<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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: ...........................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
LEXFORD LOGO
March 25, 1999
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Lexford Residential Trust (the "Company") to be held at the Company's offices,
6954 Americana Parkway, Columbus, Ohio at 10:00 a.m. (local time) on Wednesday,
April 28, 1999.
At this meeting, you will be asked to vote on the (1) 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
6954 AMERICANA PARKWAY
COLUMBUS, OHIO 43068
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1999
To Our Shareholders:
Notice is hereby given of the Annual Meeting of Shareholders of Lexford
Residential Trust (the "Company") to be held at the Company's offices, 6954
Americana Parkway, Columbus, Ohio, on Wednesday, April 28, 1999, 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 2002;
2. To transact any other business which may properly come before the
meeting.
Shareholders of record as of the close of business on March 24, 1999, 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
March 25, 1999
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
6954 AMERICANA PARKWAY
COLUMBUS, OHIO 43068
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 Wednesday, April 28, 1999, 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 I trustees to the
Board of Trustees (the "Board") for three-year terms expiring in 2002; 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 March 24, 1999 (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 March 25,
1999. On March 24, 1999, the Company had outstanding 9,551,877 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
(without separate compensation being paid for any such solicitation). 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 I trustees for
three-year terms expiring at the Annual Meeting in 2002. 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 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 adopted effective September 29, 1998 and
remaining in effect the Board consists of six trustees with two trustees serving
in each of the three classes. Messrs. Schwartz and Fimberg are current trustees
of the Company who have been nominated for election as Class I trustees at the
Annual Meeting to serve for terms to expire at the Annual Shareholders Meeting
to be held in 2002.
2
<PAGE> 6
NOMINEES FOR TRUSTEE
CLASS I TRUSTEES NOMINATED FOR ELECTION AT 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 44 1992 Mr. Schwartz is a Trustee of the Company and has served in
such capacity 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 Reorganization Department since 1991. Prior to
joining the law firm 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 a 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
such capacity 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 May 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>
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 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., PeopleServ, Inc., Columbus
Showcase Company and The Frank Gates Service Company. Mr.
Madigan is a Trustee of the Company and has served in such
capacity since September 1992. Mr. Madigan currently serves
as Chairman of the Company's Board and served as Acting
Chairman and Chief Executive Officer 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 41 1992 Mr. Pollack is a Trustee of the Company and has served in
such capacity 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 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>
4
<PAGE> 8
CLASS III TRUSTEES SERVING UNTIL THE 2001 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 has served as a Trustee and the President and
Chief Executive Officer of the Company 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
such capacity since September 1992. Mr. Weiler served as
the Company's Acting President and Chief Operating Officer
from June through 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 also served as a member of
the Columbus Board of Education where he served as its
President in 1987.
</TABLE>
INFORMATION RELATING TO THE BOARD OF TRUSTEES AND COMMITTEES OF THE BOARD OF
TRUSTEES
The Board of Trustees of the Company held 12 meetings during 1998. Each
incumbent trustee attended at least 75% of the aggregate number of meetings of
the Board and all committees on which he served during 1998.
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 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
practices and procedures of
5
<PAGE> 9
the Company as it may find appropriate or as may be brought to its attention.
The Audit Committee held three meetings during 1998. The composition of the
Audit Committee is as follows:
Glenn C. Pollack, Chairman
H. Jeffrey Schwartz
Stanley R. Fimberg
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
five meetings during 1998. The composition of the Compensation Committee is as
follows:
Robert J. Weiler, Chairman
Stanley R. Fimberg
H. Jeffrey Schwartz
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 Amended and Restated 1992 Incentive Equity Plan (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, an 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 options in full.
In addition, each non-employee trustee then serving for at least 12 months prior
to date of grant (which includes each current non-employee trustee other than
Mr. Fimberg) was granted on November 30, 1995, May 22, 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 such trustee has
exercised the vested 1995 and 1996 options in full.
In October 1997, the shareholders of the Company approved the Company's
1997 Performance Equity Plan (the "Performance Plan"). The Performance Plan
authorized 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 nine non-employee trustees
incumbent on such date (which includes all five current non-employee trustees).
Vesting under the Performance Plan occurs only upon attainment of specified
performance goals set forth in the Performance Plan. The trustees have vested in
all shares based upon the achievement of certain performance goals.
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 100,000 shares for issuance under the
Trustee 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-employee trustees under the Trustees Restricted Stock
Plan. Each non-employee trustee who participates in the Trustee Restricted Stock
Plan receives restricted Common Shares in lieu of cash compensation with the
shares
6
<PAGE> 10
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 3 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) 3 years from the date of the issuance or payment of the restricted
Common Shares to the holder, provided the holder has continued to serve as a
trustee of the Company; (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 re-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 1998 fiscal year, each non-employee trustee had elected to participate
in the Trustees Restricted Stock Plan by electing to receive restricted Common
Shares in lieu of a percentage of trustee fees otherwise payable in cash, such
elective percentages ranging from 25% to 100% of trustee 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 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 March 25, 1999. 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 Thompson 41 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 1997, in the law firm of
Benesch, Friedlander, Coplan & Aronoff LLP.
Leslie B. Fox 40 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.
Paul R. Selid 36 Senior Vice President -- Portfolio Management of the
Company since December 1998. Prior to that time, Mr.
Selid was Senior Vice President -- Acquisitions of the
Company from December 1997 to December 1998 and 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 Finance of
Hall Financial Group, Inc. from January 1990 to
September 1992.
Ronald P. Koegler 46 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 37 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>
8
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and its other four most highly compensated executive
officers for services rendered in all capacities to the Company during 1998 as
well as 1997 and 1996, where applicable.
<TABLE>
<CAPTION>
LONG-TERM (4)
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------------------
(3) SECURITIES
OTHER RESTRICTED UNDER- (5) (6)
(1) (2) ANNUAL SHARE LYING LTIP ALL OTHER
NAME AND SALARY BONUS(ES) COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS # ($) ($)
------------------ ---- -------- --------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John B. Bartling........ 1998 $340,000 $204,000 $488,165 -- -- $ 830,142 $6,287
Chief Executive Officer 1997 $341,250 $198,000 $ 9,000 -- -- $1,660,266 $6,260
and President 1996 $285,000 $171,000 $503,800 $402,188 40,000 -- $7,371
Mark D. Thompson........ 1998 $230,000 $207,000 $423,464 -- -- $ 529,484 $4,129
Chief Financial Officer 1997 $230,000 $207,000 -- -- -- $1,058,968 $2,400
and Executive Vice 1996 $127,885 $157,491 $216,635 $136,875 25,000 -- $ 934
President
Leslie B. Fox........... 1998 $230,000 $207,000 $128,265 -- -- $ 552,000 $ 523
Chief Operating Officer 1997 $102,981 $178,125 -- $396,000 25,000 -- $1,236
and Executive Vice 1996 -- -- -- -- -- -- --
President
Bradley A. Van Auken.... 1998 $175,000 $157,500 $223,267 -- 5,000 $ 189,750 $1,672
Senior Vice President 1997 -- -- -- -- -- -- --
General Counsel 1996 -- -- -- -- -- -- --
and Secretary
Ronald P. Koegler....... 1998 $115,000 $ 51,750 $ 96,273 -- -- $ 162,932 $3,869
Senior Vice President 1997 $105,000 $ 42,000 -- -- 2,500 $ 325,864 $2,400
and Controller 1996 $ 84,492 $ 38,250 -- -- 5,000 -- $6,218
</TABLE>
- ---------------
(1) The salary amounts represent annual compensation except for Mr. Thompson's
salary for the period from April 1, 1996, when Mr. Thompson commenced his
employment with the Company, to December 31, 1996, and Ms. Fox's salary for
the period from June 1, 1997, when Ms. Fox commenced employment with the
Company, to December 31, 1997. Salary represents cash paid except for the
following:
Mr. Bartling's salary in 1997 includes cash payments of $300,000 and
$40,000 in the form of 4,000 Common Shares (valued at the December 31,
1996 closing price of $10.315 per share) which Mr. Bartling elected to
have issued to the Company's Executive Deferred Compensation Rabbi Trust
("Rabbi Trust") for his benefit in lieu of cash.
Mr. Thompson's salary in 1997 includes cash payments of $200,000 and
$30,000 in the form of 2,912 Common Shares (valued at the December 31,
1996 closing price of $10.315 per share) which Mr. Thompson elected to
have issued to the Rabbi Trust for his benefit in lieu of cash.
Ms. Fox's salary in 1998 includes cash payments of $200,000 and $30,000
in the form of 1,579 Common Shares in lieu of cash which Ms. Fox elected
to have issued to the Rabbi Trust for her benefit in quarterly
installments determined by dividing $7,500 by the closing price of the
Common Shares as of the last trading day of each calendar quarter.
Mr. Koegler's salary in 1997 includes cash payments of $95,000 and
$10,000 in the form of 968 Common Shares (valued at the December 31, 1996
closing price of $10.315 per share) which Mr. Koegler elected to have
issued to the Rabbi Trust for his benefit in lieu of cash.
(2) Cash bonuses for each year listed are paid in the subsequent year. In
addition to the cash bonus the following executives received share bonuses
in the form of Common Share awards (issuable to the Rabbi Trust for their
respective benefit).
Mr. Bartling's bonus in 1996 includes an award of 13,880 Common Shares as
a bonus for 1996 granted in 1997. The value of the bonus was determined
by multiplying the number of shares subject to this award by the closing
price of the Common Shares at 1996 fiscal year-end, which was $10.3125.
9
<PAGE> 13
Mr. Thompson's bonus in 1998 includes an award of 3,730 Common Shares as
a bonus for 1998 granted in 1999. The value of the bonus was determined
by multiplying the number of shares subject to this award by the closing
price of the Common Shares at 1998 fiscal year end, which was $18.50. In
1997 Mr. Thompson earned an award of 4,000 Common Shares as a bonus for
1997 granted in 1998. The value of the bonus was determined by
multiplying the number of shares subject to this grant by the closing
price of the Common Shares at 1997 fiscal year end, which was $17.25. In
1996 Mr. Thompson earned an award of 12,634 Common Shares as a bonus for
1996 granted in 1997. The value of the 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.
Ms. Fox's bonus in 1998 includes an award of 3,730 Common Shares as a
bonus for 1998 granted in 1999. The value of the bonus was determined by
multiplying the number of shares subject to this award by the closing
price of the Common Shares at 1998 fiscal year end, which was $18.50. In
1998, Ms. Fox earned an award of 2,282 Common Shares as a bonus for 1997
granted in 1998. The value of the bonus was determined by multiplying the
number of shares subject to this award by the closing price of the Common
Shares at fiscal year end, which was $17.25.
Mr. Van Auken's bonus in 1998 includes an award of 2,838 Common Shares as
bonus for 1998 granted in 1999. The value of the bonus was determined by
multiplying the number of shares subject to this award by the closing
price of the Common Shares at 1998 fiscal year end, which was $18.50.
(3) Other annual compensation includes compensation related to the award of
matching shares per employment contracts (issuable to the Rabbi Trust for
the benefit of the executive entitled to the matching share grant), income
related to the difference between the strike price and the market price
upon the date of exercise of stock options, distributions of dividend
amounts made in accordance with the executive's election to receive such
distributions on account of vested shares deferred and held for such
executive's benefit in the Rabbi Trust ("Rabbi Trust Dividend
Distributions"), relocation payments and auto allowances. Specific
information by executive is as follows:
Mr. Bartling's other annual compensation in 1998 is comprised of: (a)
$393,500 of income related to the exercise of non-qualified options in
1998; and (b) $94,665 in Rabbi Trust Dividend Distributions. 1997 other
annual compensation constitutes a car allowance of $750 per month (which
car allowance Mr. Bartling waived in 1998). 1996 other annual
compensation includes an award of 20,000 matching 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 for his own account, up to a maximum
of 20,000 matching shares. The value of 10,000 matching shares subject to
this award was determined by multiplying such shares by the per share
closing price of the Common Shares on June 10, 1996, the date of Mr.
Bartling's purchase of 10,000 Common Shares for his own account, which
was $9.9375. In addition, pursuant to an amendment to Mr. Bartling's
Employment Agreement, Mr. Bartling elected to cause the Company to issue
10,000 Common Shares to the Rabbi Trust for his benefit 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 matching share grant and,
accordingly, the value of these 10,000 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. 1996 other compensation 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.
Mr. Thompson's other compensation in 1998 is comprised of: (a) $248,425
of income related to the exercise of non-qualified options in 1998; (b)
$54,731 in Rabbi Trust Dividend Distributions; and (c) a relocation
reimbursement of $62,560 paid in 1998 for Mr. Thompson's costs related to
the sale of his former residence, as well as payment of $57,748 to
compensate Mr. Thompson for any taxes relating to such relocation
reimbursement. Other compensation in 1996 includes an award of 10,000
matching
10
<PAGE> 14
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 5,000 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 Mr. Thompson's purchase of 5,000
Common Shares for his own account, which was $9.9675. In addition,
pursuant to an amendment to Mr. Thompson's Employment Agreement, Mr.
Thompson elected to cause the Company to issue 5,000 Common Shares to the
Rabbi Trust for his benefit 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 matching share grant and, accordingly, the value of
these 5,000 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. 1996
other annual compensation 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
Ms. Fox's other compensation in 1998 is comprised of: (i) $21,390 in
Rabbi Trust Dividend Distributions; and (ii) an award of 5,000 Common
Shares in 1998 pursuant to the terms of Ms. Fox's Employment Agreement
with the Company, which states that Ms. Fox will receive one Common Share
for each Common Share purchased by her, up to a maximum of 10,000 shares.
The value of the 5,000 shares subject to this award was determined by
multiplying such shares by the purchase price of the Common Shares on the
date of her matching purchase, which was $21.375. Ms. Fox elected to
defer receipt of the matching shares subject to the matching share award
which were issued to the Rabbi Trust for Ms. Fox's benefit.
Mr. Van Auken's other compensation in 1998 is comprised of: (i) $2,882 in
Rabbi Trust Dividend Distributions; (ii) a relocation bonus of $60,000
for Mr. Van Auken moving his principal residence to Columbus, Ohio, as
well as payment of $55,385 to compensate Mr. Van Auken for any taxes
relating to such relocation bonus; and (iii) an award of 5,000 Common
Shares in 1998 pursuant to the terms of Mr.Van Auken's Employment
Agreement with the Company, which states that Mr. Van Auken will receive
one Common Share for each Common Share purchased by him, up to a maximum
of 5,000 shares. The value of the 5,000 shares subject to this award was
determined by multiplying such shares by the purchase price of the Common
Shares on the date of his matching purchase, which was $21.00. Mr. Van
Auken elected to defer receipt of 4,250 of the matching shares subject to
the matching share award which were issued to the Rabbi Trust for Mr. Van
Auken's benefit.
Mr. Koegler's other compensation in 1998 is comprised of: (i) $86,339 of
income related to the exercise of non-qualified options; and (ii) $9,934
in Rabbi Trust Dividend Distributions.
(4) Long Term Compensation Awards includes the dollar value of awards of
restricted Common Shares and the number of Common Shares underlying grants
of options. Long Term Compensation Awards by executive is as follows:
Mr. Bartling's 1996 Long Term Compensation is comprised of an award of
45,000 restricted Common Shares (issuable to the Rabbi Trust for his
benefit) 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" (i.e. the aggregate market value of
the Company's issued and outstanding Common Shares) 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 Shares on April 5, 1996, $8.937. The
value of this award at the end of the 1998 fiscal year was $832,500 based
on the fiscal year-end price of $18.50 per share. The Market
Capitalization vesting requirement was satisfied in the first quarter of
1998. In addition, 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
11
<PAGE> 15
Capitalization vesting requirement was satisfied in the first quarter of
1998. Mr. Bartling exercised the options in full on July 2, 1998.
Mr. Thompson's 1996 Long Term Compensation is comprised of an award of
15,000 restricted Common Shares (issuable to the Rabbi Trust for his
benefit) 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 award by
the closing price of the Common Shares on April 15, 1996, $9.125. The
value of this award at the end of the 1998 fiscal year was $277,500 based
on the fiscal year-end price of $18.50 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 Agreements -- Mark D.
Thompson Employment Agreement"). In addition, Mr. Thompson received an
option to purchase 25,000 Common Shares at $8.8125 per share on April 1,
1996, one-fifth of which vests 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 Agreements -- Mark D.
Thompson Employment Agreement"). Mr. Thompson exercised the options in
full on July 2, 1998.
Ms. Fox received an award of 15,000 restricted Common Shares (issuable to
the Rabbi Trust for her benefit) 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 (issuable to the
Rabbi Trust for her benefit) on June 1, 1997, which award was amended on
January 1, 1998, to provide that one-half of such shares vested 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 1998 fiscal year was $610,500 based
upon the fiscal year-end price of $18.50 per share. 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.
Mr. Van Auken received an option to purchase 5,000 Common Shares at
$17.25 per share on January 1, 1998, one-fifth of which vest on the
first, second, third, fourth and fifth anniversaries of the date of the
grant.
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. 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. Mr. Koegler exercised all
his vested options (for 4,167 shares) on July 2, 1998.
(5) Long Term Incentive Plan ("LTIP") payouts consists of restricted Common
Share awards (issuable to the Rabbi Trust for the benefit of the named
executive) wherein vesting is contingent (in addition to continuing
employment) upon the achievement of certain performance criteria. Such
awards have been granted pursuant to employment contracts or the Company's
Performance Plan. Specific awards by executive is as follows:
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
Market Capitalization of the Common Shares over ten consecutive trading
days exceeds $90 million, one-third of which shall vest when the Market
Capitalization over ten consecutive trading days exceeds $120 million,
and the final one-third of which shall vest when the Market
Capitalization over ten consecutive trading days exceeds $150 million.
Mr. Bartling earned two thirds, 26,666, of the 40,000 shares, in 1997 and
earned the remaining 13,334 shares in 1998. 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 (the date of
grant) which was $8.937. In addition, Mr. Bartling earned 96,000
restricted Common Shares in 1997 and earned the remaining 48,000
restricted Common Shares in 1998 pursuant to the terms of the Performance
Plan. The value of these shares was determined by
12
<PAGE> 16
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 1998
fiscal year was $3,404,000 based upon the fiscal year-end price of $18.50
per share.
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
over ten consecutive trading days exceeds $120 million, and the final
one-third of which shall vest when the Market Capitalization over ten
consecutive trading days exceeds $150 million. Mr. Thompson earned two
thirds, 12,000, of the 18,000 shares, in 1997 and earned the remaining
6,000 shares in 1998. 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 15, 1996, which was $9.25. In
addition, Mr. Thompson earned 64,000 restricted Common Shares in 1997 and
earned the remaining 32,000 restricted Common Shares in 1998, 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
1998 fiscal year was $2,109,000 based upon the fiscal year-end price of
$18.50 per share.
Ms. Fox received an award of 96,000 restricted Common Shares on January
1, 1998, one-third of which vested on January 1, 1998, the remainder of
which vests in 32,000 share increments on the later of satisfaction of
the financial performance goals set forth in the Company's Performance
Plan and the first and second anniversaries of such date. The value of
the vested portion of the award was determined by multiplying the number
of shares subject to the award by the closing price of the Common Shares
on January 1, 1998, being $17.25. At December 31, 1998, the aggregate
value of the Common Shares subject to this award was $1,776,000 based
upon the fiscal year-end price of $18.50 per share.
Mr. Van Auken received an award of 33,000 restricted Common Shares on
January 1, 1998, one-third of which vested on January 1, 1998 and the
remainder of which vests 11,000 share increments on the later of the
satisfaction of the financial performance goals set forth in the
Company's Performance Plan and the first and second anniversaries of such
date. The value of the awards was determined by multiplying the number of
shares subject to the award by the closing price of the Common Shares on
January 1, 1998, being $17.25. The value of the awards at the end of the
1998 fiscal year was $610,500 based upon the fiscal year-end price of
$18.50 per share.
Mr. Koegler earned 22,000 restricted Common Shares in 1997 and earned the
remaining 11,000 restricted Common Shares in 1998, 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 $14.8125. The
value of these vested awards at the end of 1998 fiscal year was $610,500
based upon the fiscal year-end price of $18.50 per share. Mr. Koegler
elected to defer receipt of all 33,000 shares subject to this award which
shares were issued to the Rabbi Trust for Mr. Koegler's benefit.
(6) All Other Compensation includes the Company's portion of the cost of group
term life insurance, health and dental insurance and disability insurance
paid on behalf of each executive based upon the benefit plans in which each
executive is enrolled. In addition, for Mr. Bartling this amount includes
the payment of a premium for a term life insurance policy.
13
<PAGE> 17
STOCK OPTIONS GRANTS TABLE
The following table sets forth the information noted for all grants of
stock options to each of the executive officers named in the Summary
Compensation Table during 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
---------------------------- RATES
NUMBER OF PERCENT OF OF SHARE PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bradley A. Van Auken
Senior Vice President,
General Counsel
and Secretary......... 5,000(1) 4.30% $17.25 1/01/2008 $54,242 $137,460
</TABLE>
- ---------------
(1) Mr. Van Auken received an option to purchase 5,000 Common Shares with an
exercise price of $17.25 per share on January 1, 1998, one-fifth of which
vest on the first, second, third, fourth and fifth anniversaries of the date
of the grant.
14
<PAGE> 18
STOCK OPTIONS VALUE TABLE
The following table sets forth the value of options exercised during 1998
and the fiscal year-end value of unexercised stock options for each of the
executive officers named in the Summary Compensation Table for the 1998 fiscal
year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN THE MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES VALUE (#) ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- -------------------- ----------------------
<S> <C> <C> <C> <C>
John B. Bartling
Chief Executive
Officer and President(1)................ 40,000 $393,500 n/a n/a
Mark D. Thompson Chief Financial Officer
and Executive Vice President(2)......... 25,000 $248,425 n/a n/a
Leslie B. Fox
Chief Operating Officer and 5,000 Exercisable/ $33,125 Exercisable/
Executive Vice President(3)............. n/a n/a 20,000 Unexercisable $132,500 Unexercisable
Bradley A. Van Auken Senior Vice
President
General Counsel and None Exercisable/ None Exercisable/
Secretary(4)............................ n/a n/a 5,000 Unexercisable $6,250 Unexercisable
Ronald P. Koegler
Senior Vice President and None Exercisable/ None Exercisable/
Controller(5)........................... 6,877 $ 86,339 3,333 Unexercisable $29,685 Unexercisable
</TABLE>
- ---------------
(1) Mr. Bartling received an option to purchase 40,000 Common Shares with an
exercise price of $8.9125 per share on April 5, 1996. The options became
fully vested in 1998 and were exercised on July 2, 1998. The value realized
was calculated by multiplying the number of underlying Common Shares by the
difference between (a) $18.75 per share being the closing price of the
Common Shares on the date of exercise on the New York Stock Exchange
("NYSE"), and (b) the exercise price of the option, $8.9125 per share.
(2) Mr. Thompson received an option to purchase 25,000 Common Shares with an
exercise price of $8.8125 per share on April 1, 1996. The options became
fully vested in 1998 and were exercised on July 2, 1998. The value realized
was calculated by multiplying the number of underlying Common Shares by the
difference between (a) $18.75 per share being the closing price of the
Common Shares on the date of exercise on the NYSE, and (b) the exercise
price of the options, $8.8125 per share.
(3) 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. The value of the option was calculated by multiplying the number of
underlying Common Shares by the difference between (a) $18.50 per share
being the closing price of the Common Shares at fiscal year-end on the NYSE,
and (b) the exercise price of the options, $11.875 per share.
(4) Mr. Van Auken received an option to purchase 5,000 Common Shares with an
exercise price of $17.25 per share on January 1, 1998, one-fifth of which
vest on the first, second, third, fourth and fifth anniversaries of the date
of the grant. The value of the option was calculated by multiplying the
number of underlying Common Shares by the difference between (a) $18.50 per
share being the closing price of the Common Shares at fiscal year-end on the
NYSE, and (b) the exercise price of the options, $17.25 per share.
15
<PAGE> 19
(5) Mr. Koegler received an option to purchase 2,500 Common Shares with an
exercise price of $10.312 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. On
July 2, 1998 Mr. Koegler exercised options to purchase 834 shares at $10.312
per share, 3,333 shares at $9.625 per share and 2,710 shares at $0.71 per
share. The value realized on the exercise of options was calculated by
multiplying the number of underlying Common Shares by the difference between
(a) $18.75 per share being the closing price of the Common Shares on the
date of exercise on the NYSE, and (b) the exercise price of the options. The
value of the options outstanding was calculated by multiplying the number of
underlying Common Shares by the difference between (a) $18.50 per share
being the closing price of the Common Shares at fiscal year-end on the NYSE,
and (b) the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following award sets forth information regarding long-term incentive
plan awards granted to executive officers during the Company's 1998 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE PERIOD
COMMON SHARES UNTIL
NAME AWARDED FORFEITURE OR PAYOUT
---- --------------------- ------------------------
<S> <C> <C>
Leslie B. Fox......................... 96,000 Through 1/1/00
Bradley A. Van Auken.................. 33,000 Through 1/1/00
</TABLE>
The foregoing awards were made subject to vesting based upon continuing
employment as well as the Company's attaining the financial performance goals
set forth in the Performance Plan. (For information regarding the dollar values
of these awards, see Footnote 5 to the Summary Compensation Table).
Management Indebtedness to Company
In July 1998, the Company's Compensation Committee authorized the Company
to lend funds to certain of the Company's executive officers and trustees to
finance the personal income tax liabilities arising out of, and payable in
connection with, such option exercises. In the case of Messrs. Bartling and
Thompson the loans were also contemplated and authorized by their respective
Employment Agreements with the Company. The loans bear interest, compounded
annually, at a variable rate equal to the prime rate charged by the Company's
senior working capital lender from time to time plus one percent and are payable
in full on the third anniversary of the original advance.
The following table sets forth the name and title of each such executive
officer or trustee who was indebted to the Company in respect of such financing
transactions in an amount in excess of $60,000 at any time since the original
advance of such loan, the largest dollar amount of indebtedness outstanding at
any time since such date and the amount of indebtedness outstanding on March 15,
1999.
<TABLE>
<CAPTION>
AMOUNT OF INDEBTEDNESS
OUTSTANDING AT
LARGEST AMOUNT OF MARCH 15,
NAME TITLE INDEBTEDNESS OUTSTANDING 1999
---- ----- ------------------------ -----------------------
<S> <C> <C> <C>
John B. Bartling........ President, Chief Executive $195,943 $195,943
Officer & Trustee
Mark D. Thompson........ Executive Vice President & $124,042 $124,042
Chief Financial Officer
</TABLE>
Stanley R. Fimberg, a trustee of the Company, is managing member of FSC
Realty, LLC, which in turn is managing member of Brentwood-Lexford Partners,
LLC. Brentwood-Lexford Partners, LLC is indebted to the Company in the principal
amount of $1,833,333. This indebtedness is evidenced by a Promissory Note dated
April 1, 1998 bearing interest at 6% through April 1, 2000, and 11% thereafter.
The Promissory Note was issued
16
<PAGE> 20
to Lexford Properties, Inc. ("LPI"), a wholly owned subsidiary of the Company,
in connection with the acquisition by Brentwood-Lexford Partners, LLC of all of
LPI's preferred equity interest in the third party property management business
formerly conducted by LPI (see "Certain Relationships and Related
Transactions").
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. The Bartling Employment Agreement, as
amended (pursuant to the amendments described below) has been extended for a
renewal term of one year ending December 31, 1999.
Under the terms of the Bartling Employment Agreement, the Company granted
Mr. Bartling (i) an award of 45,000 restricted Common Shares, (ii) an additional
award of 40,000 restricted Common Shares, (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 footnotes 3 and 4 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 3 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 restricted Common Shares
which would otherwise be issuable to him under the terms of the 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 (not including Common Shares
issuable upon exercise of non-qualified options) have been issued to the Trustee
of the Rabbi Trust for the benefit of Mr. Bartling.
The Bartling Employment Agreement was 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 issuable to the Rabbi Trust for Mr. Bartling's
benefit.
17
<PAGE> 21
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 a
renewal 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;
(ii) an additional award of 18,000 Common Shares; (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 footnotes 3 and 4 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 2 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 restricted 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 (not including Common Shares
issuable upon exercise of non-qualified options) 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 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,
1997 (the "Fox Employment Agreement") for an original term through May 31, 2000
at 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
18
<PAGE> 22
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 Award
Agreements, the Company issued to the Rabbi Trust for the benefit of Ms. Fox (i)
15,000 restricted Common Shares; and (ii) 18,000 restricted Common Shares. Ms.
Fox also received a grant of options to purchase 25,000 Common Shares (see
footnotes 3 and 4 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 30% 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 Long-term
Incentive Plans Table and the Summary Compensation Table respectively. 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 (which financial performance goals were since satisfied on account of the
Company's 1998 fiscal year results). Finally, the January 1998 amendment to the
Fox Employment Agreement provided for the issuance of up to a maximum of 10,000
Common Shares to the Rabbi Trust for Ms. Fox's benefit ("Fox Matching Shares")
for each Common Share purchased by Ms. Fox in 1998 and/or through Ms. Fox's
election to defer receipt of all or any portion of her cash bonus earned on
account on 1998 and instead to direct the Company to issue Common Shares (valued
at their closing price on the NYSE at December 31, 1998) to the Rabbi Trust for
her benefit (see footnote 3 to the Summary Compensation Table).
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; (iii) 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; and (iv) accelerated vesting of options
to purchase Common Shares.
Bradley A. Van Auken Employment Agreement
The Company and Mr. Van Auken entered into an Employment Agreement dated
January 1, 1998 (the "Van Auken Employment Agreement") for an original term
through December 31, 1998 at an annual base salary of $175,000 ("Van Auken's
Base Salary"), plus provisions for annual cash bonuses based upon the Company's
Adjusted EBIDTA of up to 60% of Van Auken's Base Salary and a bonus payable in
Common Shares having a value of up to 30% of Van Auken's Base Salary, also based
upon the Company's Adjusted EBIDTA. Under the terms of the Van Auken Employment
Agreement, Mr. Van Auken was retained as the Company's Senior Vice President,
General Counsel and Secretary.
Under the terms of the Van Auken Employment Agreement and a related Award
Agreement, the Company issued to the Rabbi Trust for the benefit Mr. Van Auken
33,000 restricted Common Shares. Mr. Van Auken also received a grant of options
to purchase 5,000 Common Shares (see Footnotes 3 and 4 to the Summary
Compensation Table).
19
<PAGE> 23
In consideration of Mr. Van Auken's prior service to the Company as outside
general counsel and his acceptance of permanent employment with the Company
pursuant to the Van Auken Employment Agreement, 11,000 of the restricted Common
Shares issued to the Rabbi Trust for Mr. Van Auken's benefit were immediately
vested. The remaining 22,000 shares were made subject to vesting requirements
parallel to the Performance Plan financial performance goals (which were
subsequently satisfied as of December 31, 1998) with the additional vesting
requirement that Mr. Van Auken remain in the employ of the Company or a
subsidiary of the Company in order to vest in 11,000 of the shares on January 1,
1999, and the remaining 11,000 of the shares on January 1, 2000. The Van Auken
Employment Agreement also provided for the issuance of up to a maximum of 5,000
Common Shares to Mr. Van Auken or, per his election, to the Rabbi Trust for his
benefit for each Common Share purchased by Mr. Van Auken in 1998 (see footnote 3
to the Summary Compensation Table).
Upon termination of Mr. Van Auken's employment without cause, despite the
expiration of the original term of the Van Auken Employment Agreement without
its renewal for a successive term, Mr. Van Auken would be entitled to receive:
(i) any of Van Auken's Base Salary for 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 (iii) any restricted Common Shares subject to
the award agreements which have vested prior to the date of termination; and
(iv) accelerated vesting of options to purchase Common Shares.
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 management'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 interest 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 share 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,
20
<PAGE> 24
annual cash and equity incentive bonus and long term equity incentives. In this
regard, the Company's compensation arrangements have been 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 non-recurring items or extraordinary gains or
losses ("Adjusted EBITDA") and restricted share awards which vest on the basis
of growth in the Company's market capitalization or attainment of targeted
increases in Adjusted EBITDA or Common Share market price. 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 have implemented its goal of aligning his
interests with those of the Company's long-term investors.
Because Market Capitalization targets as well as the financial performance
goals set forth in the Company's Performance Plan have been attained, the
Company's executives have vested in substantially all of their long-term equity
share awards, other than those relevant to Ms. Fox and Mr. Van Auken based upon
continuing service. The Compensation Committee has no immediate plans to grant
additional long-term incentive equity awards to the executive officers named in
the Summary Compensation Table at this time. The Committee believes that the
Company's executives are properly incentivized and aligned with the Company's
shareholders based upon their significant Common Share holdings.
In addition, the Compensation Committee retains its philosophy with respect
to annual incentive equity awards and is currently considering a substitute
financial performance measure for Adjusted EBIDTA. Due to the Company's
determination to elect real estate investment trust status for federal income
tax purposes beginning with its 1998 tax year, the Compensation Committee is
considering substituting Funds From Operations (or "FFO") and/or Cash Available
for Distribution (or "CAD") as such financial performance measures. FFO and CAD
are commonly used to evaluate the financial performance of real estate
investment trusts, generally. The Compensation Committee is continuing its
consideration of this issue and a final decision has not yet been reached as of
the date of this Proxy Statement.
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 the representatives of a consulting firm
retained by the Compensation Committee which specializes in designing and
advising on executive compensation packages for real estate investment trusts.
Management Incentive Plan
Annual bonuses for the executive officers on account of the Company's 1998
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 EBIDTA for the Company's Chief Executive
Officer and senior financial and legal officers and property effective gross
income for the Company's property management employees. Under the terms of the
Incentive Compensation Plan, upon achieving increases in the designated
financial performance measure when compared to the Company's 1997 results, the
executive officers and other participating employees are entitled to certain
cash and equity 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 real estate investment trust taxable
income 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
21
<PAGE> 25
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 have
elected to direct the Company to issue the Company's 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
Common Shares, 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 real estate investment trust
taxable income due to the availability of net operating and passive activity
loss carry forwards for federal income tax purposes.
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 has
aligned and will continue to align the interests of management with the interest
of shareholders of the Company.
The Compensation Committee of the Board of Trustees
Robert J. Weiler, Chairman
Stanley R. Fimberg
H. Jeffrey Schwartz
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert J. Weiler, Chairman of the Compensation Committee, is a principal of
Americana Investment Company, the lessor of the building housing the Company's
principal operating offices (see "Certain Relationships and Related
Transactions").
H. Jeffrey Schwartz, a member of the Compensation Committee, is a partner
in the law firm of Benesch, Friedlander, Coplan & Aronoff, LLP, which serves as
outside legal counsel to the Company.
Stanley R. Fimberg, a member of the Compensation Committee, is the managing
member of FSC Realty, LLC, which in turn is the managing member of
Brentwood-Lexford Partners, LLC, a company indebted to the Company in respect of
its acquisition of the third party property management business formerly owned
and operated by the Company (see "Certain Relationships and Related
Transactions").
22
<PAGE> 26
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 six
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>
LFT MARKET VALUE DOW JONES REAL ESTATE DOW JONES EQUITY MKT
---------------- --------------------- --------------------
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 250.00 112.00 107.00
12/31/94 350.00 103.00 104.00
12/31/95 583.00 121.00 139.00
12/31/96 687.00 150.00 167.00
12/31/97 1149.00 170.00 220.00
12/31/98 1232.00 129.00 227.00
</TABLE>
23
<PAGE> 27
SECURITY OWNERSHIP OF CERTAIN PERSONS
On March 24, 1999, the Company had outstanding 9,551,877 Common Shares. The
following table sets forth the information as of March 24, 1999 regarding Common
Shares owned beneficially by (a) each person known by the Company to own
beneficially more than 5% of the Company's outstanding Common Shares (there
being no such person), (b) each trustee of the Company and executive officer
named in the Summary Compensation table above and (c) 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>
Trustees and Executive Officers Named in "Summary
Compensation Table"
John B. Bartling................................. 316,880(c) 3.3% --
Mark D. Thompson................................. 192,276(d) 2.0% --
Leslie B. Fox.................................... 110,091(e) 1.2% 71,500
Bradley A. Van Auken............................. 38,413(f) * 15,552
Ronald P. Koegler................................ 52,949(g) * 2,499
Stanley R. Fimberg............................... 222,738(h) 2.3% 1,873
Joseph E. Madigan................................ 69,789(i) * 8,297
Glenn C. Pollack................................. 88,130(j) * 2,084
H. Jeffrey Schwartz.............................. 161,907(k) 1.7% 1,986
Robert J. Weiler................................. 159,754(l) 1.7% --
All present executive officers and trustees of
the Company as a group (12 persons)............ 1,501,636(m) 15.7% 124,193
</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 underlying
outstanding 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" nor in the determination of
"Percentage of Common Shares."
(c) This amount includes 266,880 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.
(d) This amount includes 162,276 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.
(e) This amount includes 5,000 Common Shares subject to options which are
exercisable within 60 days but does not include 20,000 Common Shares
subject to options which are not exercisable within 60 days. This amount
includes 95,091 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 51,500 restricted Common
Shares held on behalf of Ms. Fox by the Rabbi Trust as to which shares Ms.
Fox has neither investment or voting power.
(f) This amount includes 1,000 Common Shares subject to options which are
exercisable within 60 days but does not include 4,000 Common Shares subject
to options which are not exercisable within 60 days. This amount includes
29,690 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
24
<PAGE> 28
include 11,552 restricted Common Shares held on behalf of Mr. Van Auken by
the Rabbi Trust as to which shares Mr. Van Auken has neither investment or
voting power.
(g) This amount includes 834 Common Shares subject to options which are
exercisable within 60 days but does not include 2,499 Common Shares subject
to options which are not exercisable within 60 days. This amount also
includes 33,968 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.
(h) This amount includes 34,737 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 1,873
restricted Common Shares held on behalf of Mr. Fimberg by the Rabbi Trust
as to which shares Mr. Fimberg has neither investment or voting power.
(i) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 37,000 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
1,673 restricted Common Shares as to which Mr. Madigan has voting power but
does not have investment power. This amount does not include 8,297
restricted Common Shares held on behalf of Mr. Madigan by the Rabbi Trust
as to which shares Mr. Madigan has neither investment or voting power.
(j) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 33,000 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 2,084
restricted Common Shares held on behalf of Mr. Pollack by the Rabbi Trust
as to which shares Mr. Pollack has neither investment or voting power.
(k) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 34,744 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 Common Shares as to which Mr. Schwartz has voting power
but does not have investment power. This amount does not include 1,986
restricted Common Shares held on behalf of Mr. Schwartz by the Rabbi Trust
as to which shares Mr. Schwartz has neither investment or voting power.
(l) This amount includes 4,000 Common Shares subject to options which are
exercisable within 60 days. This amount also includes 34,655 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, 92,00
shares held by Mr. Weiler's spouse and 6,620 Restricted shares as to which
Mr. Weiler has voting power but does not have investment power.
(m) This amount includes 5,992 Common Shares held in individual Trustee and
executive officer 401(k) retirement plan accounts, 19,845 restricted Common
Shares as to which certain trustees have voting power but do not have
investment power, 830,616 Common Shares held on behalf of certain Trustees
and executive officers by the Rabbi Trust which shares such Trustees and
executives officers have the right to receive under certain circumstances
within 60 days, and 29,499 Common Shares subject to options which are
exercisable within 60 days. This amount does not include 77,292 restricted
Common Shares held in the Rabbi Trust as to which shares such Trustees and
executive officers have neither investment or 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.
25
<PAGE> 29
To the Company's knowledge, based on its 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, subject to Mr. Madigan's continuing service as Chairman of the Board.
Effective as of April 1, 1998, the Company sold its entire preferred equity
interest in a third party property management business conducted by 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 and Lexford
Properties, Inc., respectively. 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 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 principal operating offices are
competitive with commercial lease rates in the Columbus, Ohio market. The annual
lease payments are as follows:
<TABLE>
YEAR ANNUAL RENT
- ------------------------------------------------- -----------
<S> <C>
1998............................................. $ 320,785
1999-2000........................................ $ 292,920
2001............................................. $ 298,440
2002............................................. $ 309,480
2003............................................. $ 315,016
2004............................................. $ 217,392
</TABLE>
AUDITORS
The Company has selected Ernst & Young, LLP, as independent auditors for
the 1999 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.
26
<PAGE> 30
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 Annual Report to Shareholders first sent to
shareholders on or about March 25, 1999;
(ii) The Company's Form 10-K for the fiscal year ended December 31,
1998, filed with the SEC on March 23, 1999; and
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 APRIL 20, 1999.
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
All shareholder proposals for the Company's 2000 Annual Meeting of
Shareholders must be received in writing by the Secretary of the Company at 6954
Americana Parkway, Reynoldsburg, Ohio 43068 no later than December 31, 1999. 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 2000 Annual Meeting
of Shareholders on or before May 28, 2000, the latest date upon which a
shareholder proposal may be timely submitted is December 31, 1999. In the event
that the Company subsequently determines to call and hold its 2000 Annual
Meeting of Shareholders on a date on or after May 28, 2000, 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.
27
<PAGE> 31
ANNUAL REPORT
A copy of the Company's Annual Report to shareholders for the 1998 fiscal
year, which contains Consolidated Financial Statements of the Company and its
subsidiaries, is being sent concurrently with this Proxy Statement 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: March 25, 1999
<PAGE> 32
R.S. Rowe & Company, Inc.; Job No. 7614; Proof of 3-17-99
[GRAPHIC] (781) 849-9700; (212) 926-2444; (800) 324-6202; FAX No. (781) 849-9740
EMAIL Address: [email protected]
pm6\5th-3rd\lexford-prx.pm6
LEXFORD RESIDENTIAL TRUST
PROXY/VOTING INSTRUCTIONS CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES FOR THE ANNUAL
SHAREHOLDERS MEETING ON APRIL 28, 1999
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 March 24, 1999, at the Annual Meeting of
Shareholders to be held at the Company Headquarters, 6954 American Parkway,
Columbus, Ohio 43068 on April 28, 1999 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".)
H. Jeffrey Schwartz Stanley R. Firnberg
2. I PLAN TO ATTEND THE ANNUAL MEETING [ ]
</TABLE>
(Continued on Other Side)
<PAGE> 33
LEXFORD RESIDENTIAL TRUST
C/O CORPORATE TRUST SERVICES
MAIL DROP 10AT66-4129
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: April , 1999
--------------------
--------------------------------------
(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.
