7
Six Piedmont Center
Atlanta, Georgia 30305
David C. Dressler, Jr........ 25,629(5) *
Michael D. Cryan............. 25,000(5) *
John P. Frazee, Jr. ......... 4,758(6) *
Manuel A. Garcia III......... 36,139(7) *
John C. Schweitzer........... 6,316(8) *
Gary A. DeLapp............... 10,000(5) *
Robert W. Frost, Jr.......... 11,000(5) *
John R. Patterson............ 10,041(5) *
All directors and executive
officers as a group
(10 persons)................ 141,983 *
</TABLE>
- --------
*Less than 1%
(1) Includes, for PTR and ATLANTIC, all Shares that may be issued upon
conversion of all convertible mortgage notes that may be outstanding upon
full funding under the Funding Commitment Agreements (described below). As
of April 15, 1997, PTR and ATLANTIC had funded approximately $120.4
million and $25 million, respectively, under their respective Funding
Commitment Agreements, which at face mortgage amounts are convertible into
11,658,030 and 1,917,818 Shares, respectively. Includes for Security
Capital, Mr. Dressler, Mr. Cryan, Mr. Frazee, Mr. Garcia, Mr. Schweitzer,
Mr. DeLapp, Mr. Frost, Mr. Patterson and all directors and executive
officers as a group, 3,180,922; 252; 0; 1,107; 2,508; 2,536; 0; 0; 0 and
16 Shares, respectively, that may be acquired upon exercise of warrants to
purchase Shares ("Warrants").
(2) Assumes (i) in the case of PTR and ATLANTIC, that PTR or ATLANTIC, as
applicable, has converted all convertible mortgages that may be
outstanding under the Funding Commitment Agreements and that no other
person has converted or exercised any outstanding convertible or
exercisable securities, (ii) in the case of Security Capital, that each of
PTR and ATLANTIC have converted all convertible mortgages that may be
outstanding under the Funding Commitment Agreements, that Security Capital
has exercised all Warrants owned by it and that no other person has
converted or exercised any outstanding convertible or exercisable
securities and (iii) in the case of each other person, that such person
has exercised all Warrants and options owned by him or her and that no
other person has converted or exercised any outstanding convertible or
exercisable securities.
2
<PAGE>
(3) Includes 19,246,402 Shares beneficially owned by PTR and 8,524,215 Shares
beneficially owned by ATLANTIC upon conversion of convertible mortgages. As
a result of its ownership of 35.8% of PTR's outstanding common shares and
51.4% of ATLANTIC's outstanding common stock and Security Capital's
contractual arrangements with PTR and ATLANTIC, Security Capital may be
deemed to beneficially own all Shares owned by PTR and ATLANTIC. Also
includes 3,180,922 Shares that may be acquired upon exercise of Warrants.
11,472,472 Shares and Warrants to acquire 3,180,922 Shares are, or will be,
owned of record by SC Realty Incorporated, a wholly owned subsidiary of
Security Capital, and, except for Warrants to acquire 1,700,900 Shares,
are, or will be, pledged to secure a $300 million revolving line of credit
facility with a syndicate of banks. As of April 25, 1997, there were $22
million of borrowings outstanding under the line of credit. The line of
credit is also secured by securities owned indirectly by Security Capital
of PTR, ATLANTIC, Security Capital Industrial Trust and Security Capital
U.S. Realty, a publicly traded entity based in Luxembourg that is
affiliated with Security Capital and which invests in real estate operating
companies in the United States. Security Capital estimates that the
aggregate market value of the pledged securities exceeded $2.9 billion as
of April 25, 1997. Security Capital was in compliance with all covenants
under the line of credit as of December 31, 1996.
(4) All such Shares are issuable upon conversion of convertible mortgages.
(5) Except for 629 Shares owned by Mr. Dressler and 41 Shares owned by Mr.
Patterson, all such Shares were purchased, subject to certain restrictions,
pursuant to the Homestead Village Incorporated 1996 Long-Term Incentive
Plan. Although the shareholder has all voting rights with respect to such
Shares, during the restricted period, such Shares may not be sold,
assigned, transferred, pledged or otherwise encumbered.
(6) Includes options to purchase 2,000 Shares that are immediately exercisable.
(7) Includes 1,332 Shares and Warrants to purchase 894 Shares held by a
partnership of which Mr. Schweitzer is a general partner and 494 Shares and
Warrants to purchase 332 Shares held by a corporation that Mr. Schweitzer
manages.
(8) Includes 7,523 Shares and Warrants to purchase 1,022 Shares held by a trust
of which Mr. Garcia is a trustee.
ELECTION OF DIRECTORS
The Shares represented by the accompanying proxy will be voted to elect the
nominees named below: Messrs. Dressler and Garcia as Class I Directors, Mr.
Cryan as a Class II Director and Messrs. Frazee and Schweitzer as Class III
Directors. Messrs. Dressler and Garcia, if elected, will serve as Directors
until the annual meeting of shareholders in 2000, Mr. Cryan, if elected, will
serve as a Director until the annual meeting in 1998 and Messrs. Frazee and
Schweitzer, if elected, will serve as Directors until the annual meeting in
1999. Any vacancies occurring during any calendar year will be filled by the
remaining Directors in office. Any Director elected by the Directors to fill a
vacancy will hold office until the next annual meeting of shareholders, at
which time the shareholders will elect a Director to fill the unexpired term of
the class of Directors in which the vacancy occurred. Should any of the
nominees named below become unavailable for election, which is not anticipated,
the Shares represented by the accompanying proxy will be voted for the election
of another person recommended by the Board.
3
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND TERM
DIRECTOR AGE DIRECTORSHIPS OF PUBLICLY HELD COMPANIES EXPIRES
-------- --- ---------------------------------------- -------
<C> <C> <S> <C>
Michael D. Cryan....... 46 Co-Chairman and Chief Operating Officer 1998
of Homestead since October 1996, where
he has overall responsibility for
operations; formerly with ITT Sheraton
Corporation from August 1986 to August
1996, where his most recent position
held was Director, Executive Vice
President and Chief Financial Officer.
Prior thereto, Mr. Cryan held positions
with ITT Sheraton Corporation as
Director of Acquisitions and Asset
Management, Director of Strategic
Projects and Director of Operations
North America East; from December 1976
to August 1986 Mr. Cryan was with Arthur
Andersen & Co. where he was a member of
the Worldwide Hospitality Specialty Team
focusing on profit improvement and
specialty analysis for the hotel
industry and providing financial
consulting services to real estate and
hospitality clients.
Manuel A. Garcia III... 53 Chief Executive Officer of Davgar 2000
Restaurants, Inc. since May 1969 where
he is the owner/operator of ten Burger
King Restaurants in central Florida,
five Pebbles Restaurants, Harvey's
Bistro and Manuel's on the 28th
Restaurant in Orlando, Florida; Director
of Sprint/United Telephone, Security
Capital Atlantic Incorporated
(multifamily properties), The Foundation
for Orange County Public Schools,
Florida State University Seminole
Boosters' Association, a Director and
Member of the Executive Committee of the
Florida Citrus Sports Association and
National Director of Cities in Schools.
Mr. Garcia is also on the Board of the
National Conference of Christians and
Jews and an Honorary Director of the
Boys' Clubs and Boy Scouts of Central
Florida. In addition, Mr. Garcia is a
former Member of former President Bush's
Drug Advisory Council.
John P. Frazee, Jr. ... 52 Private investor; formerly President and 1999
Chief Operating Officer of Sprint
Corporation; prior to the March 1993
merger with Sprint, Mr. Frazee was the
Chairman and Chief Executive Officer of
Centel Corporation (a major
telecommunications company he joined in
1972). He is a member of the Board of
Directors of Nalco Chemical Company,
Dean Foods Company, PageNet, Inc., C-
Span and Security Capital. He is a life
trustee of Rush-Presbyterian-St. Luke's
Medical Center, a national trustee of
The Newberry Library and a trustee of
the Florida State University Foundation.
David C. Dressler, Jr.. 43 Co-Chairman and Chief Investment Officer 2000
of Homestead since May 1996 and
President since January 1996, where he
oversees all investment and capital
allocation decisions; Co-Chairman of
Security Capital Investment Research
Incorporated from March 1995 to May
1996; Managing Director of SCG
Multifamily Development from January
1994 to August 1995; Managing Director
of PTR from May 1993 to May 1996 and
Director of Security Capital Pacific
Incorporated from February 1995 to
January 1997; Managing Director of
Security Capital (Atlantic) Incorporated
from April 1992 to May 1996; from 1984
to May 1991, Regional Partner, Trammell
Crow Residential based in Boston,
Massachusetts (multifamily real estate
development and property management).
While with Trammell Crow Residential,
Mr. Dressler was on the Management Board
for Trammell Crow Residential Services,
managing 90,000 multifamily units
nationwide, and was co-founder and a
board member of Trammell Crow
Residential Services-North.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND TERM
DIRECTOR AGE DIRECTORSHIPS OF PUBLICLY HELD COMPANIES EXPIRES
-------- --- ---------------------------------------- -------
<C> <C> <S> <C>
John C. Schweitzer. 52 General Partner, G.P. Campbell Capital Ltd. 1999
(real estate and investments)
since 1976; Managing Partner, Continental
Properties Company, Austin, Texas (real
estate and investments) since 1976; Trustee,
Security Capital Pacific Trust (ownership
and operation of multifamily properties) and
Texas Christian University; Director, Austin
Smiles.
</TABLE>
Security Capital has the right to nominate up to two Directors, depending
upon its level of beneficial ownership of Shares. See "Certain Relationships
and Transactions--Security Capital Investor Agreement." Messrs. Cryan and
Dressler are the nominees of Security Capital. In addition, PTR and ATLANTIC
each have the right to nominate up to one Director, depending upon the
principal amount of loans made pursuant to their respective funding commitment
agreements with Homestead. See "Certain Relationships and Transactions--
ATLANTIC and PTR Investor Agreements." Mr. Schweitzer is the nominee of PTR
and Mr. Garcia is the nominee of ATLANTIC. Homestead's Restated Charter
requires that a majority of the Directors be independent Directors.
MEETINGS AND COMMITTEES
The Board held two meetings during 1996.
The Audit Committee of the Board was formed in December 1996 and consists of
Messrs. Frazee and Schweitzer. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews the plans
and results of the audit engagement with the independent public accountants,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of Homestead's
internal accounting controls. The Audit Committee held one meeting during
1996.
The Compensation Committee was formed in December 1996 and consists of
Messrs. Frazee and Garcia who review and approve the compensation arrangements
and plans of Homestead. The Compensation Committee administers the Homestead
Village Incorporated 1996 Long-Term Incentive Plan. The Compensation Committee
held no meetings during 1996.
During 1996, each Director attended at least 75 percent of the total number
of meetings of the Board and the committees on which such Director served.
DIRECTOR COMPENSATION
Directors who are not employees of Homestead or Security Capital receive
$14,000 per year for serving as a director and are reimbursed for their travel
and other expenses incurred in connection with attending meetings of the Board
or committees thereof. Outside directors also receive grants of options to
acquire Shares. For 1996, Mr. Frazee received $8,750 and options to purchase
2,000 Shares.
OUTSIDE DIRECTORS PLAN
Homestead adopted the Homestead Village Incorporated 1996 Outside Directors
Plan, under which up to 100,000 Shares may be subject to options (the "Outside
Directors Plan"). Options granted under the Outside Directors Plan have a five
year term and are immediately exercisable in whole or in part. Options to
purchase 2,000 Shares each, at an exercise price of $10.00 per Share, have
been granted to John P. Frazee, Jr. and Patricia G. Will, a former director
and current advisory director of Homestead, under the Outside Directors Plan
and will be granted to each outside director as of the date of each annual
meeting of shareholders of Homestead commencing in 1997 at an exercise price
equal to the fair market value of the Shares as of those dates. Options
granted under the Outside Directors Plan will provide that the option holder
may, in the event of the acquisition of 50% or more of the outstanding Shares
as the result of any cash tender offer or exchange offer (other than one made
by Homestead), exercise the options immediately or surrender the options, or
any unexercised option
5
<PAGE>
thereof, to Homestead and receive cash from Homestead equal to the difference
between the exercise price of each option and the per Share price of the
tender offer or exchange offer, multiplied by the number of Shares for which
options are held.
EXECUTIVE COMPENSATION
The following table presents the compensation for 1996 paid to the chief
investment officer, the chief operating officer and the three other most
highly compensated executive officers of Homestead (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ ------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARD(1) OPTIONS(#) COMPENSATION
------------------ -------- -------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David C. Dressler, Jr.
Co-Chairman, President
and Chief Investment
Officer................ $195,000 $285,000 -- 25,000 Shares -- (2)
Michael D. Cryan
Co-Chairman and Chief
Operating Officer(3)... 85,635 65,000 -- 25,000 Shares -- (2)
Gary A. DeLapp
Senior Vice
President(4)........... 127,452 70,000 -- 10,000 Shares -- (2)
Robert W. Frost, Jr.
Senior Vice President.. 175,000 50,000 -- 11,000 Shares -- (2)
John R. Patterson
Senior Vice President.. 160,000 55,000 -- 10,000 Shares -- (2)
</TABLE>
- --------
(1) Until the earlier of (i) the second anniversary of the purchase (October
15, 1998 in the case of all Shares referred to above), (ii) the date on
which the participant terminates employment with Homestead or its
affiliates by reason of death or disability or (iii) immediately prior to
a change-in-control, the Shares of restricted stock may not be sold,
transferred, pledged or otherwise encumbered.
(2) Prior to Homestead becoming an independent company on October 17, 1996,
Security Capital granted Messrs. Dressler, Cryan, DeLapp, Frost and
Patterson options to acquire $500,000 (at $1,139 per Class A Share),
$500,000 ($290,000 stock option award exercisable at $1,057 per Class A
Share and an option on $210,000 principal amount of convertible
debentures, convertible into 180.6 Class A Shares at a conversion price of
$1,163 per Class A Share), $150,000 (at $1,139 per Class A Share),
$100,000 (at $1,139 per Class A Share) and $200,000 (at $1,139 per Class A
Share), respectively, of Class A Shares.
(3) Mr. Cryan joined Homestead on September 1, 1996 and the compensation
figures reflect the portion of the year he was employed by Homestead.
(4) Mr. DeLapp joined Homestead on February 26, 1996 and the compensation
figures reflect the portion of the year he was employed by Homestead.
OPTION GRANTS
During 1996, options for 580,000 Shares were granted, prior to formation of
the Compensation Committee, by the Board of Directors to 50 key employees and
officers of Homestead at an exercise price equal to $10.00 per Share (465,000
Shares total) for grants made on October 15, 1996 and $16.00 per Share
(115,000 Shares total) for grants made on December 18, 1996. The following
table sets forth certain information with respect to individual grants of
options to each of the Named Executive Officers.
6
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
SECURITIES PERCENT OF EXERCISE
UNDERLYING TOTAL OPTIONS OR
OPTIONS GRANTED TO BASE GRANT DATE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME (NUMBER) FISCAL YEAR ($/SHARE) DATE ($)(2)
- ---- ---------- ------------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
David C. Dressler, Jr... 60,000 10.34 10.00 October 15, 2006 385,320
Michael D. Cryan........ 50,000 8.62 10.00 October 15, 2006 321,100
Gary A. DeLapp.......... 25,000 4.31 10.00 October 15, 2006 160,550
Robert W. Frost, Jr..... 25,000 4.31 10.00 October 15, 2006 160,550
John R. Patterson....... 25,000 4.31 10.00 October 15, 2006 160,550
</TABLE>
- --------
(1) The options vest ten percent in the second year after the date of grant,
twenty percent in the third year after the date of grant, thirty percent in
the fourth year after the date of grant and forty percent in the fifth year
after the date of grant. All options expire ten years after the date of
grant.
(2) The amounts shown are based on the Black-Scholes option pricing model. The
material assumptions incorporated in the Black-Scholes model in estimating
the value of the options include the following: an exercise price of
$10.00; an expected option life of 5.5 years; a risk-free interest rate of
6.23%; no expected dividend yield; and expected volatility of 37%. The
actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of the Shares over the
exercise price on the date the option is exercised. There can be no
assurance that the value realized by an optionee will be at or near the
value estimated by using the Black-Scholes model.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning exercises of
options during 1996 by each of the Named Executive Officers and the year-end
value of unexercised options owned by such executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT YEAR-END YEAR-END ($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (NUMBER) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David C. Dressler, Jr... None N/A 0 60,000 0 480,000
Michael D. Cryan........ None N/A 0 50,000 0 400,000
Gary A. DeLapp.......... None N/A 0 25,000 0 200,000
Robert W. Frost, Jr..... None N/A 0 25,000 0 200,000
John R. Patterson....... None N/A 0 25,000 0 200,000
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Homestead has no employment contracts with any Named Executive Officer and no
plans or arrangements by which any such executive officer will be compensated
as a result of his resignation or retirement or any other termination of his
employment with Homestead or in connection with a change in control of
Homestead, except that in the event a "Change in Control," as such term is
defined in either the Homestead Village Incorporated 1996 Long-Term Incentive
Plan or the Outside Directors Plan, occurs, options to purchase Shares granted
under either of the plans become immediately exercisable and restrictions on
purchased Shares lapse.
LOANS TO EXECUTIVE OFFICERS
Homestead loaned each of Mr. Cryan and Mr. Dressler $250,000 on October 15,
1996. Each person used the proceeds of such loans to purchase 25,000 restricted
Shares. Such Shares will vest on October 15, 1998. The loans are due on January
5, 2006, are secured by the Shares and interest accrues at the lowest rate
charged by Morgan Guaranty Trust Company on maturities of 90 days or less, plus
0.25%. If either Mr. Cryan or Mr. Dressler leaves the employ of Homestead prior
to payment in full of the loan, Homestead will buy back these Shares at a price
of $10 per Share and will refund all payments of interest made under the loan.
7
<PAGE>
HOMESTEAD VILLAGE INCORPORATED 1996 LONG-TERM INCENTIVE PLAN
General
Homestead adopted the Homestead Village Incorporated 1996 Long-Term
Incentive Plan (the "Incentive Plan") which contains the following terms and
conditions. The number of Shares which may be awarded under the Incentive Plan
may not exceed 4,000,000 in the aggregate. Shares issued under the Incentive
Plan may be authorized and unissued Shares or treasury Shares. In the event of
certain transactions affecting the type or number of outstanding Shares, the
number of Shares subject to the Incentive Plan, the number or type of Shares
subject to outstanding awards and the exercise price thereof will be
appropriately adjusted. The Incentive Plan authorizes the award of stock
grants (which may be subject to restrictions), and performance stock and
authorizes the establishment of one or more stock purchase programs. The Board
of Directors administered the Incentive Plan until the Compensation Committee
was formed in December 1996, which committee currently administers the
Incentive Plan. Subject to the terms of the Incentive Plan, the Compensation
Committee determines which employees or other individuals providing services
to Homestead shall be eligible to receive awards under the Incentive Plan, and
the amount, price, timing and other terms and conditions applicable to such
awards.
Options awarded under the Incentive Plan may be either incentive stock
options which are intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options which are not intended to satisfy Section 422 of the Code. Options
become exercisable in accordance with the terms established by the
Compensation Committee, which may include conditions relating to completion of
a specified period of service or achievement of performance standards. Options
expire on the date determined by the Compensation Committee which shall not be
later than the earliest to occur of (i) the tenth anniversary of the grant
date, (ii) the first anniversary of the participant's termination of
employment by reason of death, disability or retirement or (iii) the three
month anniversary of the participant's termination of employment for any other
reason. Shares transferred to a participant pursuant to the exercise of an
option may be subject to such additional restrictions or limitations as the
Compensation Committee may determine.
Under the Incentive Plan, the Compensation Committee may grant awards of
Shares to participants, which are subject to such conditions and restrictions,
if any, as the Compensation Committee determines. During the period a stock
award is subject to restrictions or limitations, the Compensation Committee
may award the participant dividend rights with respect to such Shares. The
Incentive Plan also provides that the Compensation Committee may establish one
or more stock programs which may permit purchases of Shares.
The Compensation Committee may award participants performance stock, the
distribution of which is subject to achievement of performance objectives. The
number of Shares and the performance measures and periods shall be established
by the Compensation Committee at the time the award is made.
Non Qualified Options
Homestead has granted nonqualified options to acquire Shares. The Named
Executive Officers and certain other officers of Homestead have received
options to purchase an aggregate of 465,000 Shares at $10.00 per Share and an
aggregate of 115,000 Shares at $16.00 per Share. The options become
exercisable ten percent in the second year after the date of grant, an
additional twenty percent in the third year after the date of grant, an
additional thirty percent in the fourth year after the date of grant and the
remaining forty percent in the fifth year after the date of grant and expire
ten years after the date of grant. The participants have no rights as
shareholders with respect to the Shares subject to his or her options until
the option is exercised. No income will be recognized by a participant at the
time the options are granted. The exercise of a nonqualified stock option is
generally a taxable event that requires the participant to recognize, as
ordinary income, the difference between the fair market value of the Shares at
the time of exercise and the option price. Homestead ordinarily will be
entitled to claim a federal income tax deduction on account of the exercise of
a nonqualified option. The amount of the deduction is
8
<PAGE>
equal to the ordinary income recognized by a participant. Homestead has
adopted Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations in accounting for
its stock options. Therefore, any excess of fair value of the Shares at the
date of grant over the option price has been treated as compensation expense,
recorded over the option period.
Stock Purchase Program
Homestead has permitted six senior officers to purchase 92,000 Shares at
$10.00 per Share under the stock purchase program portion of the Incentive
Plan. The stock purchases provide for a two year restricted period during
which the participants must remain employed by Homestead. If a participant
leaves the employ of Homestead prior to the end of the restricted period,
Homestead has the right to repurchase the Shares at the original purchase
price plus an imputed interest rate. At the end of the two-year period, the
participant would own the Shares without further restriction. In accordance
with APB 25, any excess fair value of the Shares at the date of sale over the
sales price has been treated as compensation expense, recorded over the
restriction period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Payment of cash compensation to the executive officers of Homestead began on
October 17, 1996, the day the Homestead transaction occurred, see "Certain
Relationships and Transactions--The Mergers." The salary paid to Homestead's
executive officers during 1996 was determined by Security Capital. Beginning
with January 1, 1997, option grants and salaries were set by the Compensation
Committee. In making these determinations, the Compensation Committee
considered, and will consider, job responsibilities, the salaries paid and
options granted to executive officers of other companies similar to Homestead,
as well as the salaries paid to, and past performance, of such persons in
their prior capacities at PTR, ATLANTIC or elsewhere.
Homestead has adopted the Incentive Plan, under which the Compensation
Committee determines which employees or other individuals providing services
to Homestead will be eligible to receive awards, and the amount, price, timing
and other terms and conditions applicable to such awards. See "--Homestead
Village Incorporated 1996 Long-Term Incentive Plan." Through the Incentive
Plan and other means, the Compensation Committee intends to maintain strong
links between executive officer compensation and corporate and individual
performance.
Stock options will be granted annually based on the person's position with
Homestead while restricted stock awards will be granted to selected persons.
The sizes of annual stock option awards and restricted stock awards will be
based on annual surveys of comparable award levels in other companies.
Homestead's salary structure is designed to attract and retain highly
qualified executives. This is accomplished by providing competitive base
salaries and meaningful incentives, including both short-term and long-term
incentives, intended to reward performance. The Compensation Committee
believes that its compensation levels will compare favorably to similarly
situated companies and targets competitive compensation levels for its
executive officers.
The Compensation Committee recognizes that the interests of the shareholders
are best served by giving key officers and employees the opportunity to
participate in the appreciation of Homestead's Shares through the granting of
options and restricted stock awards. In addition, the Compensation Committee
believes that over an extended period of time, Share performance will reflect
executive performance and that such arrangements further reinforce management
goals and incentives to achieve shareholders' objectives.
Compensation Committee
John P. Frazee, Jr.*
*On April 21, 1997, Ms. Will became an advisory director of the Board of
Directors and resigned from the Compensation Committee. On April 21, 1997, Mr.
Garcia was appointed as a member of the Compensation Committee.
9
<PAGE>
The Report of the Compensation Committee on Executive Compensation and
related disclosure, including the Performance Graph, shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Homestead specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Shares against the cumulative
total return of the Standard & Poor's Composite--500 Stock Index and the S&P
Hotel Index for the period commencing October 31, 1996, the date that the
Shares were first traded on a when-issued basis and ended December 31, 1996.
The Share price performance shown on the graph is not necessarily indicative
of future price performance.
LOGO
<TABLE>
<CAPTION>
OCTOBER 31, 1996(2) DECEMBER 31, 1996
------------------- -----------------
<S> <C> <C>
Homestead........................... $100.00 $104.35
S&P 500............................. 100.00 105.43
S&P Hotel........................... 100.00 96.49
</TABLE>
- --------
(1) Assumes that the value of the investment in Shares and each index was $100
on October 31, 1996 and that all dividends were reinvested.
(2) The Shares commenced trading on October 31, 1996 on a when-issued basis.
10
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
THE MERGERS
On May 21, 1996, ATLANTIC, PTR, Security Capital and Homestead entered into a
merger agreement, pursuant to which each of ATLANTIC, PTR and Security Capital
agreed to contribute, through a series of merger transactions, all of their
respective assets relating to Homestead Village properties to Homestead in
exchange for Shares, ATLANTIC and PTR agreed to enter into the Funding
Commitment Agreements and Security Capital provided funding for Homestead
acquisitions prior to the closing, all in exchange for Warrants. ATLANTIC's and
PTR's respective shareholders approved the Homestead transaction on September
13, 1996 and September 12, 1996, respectively, and the closing of the Homestead
transaction occurred on October 17, 1996, which resulted in (i) ATLANTIC (a)
owning 4,201,220 Shares, (b) owning 2,818,517 Warrants each to purchase one
Share at $10.00 per Share, (c) agreeing to provide funding beyond the merger
date of approximately $111 million to Homestead in exchange for up to
approximately $98 million in convertible mortgage notes and (d) providing a
cash payment of approximately $16.5 million to Homestead on the closing date;
(ii) PTR (a) owning 9,485,727 Shares, (b) owning 6,363,789 Warrants each to
purchase one Share at $10.00 per Share and (c) agreeing to provide funding
beyond the merger date of approximately $138 million to Homestead in exchange
for up to approximately $154 million in convertible mortgage notes and (iii)
Security Capital (a) owning 4,062,788 Shares and (b) owning 817,694 Warrants
each to purchase one Share at $10.00 per Share.
Each of ATLANTIC and PTR distributed the Shares and Warrants which it
received in the Homestead transaction to its shareholders pro rata on November
12, 1996 to shareholders of record on October 29, 1996. Each holder of record
of a share of ATLANTIC's common stock received 0.110875 Shares and Warrants to
purchase 0.074384 Shares and each holder of record of a share of PTR's common
shares received 0.127618 Shares and Warrants to purchase 0.085616 Shares. As a
result of the Homestead transaction, including the distributions by each of
ATLANTIC and PTR, Security Capital owned 9,894,402 Shares and Warrants to
purchase 4,730,022 Shares.
Homestead issued 4,062,788 Shares to Security Capital in exchange for its
assets related to Homestead Village properties, which consisted primarily of
the Homestead Village trademark, and the development and management expertise,
as well as operating systems utilized in the ongoing development and operations
of extended-stay lodging properties. Security Capital received 1,911,896 Shares
based on the ratio of actual funding provided at the closing of the transaction
by PTR and ATLANTIC to the total expected funding of PTR and ATLANTIC. The
remaining 2,150,892 Shares were issued to an escrow agent. As of April 22,
1997, 1,671,929 of such Shares remain in escrow. The escrowed Shares will be
transferred to Security Capital pro rata upon the completion of PTR's and
ATLANTIC's remaining funding commitments and upon request of Security Capital.
See "--Funding Commitment Agreements." In the event not all of the funding
commitments are provided to Homestead by PTR and ATLANTIC, the remaining Shares
not transferred to Security Capital from escrow will be returned to Homestead
along with the dividends, if any, paid on such Shares. The escrow agent will
vote all Shares held in the escrow account proportionately in accordance with
the vote of all other Homestead shareholders as instructed by Homestead. In the
event that instructions are not received, the escrow agent will not vote such
Shares. See "--Escrow Agreement."
PROTECTION OF BUSINESS AGREEMENT
Each of PTR, ATLANTIC and Security Capital have entered into a protection of
business agreement, dated as of October 17, 1996 (the "Protection of Business
Agreement"), with Homestead which prohibits PTR, ATLANTIC, Security Capital and
their respective affiliates from engaging, directly or indirectly, in the
extended-stay lodging business in the continental United States except through
Homestead and its subsidiaries. The Protection of Business Agreement also
prohibits Homestead from, directly or indirectly, engaging in the ownership,
operation, development, management or leasing of multifamily properties. The
Protection of Business Agreement does not prohibit any of PTR, ATLANTIC or
Security Capital from: (i) owning securities of Homestead; (ii) owning up to 5%
of the outstanding securities of another person engaged in owning, operating,
developing, managing or leasing extended-stay lodging properties, so long as
they do not actively participate in
11
<PAGE>
the business of such person; (iii) owning the outstanding securities of another
person, a majority owned subsidiary, division, group, franchise or segment of
which is engaged in owning, operating, developing, managing or leasing
extended-stay lodging properties, so long as not more than 5% of such person's
consolidated revenues are derived from such properties; and (iv) owning
securities of another person primarily engaged in business other than a
business owning, operating, developing, managing or leasing extended-stay
lodging properties, including a person primarily engaged in business as an
owner, operator or developer of hotel properties, whether or not such person
owns, operates, develops, manages or leases extended-stay lodging properties.
The Protection of Business Agreement does not prohibit Homestead from: (i)
owning securities of ATLANTIC, PTR or Security Capital; (ii) owning up to 5% of
the outstanding securities of another person engaged in owning, operating,
developing, managing or leasing garden style multifamily properties; and (iii)
owning the outstanding securities of another person, a majority owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing garden style multifamily
properties, so long as not more than 5% of such person's consolidated revenues
are derived from such properties. The Protection of Business Agreement
terminates in the event of an acquisition, directly or indirectly (other than
by purchase from PTR, ATLANTIC and Security Capital or their respective
affiliates (as defined in the Protection of Business Agreement)), by any person
(or group of associated persons acting in concert), other than PTR, ATLANTIC,
Security Capital or their respective affiliates, of 25% or more of the
outstanding shares of voting stock of Homestead, without the prior written
consent of the Board. Subject to earlier termination pursuant to the preceding
sentence, the Protection of Business Agreement will terminate on October 17,
2006.
SECURITY CAPITAL INVESTOR AGREEMENT
Homestead and Security Capital have entered into the Security Capital
Investor Agreement which requires Security Capital, upon notice from Homestead,
to exercise all of the Warrants (at an exercise price of $10.00 per Share)
owned by Security Capital. Homestead may call for the exercise of Warrants by
Security Capital upon 10 days' prior written notice. The Security Capital
Investor Agreement, among other things, provides that, without having first
consulted with the nominee of Security Capital designated in writing, Homestead
may not seek Board approval of (i) Homestead's annual budget, (ii) incurring
expenses in any year exceeding (A) any line item in the annual budget by 20%
and (B) the total expenses set forth in the annual budget by 5%, (iii)
acquisitions or dispositions in a single transaction or group of related
transactions where the aggregate purchase price paid or received exceeds $5
million, (iv) new contracts with a service provider for (A) investment
management, property management or leasing services, or (B) that reasonably
contemplates annual contract payments by Homestead in excess of $200,000, (v)
the declaration or payment of any dividend or other distribution, (vi) the
approval of stock option plans, (vii) the offer or sale of any shares of stock
of Homestead or any securities convertible into shares of stock of Homestead
(other than the sale or grant of any stock or grants of options or exercise of
options granted under any benefit option plan approved by stockholders) and
(viii) the incurrence, restructuring, renegotiation or repayment of
indebtedness for borrowed money in which the aggregate amount involved exceeds
$5 million. The Security Capital Investor Agreement also provides that, so long
as Security Capital owns at least 10% of the outstanding Shares, Homestead may
not increase the number of persons serving on the Board to more than seven.
Security Capital also will be entitled to designate one or more persons as
directors of Homestead, as follows: (i) so long as Security Capital owns at
least 10% but less than 30% of the outstanding Shares, it is entitled to
nominate one person; and (ii) so long as Security Capital owns at least 30% of
the outstanding Shares, it is entitled to nominate that number of persons as
shall bear approximately the same ratio to the total number of members of the
Board as the number of Shares beneficially owned by Security Capital bears to
the total number of outstanding Shares, provided that Security Capital shall be
entitled to designate no more than two persons so long as the Board consists of
no more than seven members. Any person who is employed by Security Capital or
who is an employee, a 25% shareholder or a director of any corporation of which
Security Capital is a 25% shareholder (except for Homestead) shall be deemed to
be a designee of Security Capital. The nominee(s) of Security Capital may, but
need not, be the same person(s) nominated by either PTR pursuant to the PTR
Investor Agreement or ATLANTIC pursuant to the ATLANTIC Investor Agreement.
12
<PAGE>
In addition, because Security Capital is an affiliate of Homestead, the
Security Capital Investor Agreement provides Security Capital with
registration rights pursuant to which, in certain specified circumstances,
Security Capital may request, at any time after October 22, 1997, and on not
more than three occasions, registration of all of Security Capital's Shares
pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act").
FUNDING COMMITMENT AGREEMENTS
Pursuant to funding commitment agreements dated October 17, 1996 (the
"Funding Commitment Agreements"), each of PTR and ATLANTIC agreed to make
convertible mortgage loans to Homestead after the merger date with face
amounts of up to $154,047,877 and $98,028,471, respectively. The obligations
of PTR and ATLANTIC are limited to a specific dollar amount for each property
identified in the respective Funding Commitment Agreements. Upon any
determination by Homestead to commence development of a property identified in
the Funding Commitment Agreement, Homestead is required to notify PTR or
ATLANTIC, as the case may be, and PTR or ATLANTIC, as the case may be, is
required to endeavor in good faith to fund up to the full amount of its
obligation with respect to such property. Homestead is required to complete
the development of such property consistent with the development plans for
such property. Each mortgage loan issued by Homestead pursuant to a Funding
Commitment Agreement is convertible into Shares on the basis of one Share for
every $11.50 of principal outstanding on the mortgage loan. The obligation of
Homestead to call for funding of, and the obligations of PTR and ATLANTIC to
provide funding for, the mortgage loans expires on March 31, 1998, except with
respect to properties for which Homestead has given notice that it intends to
develop. Interest on the mortgage loans accrues at the rate of 9% on the
unpaid principal balance, payable every six months. The mortgages are
scheduled to mature on October 31, 2006, and are not callable until May 28,
2001. Homestead has pledged substantially all of the assets contributed by PTR
or ATLANTIC, as the case may be, as collateral for the mortgage loans. From
October 17, 1996 to April 15, 1997, PTR and ATLANTIC have funded approximately
$60 million and $25 million under their respective Funding Commitment
Agreements.
Pursuant to each Funding Commitment Agreement, PTR and ATLANTIC will provide
Homestead aggregate funding on such developments after the merger date in the
amounts of up to approximately $138 million and $111 million, respectively,
which amounts are anticipated to be sufficient to complete the development of
the respective Homestead Village properties contributed by them. PTR and
ATLANTIC will receive convertible mortgage notes in respect of such fundings
with face amounts of up to approximately $154 million and $98 million,
respectively. The effect of these provisions is that PTR will fund $898,000
for each $1,000,000 face amount of convertible mortgage loans and ATLANTIC
will fund $1,133,535 for each $1,000,000 face amount of convertible mortgage
loans. The face amount of the convertible mortgage loans was determined based
on a 9% interest rate to provide an effective yield to each of PTR and
ATLANTIC that is reflective of the relative rates of return anticipated to be
realized on all of the properties contributed by PTR and ATLANTIC,
respectively.
ATLANTIC AND PTR INVESTOR AGREEMENTS
ATLANTIC and PTR have each entered into an investor and registration rights
agreement with Homestead (the "ATLANTIC and PTR Investor Agreements") pursuant
to which ATLANTIC and PTR each are entitled to designate one person for
nomination to the Board, and Homestead will use its best efforts to cause the
election of such nominee(s), until March 31, 1998 and for so long thereafter
as PTR or ATLANTIC has the right to convert in excess of $20 million in
principal amount of loans made pursuant to their respective Funding Commitment
Agreement. Such nominee(s) may, but need not, be the same person(s) nominated
by Security Capital pursuant to the Security Capital Investor Agreement. In
addition, Homestead has granted to each of ATLANTIC and PTR registration
rights with respect to the issuance upon conversion and the distribution of
all of the Shares issuable upon conversion of the convertible mortgage notes.
Prior to October 22, 1997, each of ATLANTIC and PTR may request one
registration of those Shares which are issued upon conversion of any or all
the convertible mortgage notes converted during such one-year period and which
it intends to distribute to its
13
<PAGE>
stockholders. After such date, each of ATLANTIC and PTR may request three
additional registrations pursuant to Rule 415 promulgated under the Securities
Act of all Shares issued or issuable upon conversion of the convertible
mortgage notes. Such registration, except for the fees and disbursements of
counsel to ATLANTIC or PTR, shall be at the expense of Homestead.
ESCROW AGREEMENT
Pursuant to an escrow agreement dated October 17, 1996 (the "Escrow
Agreement") among Homestead, Security Capital and State Street Bank and Trust
Company ("Escrow Agent"), a portion of the Shares issuable to Security Capital
was placed in an escrow account maintained with the Escrow Agent. In general,
as PTR and ATLANTIC advance funds to Homestead in accordance with the terms of
their respective Funding Commitment Agreements, a portion of the Shares in the
escrow account will be released to Security Capital, together with a
proportionate amount of accrued dividends, if any. On January 1, 2000, unless
all of the Shares placed in the escrow account have been released to Security
Capital sooner in accordance with the provisions of the Escrow Agreement, the
Escrow Agent will release to Homestead all of the Shares remaining in the
escrow account. All dividends or other distributions paid by Homestead in
respect of the Shares held in the escrow account shall be retained by the
Escrow Agent for the benefit of the party to whom the related Shares are
ultimately issued. The Escrow Agent will vote all Shares held in the escrow
account proportionately in accordance with the vote of all other Homestead
shareholders as instructed by Homestead. In the event that instructions are not
received, the Escrow Agent will not vote such Shares.
Because the number of Shares received by Security Capital was based on the
anticipated future REIT management fees and property management fees Security
Capital would have received under existing agreements with PTR and ATLANTIC for
the 80 Homestead Village properties contributed to Homestead, net of overhead
of Security Capital related to those properties, and since many of the
contributed Homestead Village properties are either in the development or
planning stage, the purpose of the Escrow Agreement is to time Security
Capital's receipt of the Shares held in escrow with the time the properties are
actually funded and supported by a completion guaranty. As of April 22, 1997,
478,963 Shares had been released from the escrow account.
ADMINISTRATIVE SERVICES AGREEMENT
As of October 17, 1996, Homestead entered into an administrative services
agreement with Security Capital (the "Administrative Services Agreement"),
pursuant to which Security Capital provides Homestead with administrative
services with respect to certain aspects of Homestead's business. These
services include, but are not limited to, insurance administration, accounts
payable administration, internal audit, cash management, human resources,
management information systems, tax and legal administration, research,
shareholder communications and investor relations. The fees payable to Security
Capital are based on Security Capital's cost of the services provided plus an
additional 20%. Any arrangements under the Administrative Services Agreement
for the provision of services are required to be commercially reasonable and on
terms not less favorable than those which could be obtained from unaffiliated
third parties. The Administrative Services Agreement expires on December 31,
1997 and is automatically renewable for one-year terms, subject to approval by
a majority of the disinterested members of the Board and the approval by the
disinterested members of the Board of the annual compensation payable to
Security Capital for services rendered to Homestead. Homestead paid fees of
$375,000 to Security Capital for administrative services provided in 1996.
Homestead believes its relationship with Security Capital under this
agreement provides it with certain advantages, including access to greater
quality and depth of management personnel and resources, highly focused
research, information systems, insurance, cash management and legal support
provided at substantial economies of scale, than it could provide internally.
14
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Homestead
directors, officers and beneficial owners of more than 10 percent of the
outstanding Shares to file reports of ownership and changes in ownership of
the Shares with the Securities and Exchange Commission and to send copies of
such reports to Homestead. Based solely upon a review of such reports and
amendments thereto furnished to Homestead and upon written representations of
certain of such persons that they were not required to file certain of such
reports, Homestead believes that no such person failed to file any such report
on a timely basis during 1996, except that Ms. Will and Messrs. Dressler and
Patterson each filed one late report of one transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Ernst & Young LLP, certified public accountants, who
have served as auditors for Homestead since 1996, to serve again as the
auditors of Homestead's books and records for the coming year. A
representative of Ernst & Young LLP is expected to be present at the annual
meeting and will be given an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
ANNUAL REPORT
Homestead's 1996 Annual Report, which includes financial statements, has
previously been mailed to shareholders or is being mailed to shareholders
together with this Proxy Statement. The Annual Report does not constitute a
part of the proxy solicitation material.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder of Homestead intended to be presented at the
1998 annual meeting of shareholders must be received by Homestead at its
principal executive offices not later than December 31, 1997, for inclusion in
Homestead's proxy statement and form of proxy relating to that meeting.
In addition, shareholders may present proposals which are proper subjects
for consideration at an annual meeting, even if the proposal is not submitted
by the deadline for inclusion in the proxy statement. To do so, the
shareholder must comply with the procedures specified by Homestead's bylaws.
Homestead's bylaws require that all shareholders who intend to make proposals
at an annual shareholders' meeting submit their proposals to Homestead during
the period 60 to 90 days before the anniversary date of the previous year's
annual meeting. To be eligible for consideration at the 1998 annual meeting,
proposals which have not been submitted by the deadline for inclusion in the
proxy statement must be received by Homestead between February 28 and March
29, 1998.
OTHER MATTERS
Homestead is not aware of any business or matter other than those indicated
above which may properly be presented at the meeting. If, however, any other
matter properly comes before the meeting, the proxy holders will, in their
discretion, vote thereon in accordance with their best judgment.
By Order of the Board of Directors
Jeffrey A. Klopf
Secretary
April 30, 1997
15
<PAGE>
HOMESTEAD VILLAGE INCORPORATED
P THE PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS
R
ANNUAL MEETING OF SHAREHOLDERS
O TO BE HELD MAY 28, 1997
X The undersigned hereby appoints each of David C. Dressler, Jr.,
Michael D. Cryan and Jeffrey A. Klopf, as proxies with full power of
Y substitution, to represent the undersigned at the annual meeting of
shareholders of Homestead Village Incorporated to be held on May 28, 1997,
and at any adjournments or postponements thereof, and to vote at such
meeting the shares of Common Stock that the undersigned would be entitled
to vote if present at such meeting, in accordance with the instructions
indicated on the other side of this card; if no instructions are indicated,
the shares represented by this proxy will be voted for the election of all
listed nominees and, at the direction of the proxies named above, on any
other matter that may properly come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting
and the Proxy Statement together with this Proxy.
- ------------------------------------------------------
COMMENTS/ADDRESS CHANGE
(Continued and to be signed and dated on the other side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
Please mark your vote as indicated in this example. [X]
FOR WITHHOLD vote
all nominees from all nominees
1. The election of the following persons as Directors:
[_] [_]
Class I - David C. Dressler, Jr. and M. A. Garcia III
Class II - Michael D. Cryan
Class III - John P. Frazee, Jr. and John C. Schweitzer
FOR ALL NOMINEES except the following nominees:
-------------------------------
[Insert Recordholder Information]
2. To vote upon any other matters that may properly be presented at the meeting
according to their best judgment and in their discretion.
Please sign exactly as name(s) appears to the left. If shares are held
jointly, each joint tenant should sign. If signing as attorney, executor,
administrator, trustee or guardian or as officer of a corporation or other
entity, please give full title and capacity in which you are signing.
---------------------------------------------------------------------------
Signature
---------------------------------------------------------------------------
Signature, if held jointly
Dated:__________________________________________, 1997
Please sign, date and return this proxy card promptly using the enclosed
postage-paid envelope whether or not you plan to attend the meeting.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
HOMESTEAD VILLAGE INCORPORATED
Annual Meeting of Shareholders
ADMISSION TICKET
Wednesday, May 28, 1997
11:00 a.m. (Eastern Daylight Time)
Renaissance Waverly Hotel
2450 Galleria Parkway
Atlanta, Georgia 30339
- --------------------------------------------------------------------------------
Please present this ticket for admittance of shareholder(s) named above.
