<PAGE> 1
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- --------------------------------------------------------------------------------
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
LEXFORD RESIDENTIAL TRUST
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[LEXFORD LETTERHEAD]
September 1, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Lexford Residential Trust (the "Company") to be held at 10:00 a.m. (local time)
on Tuesday, September 29, 1998 at The Hyatt on Capitol Square, Columbus, Ohio.
At this meeting, you will be asked to vote on (1) the election of two
trustees; and (2) any other business that may properly come before the meeting.
The Chairman of the Board of Trustees and I will also report on the
Company's affairs and there will be a discussion period for questions and
answers.
The Board of Trustees appreciates and encourages shareholder participation
in the Company's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Please complete, sign and date the
enclosed proxy card and return it in the envelope provided at your earliest
convenience.
Your vote is important and much appreciated.
Sincerely,
/s/ John B. Bartling
JOHN B. BARTLING
President and
Chief Executive Officer
<PAGE> 3
LEXFORD RESIDENTIAL TRUST
41 SOUTH HIGH STREET
SUITE 2410
COLUMBUS, OHIO 43215
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 29, 1998
To Our Shareholders:
Notice is hereby given of the Annual Meeting of Shareholders of Lexford
Residential Trust (the "Company") to be held at The Hyatt on Capitol Square, 75
E. State Street, Columbus, Ohio, on Tuesday, September 29, 1998 at 10:00 a.m.
(local time) to consider and act upon the following matters which are more fully
described in the accompanying Proxy Statement:
1. The election of two trustees to serve for three-year terms expiring
in 2001; and
2. To transact any other business which may properly come before the
meeting.
Shareholders of record as of the close of business on August 28, 1998, will
be entitled to notice of, and to vote at, the meeting.
Whether or not you plan to attend the meeting in person you are requested
to complete, sign, date and return the enclosed proxy in the envelope provided.
No postage is required if mailed in the United States. A proxy may be revoked by
a shareholder by written notice to the Secretary of the Company or the Secretary
of the meeting at any time prior to its use.
By order of the Board of Trustees,
/s/ Bradley A. Van Auken
BRADLEY A. VAN AUKEN
Secretary
Columbus, Ohio
September 1, 1998
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY IN THE RETURN ENVELOPE PROVIDED.
<PAGE> 4
LEXFORD RESIDENTIAL TRUST
41 SOUTH HIGH STREET
SUITE 2410
COLUMBUS, OHIO 43215
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to holders ("Shareholders") of common
shares of beneficial interest, par value $.01 per share ("Common Shares"), of
Lexford Residential Trust (the "Company") for use at the Annual Meeting of
Shareholders to be held on Tuesday, September 29, 1998, or at any adjournments
or postponements thereof (the "Annual Meeting"), pursuant to the accompanying
Notice of Annual Meeting of Shareholders. A proxy card for the meeting and a
return envelope are enclosed. Shareholders may revoke the authority granted by
their execution of proxies at any time before their effective exercise by filing
with the Secretary of the Company, or with the Secretary of the meeting, a
written revocation or duly executed proxy bearing a later date, or by voting in
person at the meeting.
The purpose of the meeting is to: (a) elect two Class III trustees to the
Board of Trustees (the "Board") for three-year terms expiring in 2001; and (b)
transact any other business which may properly come before the meeting. While
the Company is not currently aware of any other matters which will come before
the meeting, if any other matters do properly come before the meeting, the
persons designated as proxies intend to vote in accordance with their best
judgment on such matters. Shares represented by executed and unrevoked proxies
will be voted FOR each of the nominees for trustee unless otherwise indicated on
the form of proxy.
Proxies for use at the meeting are being solicited by the Board.
Shareholders of record at the close of business on August 28, 1998 (the "Record
Date") will be entitled to notice of and to vote at the meeting. Proxies are
being mailed to shareholders with this Proxy Statement on or about September 2,
1998. On August 28, 1998, the Company had outstanding 9,515,559 Common Shares,
each of which is entitled to one vote upon each of the matters to be presented
at the meeting. The holders of a majority of the Common Shares issued and
outstanding on the Record Date, present in person or by proxy and entitled to
vote, will constitute a quorum at the meeting. Each nominee for election to the
Board will be elected by a plurality of the votes cast in the election of such
trustee.
Abstentions (including broker non-votes) do not count as votes cast.
Proxies will be solicited primarily by mail, but additional solicitation
may be made in person or by telephone by officers or employees of the Company.
All solicitation expenses, including the costs of preparing, assembling and
mailing the proxy material, will be borne by the Company.
<PAGE> 5
ITEM 1: ELECTION OF TRUSTEES
At the Annual Meeting, Shareholders will elect two Class III trustees for
three-year terms expiring at the Annual Meeting in 2001. Members of the Board
serve until their successors have been duly elected and qualified or until their
earlier resignation or removal. If a vacancy occurs during the term of any
trustee, such vacancy may be filled by the Board for the remainder of the full
term. The Board may, by majority vote, also increase the number of members and
elect trustees to fill newly created Board seats and may remove trustees from
time to time. Set forth below are the names of, and certain information with
respect to, the persons nominated by the full Board for election as trustees.
Unless otherwise specified, all duly executed proxies will be voted FOR the
election of such nominees.
The persons named in the proxy will be authorized to vote for the two
nominees proposed by the Board that are named below, unless such authorization
is withheld. Proxies cannot be voted for a greater number of persons than the
number of nominees named. To the knowledge of the Board, both of the nominees
will be available for service at the date of the Annual Meeting. If, for any
reason, any of the nominees should become unavailable for election,
discretionary authority may be exercised by the persons named in the proxy to
vote for substitute nominees proposed by the Board.
The Company's Declaration of Trust and its Bylaws provide that, beginning
with the Company's 1998 Annual Shareholders Meeting (being the Company's first
Annual Shareholders Meeting following the merger of the Company's predecessor,
Lexford, Inc., with and into the Company), the trustees will be divided into
three classes, each class of trustees to serve for staggered terms and
consisting of a number of trustees to be determined by resolution of the Board,
provided that the total number of trustees not exceed more than seventeen
trustees with no more than six trustees serving in any class. By resolution of
the Board, effective upon the date of the Annual Meeting, there will be six
trustees with two trustees serving in each of the three classes. Messrs.
Bartling and Weiler are current trustees of the Company who have been nominated
for election as Class III trustees at the Annual Meeting to serve for terms to
expire at the Annual Shareholders Meeting to be held in 2001.
2
<PAGE> 6
NOMINEES FOR TRUSTEE
CLASS III TRUSTEES NOMINATED FOR ELECTION AT THE 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
HAS SERVED
AS TRUSTEE
NAME AGE SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
---- --- ---------- --------------------------------------------
<S> <C> <C> <C>
John B. Bartling 41 1995 Mr. Bartling is a Trustee and the Chief Executive Officer
and President of the Company and has served in equivalent
capacities for the Company's predecessor, Lexford, Inc.
(formerly known as Cardinal Realty Services, Inc.) since
December 1, 1995. From April 1993 until December 1995, Mr.
Bartling was a Director in the Real Estate Products Group
of CS First Boston, an investment banking firm. He was an
executive officer of NHP, Inc., a company specializing in
the development, ownership and management of real estate
assets, from June 1987 to April 1993. During his tenure
with NHP, Inc., Mr. Bartling also served as Executive Vice
President of NHP Real Estate Corp., NHP Capital Corp. and
NHP Servicing Inc., wholly owned subsidiaries of NHP, Inc.
Mr. Bartling is a member of the Executive Committee of the
National Multi Housing Council.
Robert J. Weiler 63 1992 Mr. Weiler is a Trustee of the Company and has served in an
equivalent capacity for the Company's predecessor, Lexford,
Inc. (formerly known as Cardinal Realty Services, Inc.)
since September 1992. Mr. Weiler served as Acting President
and Chief Operating Officer of Cardinal Realty Services,
Inc. from June 1995 to December 1995. A central Ohio real
estate developer, Mr. Weiler has been associated with The
Robert Weiler Company since 1957 and has been Chairman of
the Board since 1987. A real estate consultant since 1970,
Mr. Weiler also is a licensed real estate appraiser and a
member of the Appraisal Institute, having served as
President of the Ohio Chapter. He was a Director of the
National and Ohio Association of Realtors and is a past
President of the Columbus Board of Realtors. Mr. Weiler is
a member of the Executive Committee of the Capital
University Board of Trustees. He is also a former member of
the Columbus Board of Education and served as its President
in 1987.
</TABLE>
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR TRUSTEE NAMED ABOVE.
3
<PAGE> 7
CONTINUING TRUSTEES
CLASS I TRUSTEES SERVING UNTIL THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
HAS SERVED
AS TRUSTEE
NAME AGE SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
---- --- ---------- --------------------------------------------
<S> <C> <C> <C>
H. Jeffrey Schwartz 43 1992 Mr. Schwartz is a Trustee of the Company and has served in
an equivalent capacity for the Company's predecessor,
Lexford, Inc. (formerly known as Cardinal Realty Services,
Inc.) since September 1992. Mr. Schwartz has been a partner
in the law firm of Benesch, Friedlander, Coplan & Aronoff,
LLP ("BFCA") since 1988 and Chairman of the firm's Business
Reorganizations Department since 1991. Prior to joining
BFCA in 1983, Mr. Schwartz was a law clerk to the Honorable
William J. O'Neill, United States Bankruptcy Court for the
Northern District of Ohio, from 1982 to 1983 and to the
Honorable Joseph T. Molitoris, United States Bankruptcy
Court for the Northern District of Ohio, from 1980 to 1982.
Mr. Schwartz was a faculty member of the Bankruptcy
Litigation Institute, has written numerous articles on
securities, real estate and business reorganization law and
is the former Chairman of the Section of Bankruptcy and
Commercial Law of the Cleveland Bar Association.
Stanley R. Fimberg 64 1997 Mr. Fimberg is a Trustee of the Company and has served in
an equivalent capacity for the Company's predecessor,
Lexford, Inc. (formerly known as Cardinal Realty Services,
Inc.) since October 1997. Mr. Fimberg has been the managing
member of FSC Realty, LLC, a real estate firm specializing
in the ownership of multi-family properties, since March 1,
1996. Mr. Fimberg served as President of Fimberg Realty,
Inc., a co-venturer of Lexford Partners, a Texas joint
venture and manager of multi-family properties and
successor to Brentwood Properties, from 1988 until July
1996. Mr. Fimberg has devoted his energies solely to real
estate investment activities since 1970. Prior to that
time, Mr. Fimberg served as an attorney with O'Melveny &
Myers and worked in the office of the Tax Legislative
Counsel of the U.S. Treasury Department in Washington, D.C.
</TABLE>
4
<PAGE> 8
CLASS II TRUSTEES SERVING UNTIL THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
HAS SERVED
AS TRUSTEE
NAME AGE SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
---- --- ---------- --------------------------------------------
<S> <C> <C> <C>
Joseph E. Madigan 66 1992 A corporate financial consultant, Mr. Madigan also is a
Director of Donatos Pizza, Inc., VOCA Holding, Inc.,
Columbus Show Case Company and The Frank Gates Service
Company. Mr. Madigan is a Trustee of the Company and has
served in an equivalent capacity for the Company's
predecessor, Lexford, Inc. (formerly known as Cardinal
Realty Services, Inc.) since September 1992. Mr. Madigan
currently serves as Chairman of the Company's Board and
served as Acting Chairman and Chief Executive Officer of
Cardinal Realty Services, Inc. from June 1995 to December
1995. Mr. Madigan was Executive Vice President, Chief
Financial Officer and Director of Wendy's International,
Inc. from July 1980 through December 1987. He was Treasurer
and Vice President of Borden, Inc. between October 1968 and
June 1980.
Glenn C. Pollack 40 1992 Mr. Pollack is a Trustee of the Company and has served in
an equivalent capacity for the Company's predecessor,
Lexford, Inc. (formerly known as Cardinal Realty Services,
Inc.) since December 1992. Mr. Pollack has been Managing
Director and Principal of Brown, Gibbons, Lang & Company,
L.P., an investment banking firm located in Cleveland,
Ohio, since January 6, 1997. Mr. Pollack served as
President of Zeus Advisors, Inc., a consulting firm located
in Cleveland, Ohio, from November 1994 to December 1996.
From September 1989 to October 1994, Mr. Pollack was Chief
Executive Officer of A&W Foods, Inc., a regional food
distributor. Mr. Pollack was a senior manager in the
Corporate Strategies Group at the Cleveland office of Price
Waterhouse in 1988 and 1989, and served in a similar
capacity from 1984 to 1988 with Siedmann & Associates, a
Cleveland-based consulting firm.
</TABLE>
INFORMATION RELATING TO THE BOARD OF TRUSTEES AND COMMITTEES OF THE BOARD OF
TRUSTEES
The Board of Directors of the Company's predecessor by merger, Lexford,
Inc., held 8 meetings during 1997. Each incumbent director attended at least 75%
of the aggregate number of meetings of the Board and all committees on which he
served during 1997.
The Board has established two committees: an Audit Committee and a
Compensation Committee. The general functions and composition of each Board
committee and the number of committee meetings held by each committee during the
last fiscal year are set forth below.
Audit Committee
The primary functions of the Audit Committee are to review the services
provided by the Company's independent auditors and the independence of such firm
from the management of the Company. The Audit Committee also assists the Board
in discharging its duties relating to the internal control, accounting and
reporting practices of the Company. The Audit Committee also reviews the scope
of audits by the Company's independent auditors, the annual financial statements
of the Company, the Company's systems of internal accounting controls and such
other matters with respect to the accounting, auditing and financial reporting
5
<PAGE> 9
practices and procedures of the Company as it may find appropriate or as may be
brought to its attention. The Audit Committee held two meetings during 1997. The
composition of the Audit Committee is as follows:
H. Jeffrey Schwartz, Chairman
Glenn C. Pollack
Robert J. Weiler
Compensation Committee
The Compensation Committee is authorized to: (i) administer the Company's
various compensation plans; (ii) review and recommend to the Board of Trustees
compensation levels for executive officers; (iii) evaluate executive
management's performance; (iv) consider executive management succession and
related matters; (v) review the Company's benefit plans in which officers,
employees and trustees of the Company or its affiliates are eligible to
participate; (vi) periodically review the equity compensation plans of the
Company and the grants under such plans; (vii) carry out the duties of the
Compensation Committee contained in stock option plans or other employee benefit
plans adopted by the Company; and (viii) approve, take and implement any and all
such actions and exercise any and all such additional powers as may be necessary
or incidental to any of the foregoing powers. The Compensation Committee held 7
meetings during 1997. The composition of the Compensation Committee is as
follows:
Glenn C. Pollack, Chairman
Robert J. Weiler
Stanley R. Fimberg
Trustee Compensation
Each trustee of the Company who is not an employee of the Company is paid
an annual retainer fee of $15,000, plus (a) meeting fees of $1,000 for
attendance at each meeting of the Board and (b) $750 for each committee meeting
that occurs on a date when the full Board does not meet. Pursuant to the
Company's 1992 Incentive Equity Plan, as amended (the "Incentive Equity Plan"),
each member of the Board in September 1992 (which includes each current
non-employee trustee other than Mr. Fimberg) who was not employed by the Company
was granted, at the commencement of the trustee's term, a stock option to
purchase 15,000 Common Shares, subject to certain vesting requirements (all of
which have been satisfied). Each such trustee has exercised the foregoing stock
options in full. In addition, each non-employee trustee then serving for at
least 12 months prior to date of grant was granted on November 30, 1995, May 23,
1996 and October 7, 1997, an option to purchase 4,000 Common Shares with an
exercise price equal to the fair market value on the date of the grant, a ten
year term from date of grant and a vesting period of the lesser of one year or
the period from the date of the grant to the next annual meeting of
shareholders. Each trustee has exercised all vested stock options in full. Each
incumbent non-employee trustee who was granted stock options on October 7, 1997,
will vest in such options on the date of the Annual Meeting.
In October 1997, the shareholders of the Company approved the Company's
1997 Performance Equity Plan (the "Performance Plan"). The Performance Plan
authorizes the grant of awards of restricted Common Shares to certain officers
and non-employee trustees. The Performance Plan has a three year term (1997
through 1999), with increasing performance goals associated with each year of
the term. A total of 636,000 restricted Common Shares were made available for
grants. On October 7, 1997 the Compensation Committee of the Company's Board of
Trustees authorized grants of restricted Common Shares for the full 636,000
shares of which 297,000 shares were awarded to the non-employee trustees. The
trustees vested in 198,000 shares based upon the achievement of certain
performance goals in 1997. Vesting under the Performance Plan occurs only upon
attainment of specified performance goals. The performance goals are stated as
percentage increases over base line amounts established, and as defined, in the
Performance Plan approved by shareholders. Any awards that remain non-vested
after the third year will be forfeited.
At the Company's annual shareholders meeting held on May 22, 1996, the
shareholders approved the Company's Non-Employee Trustee Restricted Stock Plan
(the "Trustees Restricted Stock Plan"). Under the terms of the Trustees
Restricted Stock Plan, each non-employee trustee of the Company may elect to
receive restricted Common Shares in lieu of cash trustee's fees otherwise
payable to him. The Company has reserved 50,000 shares for issuance under the
Trustees Restricted Stock Plan and is also authorized to purchase Common Shares
on the open market or in private transactions in order to provide for the
payment of shares to non-
6
<PAGE> 10
employee trustees under the Trustees Restricted Stock Plan. Each non-employee
trustee who participates in the Trustees Restricted Stock Plan receives
restricted Common Shares in lieu of cash compensation with the shares paid to
such trustee being valued at a 20% discount from their fair market value on the
date of payment. Shares issued or paid to trustees under the Trustees Restricted
Stock Plan have a restriction period of three years. The trustee may not sell,
exchange, transfer, pledge, hypothecate, assign or otherwise dispose of the
shares during the restriction period, except by bequest pursuant to a will or by
intestacy. All restrictions will lapse and the holder of the restricted Common
Shares will be entitled to receipt of the shares following the earliest of (a)
three years from the date of the issuance or payment of the restricted Common
Shares to the holder; (b) the date of the holder's death or disability; (c) the
date the holder, after being nominated by the Board, is not elected by the
shareholders in an election for the Board; or (d) the date on which the Board
determines that the holder will not be nominated for election to the Board.
Restricted Common Shares will be forfeited to the Company in the event that,
during the restriction period, the holder (a) resigns (other than by reason of
disability) or is dismissed for cause from the Board during his elected term as
trustee; (b) declines to stand for an election to the Board after having been
nominated by the Board; or (c) sells, exchanges, transfers, pledges,
hypothecates, assigns or otherwise attempts to dispose of restricted Common
Shares except by bequest pursuant to a will or intestacy. As of the end of the
Company's 1997 fiscal year, each non-employee trustee had elected to participate
in the Trustees Restricted Stock Plan by electing to receive shares of
restricted Common Shares in lieu of a percentage of trustees fees otherwise
payable in cash, such elective percentages ranging from 50% to 100% of trustees
fees.
On March 26, 1998, the Board formed a Special Independent Committee
consisting of Messrs. Bartling, Fimberg and Patrick M. Holder (a former member
of the Board who resigned on July 1, 1998) to consider and formulate a
retirement program for non-employee trustees (the "Trustee Retirement Program").
None of the members of the Special Independent Committee were eligible to
participate in the Trustee Retirement Program. The Special Independent Committee
served without additional compensation and formulated the Trustee Retirement
Program, which was available to a maximum of five non-employee trustees who were
not members of the Special Independent Committee and who tendered their
resignation from the Board prior to the earlier of April 15, 1998 or the time at
which five resignations from eligible trustees had been submitted.
Four trustees retired from the Board effective April 15, 1998 pursuant to
the Trustee Retirement Program. Each retiring trustee received a package
consisting of the right to receive a cash payment of $225,000 (the "Retirement
Payment"), vesting of all non-vested Common Share awards and the opportunity to
continue participation in the Company's Executive Deferred Compensation Plan and
the related Executive Deferred Compensation Rabbi Trust ("Rabbi Trust") for up
to five years. The retiring trustees were also afforded the opportunity to defer
receipt of all or any portion of the Retirement Payment and direct that the
deferred portion be contributed to the Rabbi Trust and invested in the Company's
Common Shares for their benefit. In connection with their participation in the
Trustee Retirement Plan, two of the retiring trustees elected to defer receipt
of a total of $400,000 of Retirement Payments in such manner.
Patrick M. Holder, a former trustee and executive officer of the Company's
wholly owned subsidiary, Lexford Properties, Inc., resigned from his positions
as trustee and as President of Lexford Properties, Inc. effective July 1, 1998.
Mr. Holder was a party to an employment agreement with Lexford Properties, Inc.
for an originally scheduled term through and including July 31, 2000, at annual
base cash compensation of $175,000 plus the right to receive an annual cash
bonus of up to 60% of annual base compensation. In consideration of Mr. Holder's
resignation and full release of the Company and its affiliates, the Company paid
Mr. Holder a lump sum of $425,000.
Executive Officers and Compensation
In addition to John Bartling, Chief Executive Officer, President and a
trustee of the Company, listed below are the executive officers of the Company
as of August 28, 1998. Each executive officer will serve until his or her
successor is elected by the Board or until his or her earlier resignation or
removal. There are no family relationships among these officers.
7
<PAGE> 11
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE OR MORE YEARS
---- --- -------------------------------------------------------
<S> <C> <C>
Mark D. Thompson 40 Chief Financial Officer and Executive Vice President of
the Company since October 31, 1996. Prior to that time,
Mr. Thompson was Executive Vice President of Corporate
Acquisitions of the Company since April 1, 1996. Mr.
Thompson was a partner in the law firm of McDonald,
Hopkins, Burke & Haber from January 1995 to April 1996.
Prior to that time, Mr. Thompson was an associate, from
January 1985 through October 1992, and partner, from
October 1992 through December 1994, in the law firm of
Benesch, Friedlander, Coplan & Aronoff LLP.
Leslie B. Fox 39 Executive Vice President and Chief Operating Officer of
the Company since December 1997. Prior to that, she had
been Executive Vice President -- Investment Management
of the Company since June 1997. Ms. Fox was President
of each of Asset Investors Corporation ("AIC") and
Commercial Assets, Inc. ("CAI"), both publicly traded
real estate investment trusts, from October 1996
through May 1997. Prior to that time, Ms. Fox served as
Executive Vice President and Chief Operating Officer of
CAI and AIC from February 1995 through September 1996.
From November 1993 through February 1995, Ms. Fox
served as a Vice President of AIC and as Executive Vice
President, Chief Investment Officer and Assistant
Secretary of CAI. Ms. Fox served as Senior Vice
President of NHP Capital Corp., a subsidiary of NHP,
Inc. from December 1991 to October 1993 and Vice
President of Finance/MIS of NHP Property Management,
Inc., a subsidiary of NHP, Inc. from November 1987 to
November 1991.
Bradley A. Van Auken 41 Mr. Van Auken is the Company's Senior Vice President,
General Counsel and Secretary, serving in such capacity
for the Company since January 1998. Mr. Van Auken was a
partner and associate with the law firm of Benesch,
Friedlander, Coplan & Aronoff LLP from January 1992 and
November 1986, respectively.
Mark M. Culwell 46 Mr. Culwell has served as Senior Vice
President -- Asset Management of the Company since
December 1997 and served as Construction Services
Supervisor of the Company's subsidiary, Lexford
Properties, Inc. ("LPI"), from April through December
of 1997. Mr. Culwell was Vice President -- Real Estate
Investment and Construction of Cornerstone Housing
Corp., a company engaged in real estate investment and
construction, from October 1991 through March 1997. In
addition, he was a Southwest Partner of Trammell Crow
Residential from October 1982 to December 1986.
Annette Hoover 70 Senior Vice President -- Property Operations since
December 1997. Prior to that time, Ms. Hoover was a
Vice President of LPI since August 1, 1996. From 1988
to August 1996, Ms. Hoover was Vice President of
Lexford Partners, a property management firm and the
predecessor of LPI prior to its acquisition by the
Company. Ms. Hoover was Vice President of Operations
for Brentwood Properties, the property management
affiliate of Trammel Crow Residential, from 1985
through 1988.
Paul R. Selid 35 Senior Vice President -- Acquisitions of the Company
since December 1997. Prior to that time, Mr. Selid was
Senior Vice President -- Asset Management of the
Company from April 15, 1996 to December 1997. Mr. Selid
was Vice President of Acquisitions of NHP, Inc. from
December 1994 to April 1996. Mr. Selid also served as
Vice President of Asset Management & Underwriting of
NHP, Inc. from September 1992 to December 1994. Mr.
Selid previously served as Vice President of
</TABLE>
8
<PAGE> 12
<TABLE>
NAME AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE OR MORE YEARS
---- --- -------------------------------------------------------
<S> <C> <C>
Finance of Hall Financial Group, Inc. from January 1990
to September 1992.
<CAPTION>
<S> <C> <C>
Ronald P. Koegler 45 Senior Vice President and Controller of the Company
since December 20, 1996. Mr. Koegler served as Vice
President and Treasurer of the Company from January 16,
1996 to December 20, 1996. Prior to that time, Mr.
Koegler was Controller of the Company since April 1992.
He served as Assistant Controller of the Company from
October 1989 to April 1992.
Michael F. Sosh 36 Senior Vice President and Treasurer of the Company
since January 9, 1997. Prior to that time, Mr. Sosh
served as Divisional Vice President and Assistant
Treasurer of The Bon-Ton Stores, Inc. since March 1995.
He previously served as Manager of Financial Planning
and Financial Analyst of The Bon-Ton Stores, Inc. from
1987 to 1995. Mr. Sosh was a banking officer with
Meridian Bancorp, Inc. from 1983 to 1987.
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the other four most highly compensated executive
officers during 1997 for services rendered in all capacities to the Company
during 1997 as well as 1996 and 1995, where applicable.
<TABLE>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------
--------------------------------------- SECURITIES
OTHER RESTRICTED UNDER-
ANNUAL STOCK LYING LTIP ALL OTHER
NAME AND SALARY BONUS(ES) COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS # ($) ($)
------------------ ---- -------- --------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John B. Bartling........ 1997 $340,000(1) $198,000(2) $ 9,000(3) -- -- $1,660,266(4) $6,260(5)
Chief Executive Officer 1996 $285,000 $171,000(6) $503,800(7) $402,188(8) 40,000(9) -- $7,371(10)
and President 1995 $ 23,750(11) -- $ 13,250(12) -- -- -- --
Mark D. Thompson........ 1997 $230,000(13) $207,000(14) -- -- -- $1,058,968(15) $2,400(16)
Chief Financial Officer 1996 $127,885(17) $157,491(18) $216,635(19) $136,875(20) 25,000(21) -- $ 934(22)
and Executive Vice 1995 -- -- -- -- -- -- --
President
Leslie B. Fox........... 1997 $102,981(23) $178,125(24) -- $396,000(25) 25,000(26) -- $1,236(27)
Chief Operating Officer 1996 -- -- -- -- -- -- -- --
and Executive Vice 1995 -- -- -- -- -- --
President
Michael F. Sosh......... 1997 $105,000 $ 47,250(28) -- -- 5,000(29) $ 325,864(30) $2,400(31)
Senior Vice President 1996 -- -- -- -- -- -- --
and Treasurer 1995 -- -- -- -- -- -- --
Ronald P. Koegler....... 1997 $105,000 $ 42,000(32) -- -- 2,500(33) $ 325,864(34) $2,400(35)
Senior Vice President 1996 $ 84,492 $ 38,250(36) -- -- 5,000(37) -- $6,218(38)
and Controller 1995 $ 75,194 $ 15,450(39) -- -- -- -- $5,603(38)
</TABLE>
- ---------------
(1) This amount includes a cash payment of $300,000 and $40,000 Mr. Bartling
elected to receive in the form of 4,000 Common Shares in lieu of cash. The
Common Shares were issued based on a valuation of $10.3125 per share, being
the closing price of the Common Shares on December 31, 1996. Mr. Bartling
elected to defer receipt of the shares which were issued to the Rabbi Trust
for his benefit.
(2) Cash bonus for 1997 paid in 1998.
(3) Car allowance of $750 per month.
(4) Mr. Bartling received an award of 40,000 restricted Common Shares on April
5, 1996, providing that so long as Mr. Bartling remains in the employ of
the Company, one-third of such shares will be earned when the average
number of issued and outstanding shares of Common Shares over ten
consecutive trading days multiplied by the average closing price of the
Common Shares on the Nasdaq National Market tier of the
9
<PAGE> 13
Nasdaq Stock Market(sm) over such period (or if the Common Shares not
listed or admitted to trading on such market, the principal securities
exchange on which the Common Shares is listed or admitted to trading) plus
the liquidation value of all issued and outstanding preferred stock of the
Company ("Market Capitalization"), exceeds $90 million, one-third of which
shall vest when the Market Capitalization exceeds $120 million, and the
final one-third of which shall vest when the Market Capitalization exceeds
$150 million. Mr. Bartling vested in two thirds, 26,666, of the 40,000
shares, in 1997. The value of the shares was determined by multiplying the
number of shares subject to this grant by the closing price of the Common
Shares on April 5, 1996 which was $8.937. Mr. Bartling vested in the
remaining thirds, 13,334, of the shares subject to this grant in early
1998. In addition, Mr. Bartling vested in 96,000 restricted Common Shares
pursuant to the terms of the Performance Plan. The value of these shares
was determined by multiplying the number of shares subject to this grant by
the closing price of the Common Shares on the date of the grant, October 7,
1997, being $14.8125. The value of these awards vested at the end of 1997
fiscal year was $2,115,989 based upon the fiscal year-end price of $17.25
per share.
(5) Includes the Company's payment of a premium in the amount of $3,860 for a
term life insurance policy with a death benefit of $2,000,000 and the
Company's portion of the cost of group term life insurance, health
insurance and disability insurance paid on behalf of Mr. Bartling in the
aggregate amount of $2,400.
(6) This amount includes a cash bonus for 1996 paid in 1997 in the amount of
$27,862. This amount also includes an award of 13,880 Common Shares as a
stock bonus for 1996 granted in 1997. The value of the stock bonus was
determined by multiplying the number of shares subject to this grant by the
closing price of the Common Shares at 1996 fiscal year-end, which was
$10.3125. Mr. Bartling elected to defer receipt of the shares issued
pursuant to the stock bonus which were issued to the Rabbi Trust for the
benefit of Mr. Bartling.
(7) This amount includes an award of 20,000 restricted Common Shares in 1997
pursuant to the terms of Mr. Bartling's Employment Agreement with the
Company, which states that Mr. Bartling will receive one Common Share for
each Common Share purchased by him, up to a maximum of 20,000 shares. The
value of 20,000 shares subject to this award was determined by multiplying
such shares by the closing price of the Common Shares on June 10, 1996, the
date of his matching purchase, which was $9.9375. In addition, pursuant to
an amendment to Mr. Bartling's Employment Agreement, Mr. Bartling elected
to receive Common Shares in lieu of cash bonus compensation otherwise
payable to him on account of the Company's 1996 fiscal year. The Common
Shares were issued based on a valuation of $10.3125 per share, being the
closing price of the Common Shares on December 31, 1996. The shares issued
to Mr. Bartling pursuant to this election qualified as shares purchased for
the grant of matching stock and accordingly the value of these 20,000
matching shares was determined by multiplying such shares by the closing
price of the Common Shares on December 31, 1996, the date applicable to
such qualified matching purchase, which was $10.3125. Mr. Bartling elected
to defer receipt of the shares subject to each of the foregoing grants
which were issued to the Rabbi Trust for the benefit of Mr. Bartling. This
amount also includes (a) payments of $12,500 per month from January 1, 1996
to November 30, 1996 for Mr. Bartling's relocation and temporary living
expenses, as well as a payment of $154,800 to compensate Mr. Bartling for
any taxes relating to such monthly payments, and (b) a car allowance of
$750 per month.
(8) Mr. Bartling received an award of 45,000 restricted Common Shares on April
5, 1996, one-third of which vest on the third, fourth and fifth
anniversaries of such date or, if earlier, upon the Company maintaining
Market Capitalization in excess of $150 million for thirty consecutive
trading days. The value of this award was determined by multiplying the
number of shares subject to this grant by the closing price of the Common
Stock on April 5, 1996, $8.937. The value of this award at the end of the
1997 fiscal year was $776,250 based on the fiscal year-end price of $17.25
per share. The Market Capitalization vesting requirement was satisfied in
the first quarter of 1998.
(9) Mr. Bartling received an option to purchase 40,000 Common Shares at $8.937
per share on April 5, 1996, one-fourth of which vest on the second, third,
fourth and fifth anniversaries of the date of grant or, if earlier, upon
the Company maintaining Market Capitalization in excess of $150 million for
thirty consecutive days. The Market Capitalization vesting requirement was
satisfied in the first quarter of 1998. Mr. Bartling exercised the options
in full on July 2, 1998.
10
<PAGE> 14
(10) Includes the Company's payment of a premium in the amount of $1,190 for a
term life insurance policy with a death benefit of $2,000,000 and the
Company's portion of the cost of group term life insurance, health
insurance and disability insurance paid on behalf of Mr. Bartling in the
aggregate amount of $6,181.
(11) Salary for the period from December 1, 1995, when Mr. Bartling commenced
his employment with the Company, to December 31, 1995.
(12) Includes a payment of $12,500, which sum was required to be paid monthly
from December 1, 1995 to November 30, 1996 for Mr. Bartling's relocation
and temporary living expenses, and (b) a car allowance of $750 for the
month of December, 1995.
(13) This amount includes a cash payment of $200,000 and $30,000 Mr. Thompson
elected to receive in the form of 2,912 Common Shares in lieu of cash. The
Common Shares were issued based on a valuation of $10.3125 per share, being
the closing price of the Common Shares on December 31, 1996. Mr. Thompson
elected to defer receipt of the shares which were issued to the Rabbi Trust
for Mr. Thompson's benefit.
(14) Cash bonus of $138,000 for 1997 paid in 1998. This amount also includes an
award of 4,000 Common Shares as a stock bonus for 1997 granted in 1998. The
value of the stock bonus was determined by multiplying the number of shares
subject to this grant by the closing price of Common Shares at 1997 fiscal
year end, which was $17.25. Mr. Thompson elected to defer receipt of the
shares which were issued to the Rabbi Trust for Mr. Thompson's benefit.
(15) Mr. Thompson received an award of 18,000 restricted Common Shares on April
15, 1996, providing that so long as Mr. Thompson remains in the employ of
the Company, one-third of such shares will be earned when the Market
Capitalization over ten consecutive trading days exceeds $90 million,
one-third of which shall vest when the Market Capitalization exceeds $120
million, and the final one-third of which shall vest when the Market
Capitalization exceeds $120 million, and the final one-third of which shall
vest when the Market Capitalization exceeds $150 million. Mr. Thompson
earned two thirds, 12,000, of the 18,000 shares, in 1997. The value of the
stock was determined by multiplying the number of shares subject to this
grant by the closing price of the Common Shares on April 15, 1996, which
was $9.25. Mr. Thompson vested in the remaining third, 6,000, of the shares
subject to this grant in early 1998. In addition, Mr. Thompson earned
64,000 restricted Common Shares pursuant to the terms of the Performance
Plan. The value of these shares was determined by multiplying the number of
shares subject to this grant by the closing price of the Common Shares on
the date of the grant, October 7, 1997, being $14.8125. The value of these
vested awards at the end of 1997 fiscal year was $1,311,000 based upon the
fiscal year-end price of $17.25 per share.
(16) Includes the Company's portion of the cost of group term life insurance,
disability and health insurance paid on behalf of Mr. Thompson in the
aggregate amount of $2,400.
(17) Salary for the period from April 1, 1996, when Mr. Thompson commenced his
employment with the Company, to December 31, 1996.
(18) This amount includes a cash bonus for 1996 paid in 1997 in the amount of
$27,203. This amount also includes an award of 12,634 Common Shares as a
stock bonus for 1996 granted in 1997. The value of the stock bonus was
determined by multiplying the number of shares subject to this grant by the
closing price of the Common Shares at 1996 fiscal year-end, which was
$10.3125. Mr. Thompson elected to defer receipt of the shares which were
issued to the Rabbi Trust for Mr. Thompson's benefit.
(19) Includes an award of 10,000 Common Shares in 1997 pursuant to the terms of
Mr. Thompson's Employment Agreement with the Company, which states that Mr.
Thompson will receive one Common Share for each Common Share purchased by
him, up to a maximum of 10,000 shares. The value of 10,000 shares subject
to this award was determined by multiplying such shares by the closing
price of the Common Shares on June 10, 1996, the date of his matching
purchase, which was $9.9675. In addition, pursuant to an amendment to Mr.
Thompson's Employment Agreement, Mr. Thompson elected to receive Common
Shares in lieu of cash bonus compensation otherwise payable to him on
account of the Company's 1996 fiscal year. The Common Shares were issued
based on a valuation of $10.3125 per share, being the closing price of the
Common Shares on December 31, 1996. The shares issued to Mr. Thompson
pursuant to this election qualified as shares purchased for the grant of
matching stock and accordingly the value of these
11
<PAGE> 15
10,000 shares of matching stock was determined by multiplying such shares
by the closing price of the Common Shares on December 31, 1996, the date
applicable to such qualified matching purchase, which was $10.3125. Mr.
Thompson elected to defer receipt of the shares subject to each of the
foregoing grants which were issued to the Rabbi Trust for Mr. Thompson's
benefit. This amount also includes a relocation bonus of $60,000 paid in
1997 for Mr. Thompson's moving his principal residence to Columbus, Ohio,
as well as payment of $55,385 to compensate Mr. Thompson for any taxes
relating to such relocation bonus.
(20) Mr. Thompson received an award of 15,000 Common Shares on April 15, 1996,
one-third of which vests on the third, fourth and fifth anniversaries of
such date. The value of this award was determined by multiplying the number
of shares subject to this grant by the closing price of the Common Shares
on April 15, 1996, $9.125. The value of this award at the end of the 1997
fiscal year was $258,750 based on the fiscal year-end price of $17.25 per
share. In the first quarter of 1998, the Compensation Committee of the
Board amended the Award Agreement pursuant to which these Common Shares
were issued to provide for accelerated vesting in full. (See "Employment
Agreement -- Mark D. Thompson Employment Agreement").
(21) Mr. Thompson received an option to purchase 25,000 Common Shares at $8.8125
per share on April 1, 1996, one-fifth of which vest on the first, second,
third, fourth and fifth anniversaries of the date of grant. In the first
quarter of 1998, the Compensation Committee of the Board amended the Award
Agreement pursuant to which these Common Shares were issued to provide for
accelerated vesting in full. (See "Employment Agreement -- Mark D. Thompson
Employment Agreement"). Mr. Thompson exercised the options in full on July
2, 1998.
(22) Includes the Company's portion of the cost of group term life insurance and
disability insurance paid on behalf of Mr. Thompson in the aggregate amount
of $934.
(23) Salary for the period from June 1, 1997, when Ms. Fox commenced employment
with the Company, to December 31, 1997.
(24) This amount includes a cash bonus for 1997 paid in 1998 in the amount of
$78,750 and a $60,000 payment made upon the execution of Ms. Fox's
employment contract. This amount also includes an award of 2,282 Common
Shares as a stock bonus for 1997 granted in 1998. The value of the stock
bonus was determined by multiplying the number of shares subject to this
grant by the closing price of the Common Shares at fiscal year end, which
was $17.25. Ms. Fox elected to defer receipt of the shares issued pursuant
to the stock bonus which were issued to the Rabbi Trust for the benefit of
Ms. Fox.
(25) Ms. Fox received an award of 15,000 restricted Common Shares on June 1,
1997, one-third of which vest on the third, fourth and fifth anniversaries
of such date. Ms. Fox also received an award of 18,000 restricted Common
Shares on June 1, 1997, which award as amended on January 1, 1998, provided
that one-half of such shares will vest on January 1, 1998, and one-fourth
of such shares will vest on each of January 1, 1999 and 2000, respectively.
The value of the awards was determined by multiplying the number of shares
subject to the grants by the closing price of the Common Shares on June 1,
1997, being $12.00. The value of the awards at the end of the 1997 fiscal
year was $569,250 based upon the fiscal year-end price of $17.25 per share.
Ms. Fox elected to defer receipt of the shares subject to the foregoing
grants which were issued to the Rabbi Trust for Ms. Fox's benefit.
(26) Ms. Fox received an option to purchase 25,000 Common Shares at $11.875 per
share on June 1, 1997, one-fifth of which vest on the first, second, third,
fourth and fifth anniversaries of the date of the grant.
(27) Includes the Company's portion of the cost of group term life insurance and
disability insurance paid on behalf of Ms. Fox in the aggregate amount of
$1,236.
(28) Cash bonus for 1997 paid in 1998.
(29) Mr. Sosh received an option to purchase 5,000 Common Shares at $9.625 per
share on January 1, 1997, one-third of which options vest on the first,
second and third anniversaries of the date of grant.
(30) Mr. Sosh vested in 22,000 restricted Common Shares pursuant to the terms of
the Performance Plan. The value of these shares was determined by
multiplying the number of shares subject to this grant by the closing price
of the Common Shares on October 7, 1997, which was $14.812. The value of
these vested awards at the end of 1997 fiscal year was $379,500 based upon
the fiscal year-end price of $17.25 per share.
12
<PAGE> 16
Mr. Sosh elected to defer receipt of all 33,000 shares subject to this
award which were issued to the Rabbi Trust for Mr. Sosh's benefit.
(31) Includes the Company's portion of the cost of group term life insurance,
health insurance and disability insurance paid on the behalf of Mr. Sosh in
the aggregate amount of $2,400.
(32) Cash bonus for 1997 paid in 1998.
(33) Mr. Koegler received an option to purchase 2,500 Common Shares at $10.312
per share on January 1, 1997, one-third of which options vest on the first,
second and third anniversaries of the date of grant.
(34) Mr. Koegler vested in 22,000 restricted Common Shares pursuant to the terms
of the Performance Plan. The value of these shares was determined by
multiplying the number of shares subject to this grant by the closing price
of the Common Shares on October 7, 1997, which was $14.812. The value of
these vested awards at the end of 1997 fiscal year was $379,500 based upon
the fiscal year-end price of $17.25 per share. Mr. Koegler elected to defer
receipt of all 33,000 shares subject to this award which shares were issued
to the Rabbi Trust for Mr. Koegler's benefit.
(35) Includes the Company's portion of the cost of group term life insurance,
health insurance and disability insurance paid on the behalf of Mr. Koegler
in the aggregate amount of $2,400.
(36) Cash bonus for 1996 paid in 1997.
(37) Mr. Koegler received an option to purchase 5,000 Common Shares at $9.625
per share on June 27, 1996, one-third of which options vest on the first,
second and third anniversaries of the date of the grant.
(38) Includes the Company's portion of the cost of group term life insurance,
health insurance and disability insurance paid on behalf of Mr. Koegler.
(39) Cash bonus for 1995 paid in 1996.
13
<PAGE> 17
STOCK OPTIONS GRANTS TABLE
The following table sets forth the information noted for all grants of
stock options to each of the executive officers named in the Summary
Compensation Table during 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leslie B. Fox,
Chief Operating
Officer and Executive
Vice President....... 25,000(1) 32.4% $11.875 6/01/2007 $186,703 $473,142
Michael F. Sosh,
Senior Vice President
and Treasurer........ 5,000(2) 13% $10.312 1/01/2007 $ 32,426 $ 82,173
Ronald P. Koegler,
Senior Vice President
and Controller....... 2,500(3) 6.5% $10.312 1/01/2007 $ 16,213 $ 41,087
</TABLE>
- ---------------
(1) Ms. Fox received an option to purchase 25,000 Common Shares with an exercise
price of $11.875 per share on June 1, 1997, one-fifth of which vest on the
first, second, third, fourth and fifth anniversaries of the date of the
grant.
(2) Mr. Sosh received an option to purchase 5,000 Common Shares with an exercise
price of $10.3125 per share on January 1, 1997, one-third of which vest on
the first, second and third anniversaries of the date of the grant.
(3) Mr. Koegler received an option to purchase 2,500 Common Shares with an
exercise price of $10.3125 per share on January 1, 1997, one-third of which
vest on the first, second and third anniversaries of the date of the grant.
14
<PAGE> 18
STOCK OPTIONS VALUE TABLE
The following table sets forth the fiscal year-end value of unexercised
stock options for each of the executive officers named in the Summary
Compensation Table for the 1997 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES VALUE (#) ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
John B. Bartling, N/A Exercisable/
Chief Executive 0 Exercisable/ $332,500
Officer and President... 0 0 40,000 Unexercisable(1) Unexercisable(2)
Mark D. Thompson,
Chief Financial Officer $42,188 Exercisable(4)/
and Executive 5,000 Exercisable(3)/ $168,750
Vice President.......... 0 0 20,000 Unexercisable(3) Unexercisable(4)
Leslie B. Fox, N/A Exercisable/
Executive Vice President 0 Exercisable/ $134,375
Chief Operating
Officer............... 0 0 25,000 Unexercisable(5) Unexercisable(6)
Michael F. Sosh, $11,559 Exercisable/
Senior Vice President 1,666 Exercisable/ $23,131
and Treasurer........... 0 0 3,334 Unexercisable(7) Unexercisable(8)
Ronald P. Koegler, 5,210 Exercisable/ $63,306 Exercisable/
Senior Vice President 5,000 $36,987
and Controller.......... 0 0 Unexercisable(9) Unexercisable(10)
</TABLE>
- ---------------
(1) Mr. Bartling received an option to purchase 40,000 Common Shares with an
exercise price of $8.9375 per share on April 5, 1996, one-fourth of which
vest on the second, third, fourth and fifth anniversaries of the date of
grant, subject to accelerated vesting upon attainment of certain Market
Capitalization targets. Subsequent to December 31, 1997, the Market
Capitalization targets were attained, resulting in accelerated full
vesting. Mr. Bartling exercised these options in full on July 2, 1998.
(2) The value of the stock option was calculated by multiplying the number of
underlying securities by the difference between (a) $17.25 per share being
the closing price of the Common Shares at fiscal year-end on the Nasdaq
National Market tier of the Nasdaq Stock Market(sm), and (b) the exercise
price of the option, $8.9375 per share.
(3) Mr. Thompson received an option to purchase 25,000 Common Shares with an
exercise price of $8.8125 per share on April 1, 1996, one-fifth of which
vest on the first, second, third, fourth and fifth anniversaries of the
date of grant. In the first quarter of 1998, the Compensation Committee of
the Board amended the Award Agreement pursuant to which these options were
issued to provide for accelerated vesting in full. (See "Employment
Agreements -- Mark D. Thompson Employment Agreement"). Mr. Thompson
exercised these options in full on July 2, 1998.
(4) The value of the stock option was calculated by multiplying the number of
underlying securities by the difference between (a) $10.3125 per share
being the closing price of the Common Shares at fiscal year-end on the
Nasdaq National Market tier of the Nasdaq Stock Market(sm), and (b) the
exercise price of the options, $8.8125 per share.
(5) Ms. Fox received an option to purchase 25,000 Common Shares with an
exercise price of $11.875 per share on June 1, 1997, one-fifth of which
vest on the first, second, third, fourth and fifth anniversaries of the
date of the grant.
15
<PAGE> 19
(6) The value of the stock option was calculated by multiplying the number of
underlying securities by the difference between (a) $17.25 per share being
the closing price of the Common Shares at fiscal year-end on the Nasdaq
National Market tier of the Nasdaq Stock Market(sm), and (b) the exercise
price of the options, $11.875 per share.
(7) Mr. Sosh received an option to purchase 5,000 Common Shares with an
exercise price of $10.3125 per share on January 1, 1997 one-third of which
vest on the first, second and third anniversaries of the date of grant. Mr.
Sosh exercised the vested portion of these options for 1,667 shares on July
2, 1998.
(8) The value of the stock option was calculated by multiplying the number of
underlying securities by the difference between (a) $17.25 per share being
the closing price of the Common Shares at fiscal year-end on the Nasdaq
National Market tier of the Nasdaq Stock Market(sm), and (b) the exercise
price of the options, $10.3125 per share.
(9) Mr. Koegler received an option to purchase 2,500 Common Shares with an
exercise price of $10.3125 per share on January 1, 1997 one-third of which
vest on the first, second and third anniversaries of the date of grant. Mr.
Koegler received an option to purchase 5,000 Common Shares with an exercise
price of $9.625 per share on June 27, 1996, one-third of which vest on the
first, second and third anniversaries of the date of grant. In addition,
Mr. Koegler received an option to purchase 2,710 Common Shares with an
exercise price of $0.71 per share on September 11, 1992 all of which have
vested. Mr. Koegler exercised the vested portion of these options for 6,877
shares on July 2, 1998.
(10) The value of the stock option was calculated by multiplying the number of
underlying securities by the difference between (a) $17.25 per share being
the closing price of the Common Shares at fiscal year-end on the Nasdaq
National Market tier of the Nasdaq Stock Market(sm), and (b) the exercise
price of the options.
LONG-TERM INCENTIVE PLANS TABLE
The following table sets forth the information noted for all long-term
incentive plans awards granted to each of the executive officers named in the
Summary Compensation Table during 1997:
<TABLE>
<CAPTION>
VESTED AND CONTINGENT PAYOUTS UNDER LONG-TERM
PERFORMANCE INCENTIVE PLANS
OR OTHER PERIOD ---------------------------------------------------------
NUMBER OF UNTIL THRESHOLD UNVESTED
SHARES MATURATION OR (SHARES VESTED AT UNVESTED TARGET MAXIMUM
NAME (#) PAYOUT 12/31/97) (#) (#)
---- ---------- --------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
John B. Bartling, Chief
Executive Officer and
President............ 144,000 (1) (1) 96,000 shares (1) 20,000 shares (1) 48,000 shares (1)
Mark D. Thompson, Chief
Financial Officer and
Executive Vice
President............ 96,000 (2) (2) 64,000 shares (2) 14,000 shares (2) 32,000 shares (2)
Michael F. Sosh, Senior
Vice President and
Treasurer............ 33,000 (3) (3) 22,000 shares (3) 4,000 shares (3) 11,000 shares (3)
Ronald P. Koegler,
Senior Vice President
and Controller....... 33,000 (4) (4) 22,000 shares (4) 4,000 shares (4) 11,000 shares (4)
</TABLE>
- ---------------
(1) Mr. Bartling received an award of 144,000 restricted Common Shares pursuant
to the Performance Equity Plan approved by the shareholders on October 7,
1997. The Performance Plan has a three year term with increasing performance
goals associated with each year. Vesting under the Performance Plan occurs
only upon attainment of specified performance goals. Based upon the
performance of the Company in 1997, 96,000 of the restricted Common Shares
were earned at December 31, 1997. The terms of the restricted share award
provides for acceleration of vesting upon change of control of the Company
or the termination of Mr. Bartling's employment other than for cause. Mr.
Bartling elected to defer receipt of the restricted Common Shares subject to
this award, which were issued to the Rabbi Trust for Mr. Bartling's benefit.
(2) Mr. Thompson received an award of 96,000 restricted Common Shares pursuant
to the Performance Plan. Based upon the performance of the Company in 1997,
64,000 of the restricted shares were earned at
16
<PAGE> 20
December 31, 1997. The terms of the restricted share award provides for
acceleration upon change of control of the Company or the termination of Mr.
Thompson's employment other than for cause. Mr. Thompson elected to defer
receipt of the restricted Common Shares subject to this award, which were
issued to the Rabbi Trust for Mr. Thompson's benefit.
(3) Mr. Sosh received an award of 33,000 restricted Common Shares pursuant to
the Performance Plan. Based upon the performance of the Company in 1997,
22,000 of the restricted shares were earned at December 31, 1997. The terms
of the restricted share award provides for acceleration upon change of
control of the Company or the termination of Mr. Sosh's employment other
than for cause. Mr. Sosh elected to defer receipt of the restricted Common
Shares subject to this award, which were issued to the Rabbi Trust for Mr.
Sosh's benefit.
(4) Mr. Koegler received an award of 33,000 restricted Common Shares pursuant to
the Performance Plan. Based upon the performance of the Company in 1997,
22,000 of the restricted shares were earned at December 31, 1997. The terms
of the restricted share award provides for acceleration upon change of
control of the Company or the termination of Mr. Koegler's employment other
than for cause. Mr. Koegler elected to defer receipt of the restricted
Common Shares subject to this award, which were issued to the Rabbi Trust
for Mr. Koegler's benefit.
EMPLOYMENT AGREEMENTS
John B. Bartling Employment Agreement
The Company and Mr. Bartling entered into an employment agreement, dated as
of December 1, 1995 (the "Bartling Employment Agreement") for an original term
through December 31, 1998 and an annual base salary of $285,000 ("Bartling's
Base Salary"), plus an annual cash bonus of 2% of Bartling's Base Salary for
each 1% increase in the Company's recurring earnings before interest (other than
interest paid on mortgage loans secured by the Company's Wholly Owned
Properties), taxes, depreciation and amortization determined in accordance with
generally accepted accounting principles without regard to extraordinary gains
or losses ("Adjusted EBITDA") from the previous fiscal year's Adjusted EBITDA,
limited to 60% of Bartling's Base Salary.
Under the terms of the Bartling Employment Agreement, the Company granted
Mr. Bartling (i) an award of 45,000 restricted Common Shares (see footnote 8 of
the Summary Compensation Table), (ii) an additional award of 40,000 restricted
Common Shares (see footnote 4 to the Summary Compensation Table), (iii) one
Common Share, at no additional cost to him, for each Common Share purchased by
Mr. Bartling in 1996 up to a maximum of 20,000 shares (the "Bartling Matching
Shares"), and (iv) options to purchase 40,000 Common Shares (see footnote 9 to
the Summary Compensation Table).
The Bartling Employment Agreement was amended effective as of December 20,
1996 to provide that Mr. Bartling could elect to receive Common Shares in lieu
of his cash bonus earned in 1996. Common Shares made subject to such election
would be valued at the December 31, 1996 closing price for the Common Shares.
Such amendment further provided that any such shares which Mr. Bartling might
elect to receive in lieu of his cash bonus earned for 1996 would qualify for the
grant of the 10,000 Bartling Matching Shares not yet awarded to Mr. Bartling as
of such date. In March, 1997, Mr. Bartling elected to receive 13,880 shares in
lieu of a portion of his 1996 cash bonus (see footnote 1 to the Summary
Compensation Table). Accordingly, pursuant to Mr. Bartling's election, Mr.
Bartling was entitled to receive the balance of the 10,000 Bartling Matching
Shares not yet awarded to him as of such date. Mr. Bartling vested in all awards
of restricted Common Shares and options to purchase Common Shares in early 1998
upon the Company's attaining and sustaining Market Capitalization in excess of
$150 million.
Upon termination of Mr. Bartling's employment without cause, Mr. Bartling
would be entitled to receive: (i) any of Bartling's Base Salary, and any other
benefits due him under the Bartling Employment Agreement, payable for the
remaining period of the original term or any extension thereof; and (ii) the
cash bonus, if any, applicable to the fiscal year in which such termination
without cause occurs.
The Bartling Employment Agreement and related Award Agreements were amended
to permit Mr. Bartling to defer the receipt of all Common Shares which would
otherwise be issuable to him under the terms of the
17
<PAGE> 21
Bartling Employment Agreement and the related Award Agreements. Pursuant to
these amendments made in conjunction with the adoption of the Company's
Executive Deferred Compensation Plan and the establishment of the Rabbi Trust as
contemplated thereby, all such Common Shares have been issued to the Trustee of
the Rabbi Trust for the benefit of Mr. Bartling.
The Bartling Employment Agreement has been further amended effective as of
January 1, 1997 to increase Mr. Bartling's base salary to $340,000; $298,750 of
which was payable in 1997 in cash and the balance of which was payable in 1997
the form of 4,000 Common Shares (valued at $10.3125 per share, being the closing
price of the Common Shares on December 31, 1996) issuable to the Rabbi Trust for
Mr. Bartling's benefit.
Mark D. Thompson Employment Agreement
The Company and Mr. Thompson entered into an employment agreement, dated as
of April 1, 1996 (the "Thompson Employment Agreement") for an original term
through April 16, 1997 and an annual base salary of $175,000 ("Thompson's Base
Salary"), plus annual bonuses under which Mr. Thompson may become entitled to
receive cash and stock bonuses of up to 60% and 30%, respectively, of Thompson's
Base Salary based on incremental increases in the Company's Adjusted EBITDA from
the previous fiscal year's Adjusted EBITDA. The Thompson Employment Agreement,
as amended (pursuant to the amendments described below), has been extended for
term expiring April 16, 1999.
Under the terms of the Thompson Employment Agreement and related Award
Agreements, the Company granted Mr. Thompson an award of 15,000 Common Shares
(see footnote 20 to the Summary Compensation Table); (ii) an additional award of
18,000 Common Shares (see footnote 15 to the Summary Compensation Table); (iii)
one Common Share, at no additional cost to him, for each Common Share purchased
by Mr. Thompson in 1996 up to a maximum of 10,000 shares (the "Thompson Matching
Shares"); and (iv) options to purchase 25,000 Common Shares (see footnote 15 to
the Summary Compensation Table).
The Thompson Employment Agreement was amended effective as of December 20,
1996 to provide that Mr. Thompson could elect to receive Common Shares in lieu
of his cash bonus earned in 1996. Common Shares made subject to such election
would be valued at the December 31, 1996 closing price for the Common Shares.
Such amendment further provided that any such shares which Mr. Thompson might
elect to receive in lieu of his cash bonus earned for 1996 would qualify for the
grant of the 5,000 Thompson Matching Shares not yet awarded to Mr. Thompson as
of such date. In March 1997, Mr. Thompson elected to receive 7,544 shares in
lieu of a portion of his 1996 cash bonus (see footnote 19 to the Summary
Compensation Table). Accordingly, pursuant to Mr. Thompson's election, Mr.
Thompson was entitled to receive the balance of the 5,000 Thompson Matching
Shares not yet awarded to him as of such date.
Upon termination of Mr. Thompson's employment without cause, Mr. Thompson
would be entitled to receive: (i) any of Thompson's Base Salary, and any other
benefits due him under the Thompson Employment Agreement, payable for the
immediately succeeding nine months; and (ii) a prorated portion of the cash
bonus, if any, applicable to the fiscal year in which such termination without
cause occurs.
The Thompson Employment Agreement and related Award Agreements were amended
to permit Mr. Thompson to defer the receipt of all Common Shares which would
otherwise be issuable to him under the terms of the Thompson Employment
Agreement and the related Award Agreements. Pursuant to these amendments made in
conjunction with the adoption of the Company's Executive Deferred Compensation
Plan and the establishment of the Rabbi Trust as contemplated thereby, all such
Common Shares have been issued to the Rabbi Trust for the benefit of Mr.
Thompson.
The Thompson Employment Agreement was further amended, effective as of
January 1, 1997, to increase Mr. Thompson's base salary to $230,000, of which
$200,000 was payable in 1997 in cash and the balance was payable in 1997 in the
form of 2,910 Common Shares (valued at $10.3125 per share, being the closing
price of the Common Shares on December 31, 1996) issuable to the Rabbi Trust for
Mr. Thompson's benefit.
The Thompson Employment was further amended in March 1998 to provide that
Mr. Thompson would receive accelerated vesting in all awards of restricted
Common Shares and options to purchase Common Shares upon the Company's attaining
and sustaining Market Capitalization in excess of $150 million to provide
18
<PAGE> 22
Mr. Thompson with vesting standards equivalent to those contained in the
Bartling Employment Agreement and related Award Agreements. This vesting
requirement was satisfied in early 1998.
Leslie B. Fox Employment Agreement
The Company and Ms. Fox entered into an Employment Agreement dated June 1,
1987 (the "Fox Employment Agreement") for an original term through May 31, 2000
and an annual base salary of $175,0000 ("Fox's Base Salary"), plus provisions
for annual cash bonuses based upon the Company's returns on equity investments
of up to an aggregate of 110% of Fox's Base Salary. Under the original terms of
the Fox Employment Agreement, Ms. Fox was retained as the Company's Executive
Vice President of Investment Management.
Under the terms of the Fox Employment Agreement and related Awards
Agreement, the Company issued to the Rabbi Trust for the benefit of Ms. Fox (i)
15,000 restricted Common Shares (see Footnote 25 to the Summary Compensation
Table); (ii) 18,000 restricted Common Shares (see Footnote 25 to the Summary
Compensation Table); and (iii) options to purchase 25,000 Common Shares (see
Footnote 1 to the Summary Compensation Table).
The Fox Employment Agreement was amended effective as of January 1, 1998
to: (i) redesignate Ms. Fox as the Company's Executive Vice President and Chief
Operating Officer; (ii) increase Fox's Base Salary to $230,000 per year payable
$200,000 in cash in 1998 and $30,000 in Common Shares in 1998 issuable in four
equal installments at the end of each calendar quarter valued at the closing
price of the Common Shares on the last trading day of each such calendar
quarter; (iii) amend the terms for Ms. Fox's annual cash bonus to provide for a
cash bonus based upon the Company's year to year increases in Adjusted EBITDA up
to a maximum of 60% of Fox's Base Salary and a bonus payable in Common Shares
based upon year to year increases in the Company's adjusted EBITDA up to a
maximum in value of Common Shares of 45% of Fox's Base Salary. In addition, the
Fox Employment Agreement and related Award Agreements were amended to provide
for changes in vesting provisions of awards of Common Shares issuable to the
Rabbi Trust for Ms. Fox's benefit as described in the footnotes to the Summary
Compensation Table. Further, pursuant to the amendment to the Employment
Agreement and a related Award Agreement, the Company issued to the Rabbi Trust
for Ms. Fox's benefit 96,000 restricted Common Shares subject to vesting
requirements parallel to the Performance Plan with the additional vesting
requirement that Ms. Fox remain in the employ of the Company or a subsidiary of
the Company in order to vest in 1/3 (or 32,000) of the shares on January 1,
1998, 1/3 of the shares on January 1, 1999 and the remaining 1/3 of the shares
on January 1, 2000; subject, however, to attainment of the financial performance
goals set forth in the Performance Plan. Finally, the January 1998 amendment to
the Fox Employment Agreement provided for the issuance of up to a maximum of
10,000 Common Shares ("Fox Matching Shares") for each Common Share purchased by
Ms. Fox in 1998.
Upon termination of Ms. Fox's employment without cause, Ms. Fox would be
entitled to receive: (i) any of Fox's Base Salary for the then unexpired portion
of the original term, if any, and the succeeding nine months; (ii) a prorated
portion of the cash bonus, if any, applicable to the fiscal year in which such
termination occurs and any restricted Common Shares subject to the award
agreements which have vested prior to the date of termination together with
those Restricted Common Shares which would have otherwise vested on or before
the January 1 following the date of termination had Ms. Fox remained in the
Company's employ through such January 1.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the Performance
Graph included in this Proxy Statement shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Report or the Performance Graph by reference
therein, and shall not be deemed soliciting material or otherwise deemed filed
under either of such Acts.
The Compensation Committee administers the Company's various compensation
plans and reviews and recommends to the Board of Trustees compensation levels
for executive officers, evaluates executive manage-
19
<PAGE> 23
ment's performance and considers executive management succession and related
matters. The Compensation Committee is composed exclusively of independent,
non-employee trustees.
Philosophy of Compensation Committee
The Compensation Committee believes that executive compensation should
reflect the value created for the Company's shareholders while supporting the
Company's long-term strategic goals. It is the belief of the Compensation
Committee that executive compensation should serve to:
- reward individuals for significant contribution to the Company's success;
- align the interests of executives with those of the Company's long-term
investors;
- retain, motivate and attract qualified executives; and
- provide incentives to executives to achieve strategic objectives in a
manner consistent with the Company's values.
Executive Officer Compensation
Individual executive officer compensation consists of three components:
base salary, annual cash and stock incentive bonuses and long-term equity
incentives. Each component will be discussed below.
Salaries for executive officers are reviewed by the Compensation Committee
on an annual basis and may be increased based on (a) individual performance and
contribution and (b) increases in competitive pay levels.
The Compensation Committee believes that the compensation packages agreed
to with its executive officers and other significant employees genuinely
preserves its philosophical objectives by placing significant emphasis on the
latter two components of the Compensation Committee's stated compensation
components, namely, annual cash and stock incentive bonus and long term equity
incentives. In this regard, the Company's compensation arrangements are weighted
heavily towards incentive bonuses based upon the Company's financial performance
measured in terms of its earnings before interest, taxes, depreciation, and
amortization without regard to extraordinary gains or losses ("Adjusted EBITDA")
and awards of restricted stock which will vest on the basis of the Company's
long-term financial performance (measured as growth in market price of the
Common Shares or increases in Adjusted EBITDA). A significant portion of
management's compensation takes the form of equity ownership in the Company. In
this way, the Compensation Committee believes that Mr. Bartling's Chief
Executive Officer compensation package and the compensation packages of the
Company's other executive officers implements its goal of aligning his and their
interests with those of the Company's long-term investors.
The Compensation Committee has confirmed that all base salaries for the
Company's executive officers, including Mr. Bartling's base compensation, are
reasonable and competitive, based upon the surveys compiled by management, as
well as the advice and consultation of representatives of professional executive
compensation consulting firms retained by the Company.
Management Incentive Plan
Annual bonuses for the executive officers on account of the Company's 1997
fiscal year were governed by the Company's 1996 Incentive Compensation Plan (the
"Incentive Compensation Plan"), which was specifically designed to link
executive compensation to the Company's achieving certain operating goals and
exceeding certain projected increases in specific financial measures applicable
to the specific role in which each executive officer (and each other employee of
the Company participating in the Incentive Compensation Plan) is engaged. The
financial measures include Adjusted EBITDA for the Company's Chief Executive
Officer and senior financial and legal officers, net income from property
management for the Company's property management employees, and return on equity
for the Company's Investment Management division employees (i.e., those
employees committed to maximizing the Company's return on its investments in
real property assets). Under the terms of the Incentive Compensation Plan, upon
achieving increases in the designated financial performance measure when
compared to the Company's 1996 results, the executive officers and other
participating employees are entitled to certain cash and stock awards.
20
<PAGE> 24
As discussed above and disclosed elsewhere in this Proxy Statement, a
significant part of Mr. Bartling's compensation package included the award of an
aggregate of restricted Common shares which vested based upon Mr. Bartling's
continued employment and increases in the Company's market capitalization as
well as the award of stock options and matching shares. These awards were
provided for in Mr. Bartling's Employment Agreement, which became effective on
December 1, 1995, while the restricted Common Shares as well as the stock option
award were issued on April 5, 1996. Similar awards, albeit in lesser amounts,
were granted to the Company's Executive Vice President and Chief Financial
Officer and Senior Vice President -- Acquisitions when such executive officers
were retained in April 1996 and to the Company's Executive Vice President and
Chief Operating Officer and Senior Vice President, General Counsel and Secretary
retained in June 1997 and January 1998, respectively.
In 1997 the Compensation Committee, the full Board of Trustees and the
Company's shareholders approved the Performance Equity Plan in order to provide
the Company's executives with additional long-term incentives through contingent
awards of restricted Common Shares. In January 1998 the Company's Executive Vice
President and Chief Operating Officer and Senior Vice President, general Counsel
and Secretary received awards with vesting requirements parallel to the
Performance Plan (with additional vesting requirements for continued service
through January 1, 1999 (applicable to up to two-thirds of the restricted Common
Shares subject to the awards) and 2000 (applicable to the remaining amount of
the restricted Common Shares subject to the awards).
Deductibility
The Company intends, to the extent practicable, to preserve the
deductibility under the Internal Revenue Code of compensation paid to its
executive officers, while maintaining compensation programs that will attract
and retain its executives in a competitive environment; provided that, in light
of the Company's ability to offset current income taxes through the utilization
of net operating loss carry forwards and passive activity loss carry forwards,
the Compensation Committee will consider facilitating executives' ability to
defer taxable incentive compensation (thereby also deferring, but not reducing,
the Company's deductibility of such items). In keeping with this philosophy to
provide for maximizing compensation payable in the form of the Company's Common
Shares, as well as to provide its executives with the ability to defer taxable
incentive compensation, the Company adopted its Executive Deferred Compensation
Plan and Executive Deferred Compensation Rabbi Trust in 1996. Pursuant to the
Executive Deferred Compensation Plan, the Company's highly compensated executive
officers can elect to direct the Company to issue any Common Shares to The
Provident Bank, as Trustee under the Executive Deferred Compensation Rabbi
Trust, rather than directly to the employee otherwise entitled to receive the
shares of Common Stock, thereby deferring the recognition of taxable income for
federal income tax purposes. The Company believes that, for the foreseeable
future, this practice will not otherwise result in increased income tax
liability to the Company due to the availability of net operating and passive
activity loss carry forwards for federal income tax purposes and the Company's
intention to elect to be taxed as a real estate investment trust under the
provisions of the Internal Revenue Code for the fiscal year 1998 and thereafter.
Conclusion
In conclusion, the Compensation Committee will enable the Company to retain
highly qualified executive management and motivate its officers with respect to
the attainment of important goals and objectives. The Compensation Committee
believes the focus on Common Share ownership by the executive officers and other
long-term stock programs has aligned and will continue to align the interests of
management with the interests of shareholders of the Company. The Compensation
Committee further believes that its continuing efforts to refine the best
measures of the Company's long-term growth and improving financial results are
reflected in the terms of the 1996 Incentive Compensation Plan and will continue
to be reflected in future management incentive programs.
The Compensation Committee of the Board of Trustees
Glenn C. Pollack, Chairman
Robert J. Weiler
Stanley R. Fimberg
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<PAGE> 25
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Shares, to that of the Dow Jones Real Estate Investment Index
and the Dow Jones Market Index. In calculating cumulative total shareholder
return, reinvestment of dividends is assumed. This graph is shown for the five
full fiscal years in which the Company's Common Shares (NYSE: LFT, formerly
Nasdaq: CRSI) have been registered under the Securities Exchange Act of 1934, as
amended.
<TABLE>
<CAPTION>
Measurement Period LFT Market Dow Jones Dow Jones
(Fiscal Year Covered) Value Real Estate Equity Market
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 250 112 107
12/31/94 350 103 104
12/31/95 583 121 139
12/31/96 687 150 167
12/31/97 1149 170 220
</TABLE>
22
<PAGE> 26
SECURITY OWNERSHIP OF CERTAIN PERSONS
On August 28, 1998, the Company had outstanding 9,515,559 Common Shares.
The following table sets forth the information as of August 28, 1998 (for all
persons other than Bank of America National Trust & Savings Association as to
which the information provided is as of July 31, 1998) regarding Common Stock
owned beneficially by (a) each person known by the Company to own beneficially
more than 5% of the Company's outstanding Common Shares, (b) each trustee of the
Company, (c) the five most highly compensated current executive officers and the
five most highly compensated executive officers during the 1997 fiscal year, and
(d) all present executive officers and trustees of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE OF UNVESTED
NAME AND ADDRESS OF BENEFICIAL COMMON COMPENSATORY
BENEFICIAL OWNER OWNERSHIP(A) SHARES SHARES(B)
------------------- ------------ ------------- ------------
<S> <C> <C> <C>
Bank of America National......................... 937,402 9.9% --
Trust & Savings Association
333 South Hope Street
Los Angeles, CA 90071
Trustees and Executive Officers
John B. Bartling................................. 272,880(c) 2.9% 48,000
Mark D. Thompson................................. 162,546(d) 1.7% 32,000
Leslie B. Fox.................................... 59,047(e) * 108,000
Bradley A. Van Auken............................. 22,300(f) * 27,000
Annette Hoover................................... 80,000 * 0
Michael F. Sosh.................................. 23,667(g) * 14,333
Ronald P. Koegler................................ 40,861(h) * 14,333
Stanley R. Fimberg............................... 210,000(i) 2.2% 11,925
Joseph E. Madigan................................ 55,522(j) * 17,667
Glenn C. Pollack................................. 59,614(k) * 12,116
H. Jeffrey Schwartz.............................. 75,889(l) * 12,067
Robert J. Weiler................................. 136,602(m) 1.4% 11,000
All present executive officers and trustees of
the Company as a group (14 persons)............ 1,245,212(n) 12.4% 328,441
</TABLE>
- ---------------
* Less than one percent (1%)
(a) Unless otherwise indicated, the beneficial owner has sole voting and
investment power over these shares subject to the spousal rights, if any,
of the spouses of those beneficial owners who have spouses.
(b) The amounts reported in this column consist of restricted Common Shares,
which will not vest within 60 days, held on behalf of the specified
individual by the Rabbi Trust and as to which the specified individual has
neither investment nor voting power, and Common Shares subject to options
which are not exercisable within 60 days. These amounts are not deemed to
be beneficially owned and are not included in the column "Amount and Nature
of Beneficial Ownership."
(c) This amount includes 218,880 Common Shares held on behalf of Mr. Bartling
by the Rabbi Trust which shares Mr. Bartling has the right to receive under
certain circumstances within 60 days. This amount does not include 48,000
restricted Common Shares held on behalf of Mr. Bartling by the Rabbi Trust
as to which shares Mr. Bartling has neither investment nor voting power.
(d) This amount includes 126,546 Common Shares held on behalf of Mr. Thompson
by the Rabbi Trust which shares Mr. Thompson has the right to receive under
certain circumstances within 60 days. This amount does not include 32,000
restricted Common Shares held on behalf of Mr. Thompson by the Rabbi Trust
as to which shares Mr. Thompson has neither investment nor voting power.
23
<PAGE> 27
(e) This amount includes 5,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 49,047 Common Shares
held on behalf of Ms. Fox by the Rabbi Trust which shares Ms. Fox has the
right to receive under certain circumstances within 60 days. This amount
does not include 88,000 restricted Common Shares held on behalf of Ms. Fox
by the Rabbi Trust as to which shares Ms. Fox has neither investment nor
voting power. This amount also does not include 20,000 Common Shares
subject to options which are not exercisable within 60 days.
(f) This amount includes 15,250 Common Shares held on behalf of Mr. Van Auken
by the Rabbi Trust which shares Mr. Van Auken has the right to receive
under certain circumstances within 60 days. This amount does not include
22,000 restricted Common Shares held on behalf of Mr. Van Auken by the
Rabbi Trust as to which shares Mr. Van Auken has neither investment nor
voting power. This amount also does not include 5,000 Common Shares subject
to options which are not exercisable within 60 days.
(g) This amount includes 22,000 Common Shares held on behalf of Mr. Sosh by the
Rabbi Trust which shares Mr. Sosh has the right to receive under certain
circumstances within 60 days. This amount does not include 11,000
restricted Common Shares held on behalf of Mr. Sosh by the Rabbi Trust as
to which shares Mr. Sosh has neither investment nor voting power. This
amount also does not include 3,333 Common Shares subject to options which
are not exercisable within 60 days.
(h) This amount includes 22,968 Common Shares held on behalf of Mr. Koegler by
the Rabbi Trust which shares Mr. Koegler has the right to receive under
certain circumstances within 60 days. This amount does note include 11,000
restricted Common Shares held on behalf of Mr. Koegler by the Rabbi Trust
as to which shares Mr. Koegler has neither investment nor voting power.
This amount also does not include 3,333 Common Shares subject to options
which are not exercisable within 60 days.
(i) This amount includes 22,000 Common Shares held on behalf of Mr. Fimberg by
the Rabbi Trust which shares Mr. Fimberg has the right to receive under
certain circumstances within 60 days. This amount does not include 11,925
restricted Common Shares held on behalf of Mr. Fimberg by the Rabbi Trust
as to which shares Mr. Fimberg has neither investment nor voting power.
(j) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 23,332 Common Shares
held on behalf of Mr. Madigan by the Rabbi Trust which shares Mr. Madigan
has the right to receive under certain circumstances within 60 days and
2,524 restricted Common Shares as to which Mr. Madigan has voting power but
does not have investment power. This amount does not include 17,667
restricted Common Shares held on behalf of Mr. Madigan by the Rabbi Trust
as to which shares Mr. Madigan has neither investment nor voting power.
(k) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 22,000 Common Shares
held on behalf of Mr. Pollack by the Rabbi Trust which shares Mr. Pollack
has the right to receive under certain circumstances within 60 days and
5,614 restricted Common Shares as to which Mr. Pollack has voting power but
does not have investment power. This amount does not include 12,116
restricted Common Shares held on behalf of Mr. Pollack by the Rabbi Trust
as to which shares Mr. Pollack has neither investment nor voting power.
(l) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 22,000 Common Shares
held on behalf of Mr. Schwartz by the Rabbi Trust which shares Mr. Schwartz
has the right to receive under certain circumstances within 60 days and
5,938 restricted shares as to which Mr. Schwartz has voting power but does
not have investment power. This amount does not include 12,067 restricted
Common Shares held on behalf of Mr. Schwartz by the Rabbi Trust as to which
shares Mr. Schwartz has neither investment nor voting power.
(m) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 22,000 Common Shares
held on behalf of Mr. Weiler by the Rabbi Trust which shares Mr. Weiler has
the right to receive under certain circumstances within 60 days and 5,702
restricted Common Shares as to which Mr. Weiler has voting power but does
not have investment power. This amount does not include 11,000 restricted
Common Shares held on behalf of Mr. Weiler by the Rabbi Trust as to which
shares Mr. Weiler has neither investment nor voting power.
24
<PAGE> 28
(n) This amount includes 6,006 Common Shares held in trustee and executive
officer 401(k) and individual retirement plan accounts, 19,778 restricted
Common Shares as to which certain trustees have voting power but do not
have investment power, 603,225 Common Shares held on behalf of certain
trustees and executive officers by the Rabbi Trust which shares such
trustees and executive officers have the right to receive under certain
circumstances within 60 days, and 21,000 Common Shares subject to options
which are exercisable within 60 days. This amount does not include 276,776
restricted Common Shares held on behalf of certain trustees and executive
officers by the Rabbi Trust as to which shares such trustees and executive
officers have neither investment nor voting power.
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and trustees, and persons who
own more than 10% of the Company's outstanding Common Shares, to file initial
statements of beneficial ownership (Form 3), and statements of changes in
beneficial ownership (Forms 4 or 5) of Common Shares of the Company with the
Securities and Exchange Commission (the "SEC"). Officers, trustees and greater
than 10% shareholders are required by SEC regulation to furnish the Company with
copies of all such forms they file.
To the Company's knowledge, based on it review of the copies of such forms
received by it, or written representations from certain reporting persons that
no additional forms were required for those persons, the Company believes that
during the previous fiscal year, all filing requirements applicable to its
officers, trustees, and greater than 10% beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For services rendered to the Company in his capacity as Chairman of the
Board, Joseph E. Madigan receives a monthly retainer of $5,000 and an annual
restricted share grant of 4,000 Common Shares, vesting equally over a three year
period.
Effective as of April 1, 1998, the Company sold its entire equity interest
in its third party property management subsidiary, Lexford Property Management,
Inc. ("LPM"), to a company formed to acquire the third party management business
by FSC Realty LLC, a company affiliated with Stanley R. Fimberg, a trustee of
the Company (and a consultant to the Company at the time of the sale), Ralph V.
Williams, a consultant to the Company at the time of the sale, and Bruce
Woodward, an executive officer of the Company's wholly owned subsidiary, Lexford
Properties, Inc., at the time of the sale. As a result of the sale, each of
Messrs. Fimberg, Williams and Woodward severed their respective consulting and
employment relationships with the Company. Mr. Fimberg remains a trustee of the
Company. Each of Messrs. Fimberg, Williams and Woodward were also former
beneficial equity owners of Lexford Properties, Inc. prior to the Company's
original acquisition of the third party management business in August 1996. The
Company received a promissory note in the principal amount of $1.8 million
payable over a ten year period which bears interest at 6% annum until April 1,
2000 and 11% per annum thereafter, in exchange for all of the outstanding
preferred stock of LPM. Mr. Fimberg did not participate in the Company's
decision to sell the third party management business. Management believes that
the terms for the sale of the third party management business are representative
of terms which would have been available from an unrelated purchaser.
H. Jeffrey Schwartz, trustee of the Company, is a partner in the law firm
of Benesch, Friedlander, Coplan & Aronoff LLP, which serves as outside legal
counsel to the Company.
Robert J. Weiler, a trustee of the Company, is a principal of Americana
Investment Company, the lessor of the building housing the Company's principal
operating offices. Mr. Weiler did not participate in the Company's decision to
relocate its executive offices to The Huntington Center in downtown Columbus,
Ohio or in negotiations for a renewal term for a lease (for a smaller amount of
space) for the principal operating offices leased from Americana Investment
Company. Management believes that the lease terms for the Company's
25
<PAGE> 29
principal operating offices are competitive with commercial lease rates in the
Columbus, Ohio market. The annual lease payments are as follows:
<TABLE>
<S> <C>
1997............................................. $282,580.00
1998-2000........................................ $292,922.00
2001-2002........................................ $309,475.60
</TABLE>
AUDITORS
The Company has selected Ernst & Young, LLP, formerly known as Kenneth
Leventhal & Company, as independent auditors for the 1998 fiscal year.
Representatives of Ernst & Young, LLP will be present at the Annual Meeting,
will have an opportunity to make a statement if they desire to do so, and will
be available to answer questions.
DOCUMENTS INCORPORATED BY REFERENCE
The documents listed below have been filed by the Company with the SEC and
are incorporated by reference in this Proxy Statement:
(i) The Company's Form 10-Q for the fiscal quarter ended March 31,
1998, filed with the SEC on May 15, 1998;
(ii) The Company's Form 10-Q for the fiscal quarter ended June 30,
1998, filed with the SEC on August 12, 1998;
(iii) The Company's Annual Report to Shareholders first sent to
shareholders on or about August 11, 1998;
(iv) The Company's Form 10-K for the fiscal year ended December 31,
1997, filed with the SEC on March 31, 1998; and
(v) The Company's current reports on Form 8-K dated and filed with the
SEC on February 17, 1998, March 2, 1998, March 20, 1998, April 1, 1998 and
April 20, 1998.
The information relating to the Company contained in this Proxy Statement
does not purport to be complete and should be read together with the information
contained in the documents incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Annual Meeting shall be deemed a part hereof from the date of the filing of
such documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein (or in any other
subsequently filed document which is also incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part of this Proxy Statement, except as so
modified or superseded.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM THIS PROXY STATEMENT HAS BEEN DELIVERED, UPON WRITTEN REQUEST OF SUCH
PERSON, A COPY OF ANY AND ALL DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT (INCLUDING THE EXHIBITS TO SUCH DOCUMENTS IF SO REQUESTED). REQUESTS
FOR SUCH COPIES SHOULD BE DIRECTED TO: LEXFORD RESIDENTIAL TRUST, 41 SOUTH HIGH
STREET, SUITE 2410, COLUMBUS, OHIO 43215 ATTENTION: CAROL MERRY, DIRECTOR OF
INVESTOR RELATIONS, (614)242-3712. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
REQUESTED DOCUMENTS PRIOR TO THE ANNUAL MEETING, ANY REQUEST SHOULD BE MADE
PRIOR TO SEPTEMBER 22, 1998.
26
<PAGE> 30
OTHER BUSINESS
In addition to the matters described above, Joseph E. Madigan, Chairman of
the Board, and John B. Bartling, Chief Executive Officer and President, of the
Company will address the shareholders and answer questions.
Management knows of no other business to be presented for action at the
meeting. If other matters properly come before the meeting or any adjournment or
postponements thereof, the shareholders in attendance and the persons named as
proxies, using their best judgment, will vote upon such matters.
SHAREHOLDER PROPOSALS
Because the Company presently intends to call and hold its 1999 Annual
Meeting of Shareholders on or before April 30, 1999, all shareholder proposals
for the Company's 1999 Annual Meeting of Shareholders must be received in
writing by the Secretary of the Company at 41 South High Street, Suite 2410,
Columbus, Ohio 43215 no later than December 31, 1998. The Company's Bylaws
provide that in order for a shareholder proposal to be timely it must be
submitted to the Secretary of the Company in writing within the time period
specified by Rule 14a-8 promulgated by the SEC under the Exchange Act. Because
the Company presently intends to call and hold its 1999 Annual Meeting of
Shareholders on or before April 30, 1999, the latest date upon which a
shareholder proposal may be timely submitted is December 31, 1998. In the event
that the Company subsequently determines to call and hold its 1999 Annual
Meeting of Shareholders on a date on or after May 30, 1999, subsequent notice of
the revised date for timely submission for shareholder proposals will be
published by the Company in its earliest practicable quarterly or annual Report
filed on Form 10-Q or 10-K under the Exchange Act.
ANNUAL REPORT
A copy of the Company's Annual Report to shareholders for the 1997 fiscal
year, which contains Consolidated Financial Statements of the Company and its
subsidiaries, has been previously mailed or is being sent simultaneously to
shareholders as of the Record Date.
By Order of the Board of Trustees,
/s/ Bardley A. Van Auken
Bradley A. Van Auken
Secretary
Dated: September 1, 1998
27
<PAGE> 31
LEXFORD RESIDENTIAL TRUST
PROXY/VOTING INSTRUCTIONS CARD
THIS IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES FOR THE ANNUAL
SHAREHOLDERS MEETING ON SEPTEMBER 29, 1998
The undersigned hereby appoints John B. Bartling, Mark D. Thompson and
Bradley A. Van Auken, and each of them, as proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote as
designated herein all the common shares of beneficial interest, par value $.01
per share, of Lexford Residential Trust (the "Company") represented hereby and
held of record by the undersigned on August 28, 1998, at the Annual Meeting of
Shareholders to be held at the Hyatt on Capitol Square, 75 East State Street,
Columbus, Ohio 43215 on September 29, 1998 at 10:00 a.m. (local time) and at any
postponements or adjournments thereof, upon all subjects that may properly come
before the meeting, including the matters described in the proxy statement
furnished herewith. This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder and in accordance with the
determination of the named proxies, and any of them, on any other matters that
may properly come before the meeting. If this proxy is signed and returned and
no directions are given, this proxy will be voted "FOR" Item 1 shown on this
card, and in accordance with the determination of the named proxies, and any of
them, on any other matters that may properly come before the meeting.
<TABLE>
<S> <C> <C>
1. ELECTION OF TWO TRUSTEES
[ ] FOR all nominees listed below (except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees below.
(INSTRUCTIONS: Do no check "WITHHOLD AUTHORITY" to vote for only certain individual nominees. To withhold authority to vote for
any individual nominee, strike a line through the nominee's name below and check "FOR".)
John B. Bartling Robert J. Weiler
2. I PLAN TO ATTEND THE ANNUAL MEETING [ ]
</TABLE>
(Continued on Other Side)
<PAGE> 32
LEXFORD RESIDENTIAL TRUST
C/O CORPORATE TRUST SERVICES
MAIL DROP 1090F5-4129
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OH 45263
FOLD AND DETACH HERE
- -------------------------------------------------------------------------------
Please sign this proxy and return it promptly whether or not you plan to
attend the meeting. If signing for a corporation or partnership, or as an
agent, attorney or fiduciary, indicate the capacity in which you are signing. If
you do attend the meeting and decide to vote by ballot, such vote will supersede
this proxy.
Please date, sign and return promptly in the enclosed envelope.
Date: September , 1998
---------------
--------------------------------------
(Signature)
--------------------------------------
(Signature)
SIGNATURE(S) MUST AGREE WITH NAME(S)
PRINTED ON THIS PROXY. IF SHARES ARE
REGISTERED IN TWO NAMES, BOTH
SHAREHOLDERS SHOULD SIGN THIS PROXY. IF
SIGNING AS FIDUCIARY, EXECUTOR,
ADMINISTRATOR, OFFICER OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS SUCH.
