<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 (AMENDMENT NO. )
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>
Aaron Rents, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
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
AARON RENTS, INC.
309 E. PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA 30305-2377
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
The 1998 Annual Meeting of Shareholders of Aaron Rents, Inc. (the
"Company") will be held on Tuesday, May 5, 1998, at 10:00 a.m., Atlanta time, at
the First Union Plaza, 999 Peachtree Street, N.E., 28th Floor, Atlanta, Georgia
30309, for the purpose of considering and voting on the following:
(1) The election of ten directors to constitute the Board of Directors
until the next annual meeting and until their successors are elected and
qualified; and
(2) Such other matters as may properly come before the meeting or any
adjournment thereof.
Information relating to the above items is set forth in the accompanying
Proxy Statement.
Only shareholders of record of the Class A Common Stock at the close of
business on March 27, 1998 are entitled to vote at the meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
KEITH C. GROEN
Vice President, Legal and Secretary
Atlanta, Georgia
April 9, 1998
PLEASE COMPLETE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY
SO THAT YOUR VOTE MAY BE RECORDED AT THE MEETING
IF YOU DO NOT ATTEND PERSONALLY.
No postage is required if mailed
in the United States in the accompanying envelope.
<PAGE> 3
AARON RENTS, INC.
309 E. PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA 30305-2377
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors of Aaron
Rents, Inc. (the "Company") for use at the 1998 annual meeting (the "Annual
Meeting") of shareholders to be held on Tuesday, May 5, 1998, and any
adjournment thereof.
Each proxy that is properly executed and returned by a shareholder will be
voted as specified thereon by the shareholder unless it is revoked. Shareholders
are requested to execute the enclosed proxy and return it in the enclosed
envelope. If no direction is specified on the proxy as to any matter being acted
upon, the shares represented by the proxy will be voted in favor of such matter.
Any shareholder giving a proxy has the power to revoke it at any time before it
is voted by the execution of another proxy bearing a later date or by written
notification to the Secretary of the Company. Shareholders who are present at
the Annual Meeting may revoke their proxy and vote in person.
The affirmative vote of a plurality of the holders of shares of the
Company's Class A Common Stock present, in person or represented by proxy, at
the Annual Meeting will be necessary to elect the nominees for director listed
in this Proxy Statement. The presence, in person or by proxy, of holders of a
majority of the outstanding shares of the Company's Class A Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum.
Abstentions and broker non-votes will be included in determining whether a
quorum is present at the Annual Meeting, but will otherwise have no effect on
the election of the nominees for director. An automated system administered by
the Company's transfer agent will tabulate the votes cast.
Only shareholders of record of Class A Common Stock at the close of
business on March 27, 1998 are entitled to vote at the Annual Meeting. A list of
all shareholders entitled to vote will be available for inspection at the Annual
Meeting. As of March 27, 1998, the Company had 3,836,506 shares of Class A
Common Stock and 15,150,391 shares of Common Stock outstanding. Each share of
Class A Common Stock entitles the holder thereof to one vote with respect to
each matter that may come before the Annual Meeting. The holders of the Common
Stock are not entitled to vote with respect to the election of directors, or
with respect to most other matters presented to the shareholders for a vote.
The Company will bear the cost of soliciting proxies, including the charges
and expenses of brokerage firms, banks and others for forwarding solicitation
material to beneficial owners of shares of the Company's Class A and Common
Stock. The principal solicitation is being made by mail; however, additional
solicitation may be made by telephone, telegraph or personal interview by
officers of the Company who will not be additionally compensated therefore. It
is anticipated that this Proxy Statement and the accompanying proxy will first
be mailed to shareholders on April 9, 1998.
<PAGE> 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of February 28, 1998 (except as
otherwise noted), the beneficial ownership of the Company's Class A and Common
Stock by (i) each person who owns of record or is known by management to own
beneficially 5% or more of the outstanding shares of the Company's Class A
Common Stock, (ii) each nominee for director, (iii) the Company's Chief
Executive Officer and the other executive officers of the Company listed in the
Summary Compensation Table below (the "Named Executive Officers") and (iv) all
executive officers and directors of the Company as a group.
Except as otherwise indicated, all shares shown in the table below are held
with sole voting and investment power. The Percent of Class column represents
the percentage that the named person or group would beneficially own if such
person or group, and only such person or group, exercised all currently
exercisable options to purchase shares of the applicable class of Common Stock
held by him, her or it.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE OF CLASS OF BENEFICIAL
BENEFICIAL OWNER OF COMMON STOCK OWNERSHIP(1) PERCENT OF CLASS(1)
---------------- --------------- ----------------- -------------------
<S> <C> <C> <C>
R. Charles Loudermilk, Sr..................... Class A 2,379,262 62.02%
309 E. Paces Ferry Road Common 3,253,045(2) 21.47
Atlanta, Georgia
Gabelli Funds, Inc............................ Class A 316,700(3) 8.25
One Corporate Center Common 416,760(4) 2.75
Rye, New York
Gilbert L. Danielson.......................... Class A 2,000 *
Common 102,810(5) *
Keith C. Groen................................ Class A -0- *
Common 13,010(6) *
Earl Dolive................................... Class A 86,374 2.25
Common 122,702 *
Robert C. Loudermilk, Jr...................... Class A 1,500 *
Common 658,936(7) 4.30
Ronald W. Allen............................... Class A 5,000 *
Common -0- *
Leo Benatar................................... Class A 2,500 *
Common 2,500 *
Ingrid Saunders Jones......................... Class A -0- *
Common 100 *
M. Collier Ross............................... Class A -0- *
Common 1,000 *
J. Rex Fuqua.................................. Class A -0- *
Common 47,000(8) *
William K. Butler, Jr......................... Class A -0- *
Common 42,643(9) *
Brian E. Stahl................................ Class A 740 *
Common 59,138(10) *
All executive officers and.................... Class A 2,477,376 64.57
directors as a group Common 4,315,295(11) 27.79
(a total of 13 persons)
</TABLE>
- ---------------
* Less than 1%
2
<PAGE> 5
(1) Amounts shown do not reflect that the Common Stock is convertible, on a
share for share basis, into shares of Class A Common Stock (i) by
resolution of the Board of Directors, if, as a result of the existence of
the Class A Common Stock, either class is excluded from listing on the New
York Stock Exchange or any national securities exchange on which such class
is then listed, and (ii) automatically should the outstanding shares of
Class A Common Stock fall below 10% of the aggregate outstanding shares of
both classes.
(2) Includes 242,348 shares of Common Stock held by certain trusts for the
benefit of a daughter of Mr. Loudermilk, Sr. of which Mr. Loudermilk, Sr.
serves as trustee.
(3) As reflected in an amended Schedule 13F filed with the Securities and
Exchange Commission December 31, 1997.
(4) Gabelli Funds, Inc. is not required to disclose its holdings of non-voting
Common Stock, but the Company is advised by The Nasdaq Stock Market that
Gabelli Funds, Inc. held 416,760 shares of Common Stock as of December 31,
1997.
(5) Includes currently exercisable options to purchase 94,000 shares of Common
Stock.
(6) Includes currently exercisable options to purchase 9,000 shares of Common
Stock.
(7) Includes 54,906 shares of Common Stock held by certain trusts for the
benefit of Mr. Loudermilk, Jr.'s children, of which Mr. Loudermilk, Jr.
serves as trustee, and currently exercisable options to purchase 180,000
shares of Common Stock.
(8) Includes 32,000 shares of Common Stock held by certain trusts for the
benefit of Mr. Fuqua's children, with respect to which Common Stock Mr.
Fuqua has neither voting rights nor dispositive power.
(9) Includes currently exercisable options to purchase 30,000 shares of Common
Stock.
(10) Includes currently exercisable options to purchase 56,000 shares of Common
Stock.
(11) Includes currently exercisable options to purchase 379,000 shares of Common
Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of either
class of the Company's Common Stock, to file with the Securities and Exchange
Commission certain reports of beneficial ownership of the Company's Common
Stock. Based solely on copies of such reports furnished to the Company and
written representations that no other reports were required, the Company
believes that all applicable Section 16(a) filing requirements were complied
with by its directors, officers and 10% shareholders during the fiscal year
ended December 31, 1997.
ELECTION OF DIRECTORS
(ITEM 1)
The Company's Bylaws provide for the Board of Directors to be comprised of
eleven members. The Board recommends the election of the ten nominees listed
below to constitute the entire Board, who will hold office until the next annual
meeting of shareholders and until their successors are elected and qualified.
If, at the time of the Annual Meeting, any of such nominees should be unable to
serve, the persons named in the proxy will vote for such substitutes, or will
vote to reduce the number of directors for the ensuing year, as management
recommends. Management has no reason to believe any substitute nominee or
reduction in the number of directors for the ensuing year will be required. The
Board has not named an eleventh nominee for director, which will result in a
vacancy on the Board until the Board names an additional nominee or reduces the
size of the Board to ten members.
3
<PAGE> 6
All of the nominees listed below are now directors of the Company. The
following information relating to age, positions with the Company, principal
occupation, directorships in companies with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, subject to the
requirements of Section 15(d) of that Act or registered as an investment company
under the Investment Company Act of 1940, has been furnished by the respective
nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR PAST DIRECTOR
NAME AGE FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
- ---- --- ---------------------------------- --------
<S> <C> <C> <C>
R. Charles Loudermilk, Sr.... 70 Mr. Loudermilk, Sr. has served as Chairman of the 1962
Board and Chief Executive Officer of the Company
since the Company's incorporation in 1962. From 1962
to 1997, he was also President of the Company. He has
been a director of America's Mart Corporation, owner
and manager of the Atlanta Merchandise Mart, since
1996. He is one of the founders and Chairman of the
Board of The Buckhead Community Bank, and formerly
the Chairman of the Board of Directors of the
Metropolitan Atlanta Rapid Transit Authority.
Robert C. Loudermilk, Jr..... 38 Mr. Loudermilk, Jr. has served as a Director of the 1983
Company since 1983, and as President and Chief
Operating Officer since 1997. From 1993 to 1997, he
was Vice President, Real Estate of the
Company. From 1992 to 1993, he was a self-employed
real estate investor. From 1990 to 1991, Mr.
Loudermilk, Jr. was Executive Vice President of Ball
Stalker Co., then a subsidiary of the Company.
Gilbert L. Danielson......... 51 Mr. Danielson has served as Vice President, Finance 1990
and Chief Financial Officer and Director of the
Company since 1990.
Keith C. Groen............... 55 Mr. Groen has served as Vice President, Legal of the 1987
Company since 1984. He has been a Director of the
Company and Secretary since 1987.
Ronald W. Allen.............. 56 Mr. Allen has served as a Director of the Company 1997
since 1997. He was Chairman and Chief Executive
Officer of Delta Air Lines, an international air
passenger carrier, from 1987 to 1997. He also was
President of Delta Air Lines from 1983 to 1987 and
from 1993 to 1997, and Chief Operating Officer from
1983 to 1997. He currently serves as a Director of
The Coca-Cola Company.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR PAST DIRECTOR
NAME AGE FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
- ---- --- ---------------------------------- --------
<S> <C> <C> <C>
Leo Benatar+*................ 68 Mr. Benatar has served as a Director of the Company 1994
since 1994. He has been an associated consultant with
A.T. Kearney, Inc., a management consultant and
executive search company, since 1996. He was Chairman
of Engraph, Inc. and served as Chief Executive
Officer of that company from 1981 to 1995. Mr.
Benatar serves as a Director of Interstate Bakeries
Corporation, Mohawk Industries, Inc., Paxar
Corporation and John's Manville Corporation. He
previously served as Chairman of the Federal Reserve
Bank of Atlanta.
Earl Dolive+................. 80 Mr. Dolive has served as a Director of the Company 1977
since 1977. He currently serves as a Director of
Exide Corporation, Pameco Corp. and Greenway
Corporation, and he serves as Director Emeritus of
Genuine Parts Company. Prior to his retirement in
1988, he was Vice Chairman of the Board of Genuine
Parts Company, a distributor of automobile
replacement parts.
J. Rex Fuqua................. 48 Mr. Fuqua has served as a Director of the Company 1996
since 1996. He has been President and Chief Executive
Officer of Realan Capital Corporation, a
privately-held real estate investment corporation,
since 1985. He also has been President and Chief
Executive Officer of Fuqua Capital Corporation, a
privately-held investment management corporation,
since 1987. Previously, he was Chairman of the Board
of Directors of Fuqua Enterprises, Inc., a company
engaged in the manufacture and sale of medical
products. Mr. Fuqua serves as a Director of
Graham-Field Health Products, Inc.
Ingrid Saunders Jones*....... 52 Ms. Jones has served as a Director of the Company 1995
since 1995. She has been Vice President of Corporate
External Affairs of The Coca-Cola Company and
Chairperson of The Coca-Cola Foundation since 1991.
Previously, she was an Assistant Vice President of
The Coca-Cola Company.
M. Collier Ross+............. 71 Gen. Ross has served as Director of the Company since 1996
1996. He has been a self-employed management
consultant since 1992. He is the former Executive
Vice President of Sidwell-Ross and Associates, Inc.,
a management and technical consulting firm. Gen. Ross
retired from the United States Army in 1983 as a Lt.
General after 39 years of distinguished service.
</TABLE>
- ---------------
+ Member of the Audit Committee of the Board of Directors.
* Member of the Stock Option Committee of the Board of Directors.
5
<PAGE> 8
There are no family relationships among any of the executive officers,
directors and nominees of the Company, except that Robert C. Loudermilk, Jr. is
the son of R. Charles Loudermilk, Sr.
The Board held four meetings during the fiscal year ended December 31,
1997. All of the incumbent directors attended at least 75% of the meetings of
the Board and committees on which they served, except for Ms. Jones.
The Board has a standing Audit Committee which is composed of Messrs.
Dolive, Ross and Benatar. The function of the Audit Committee is to review with
the Company's independent auditors the scope and thoroughness of the auditors'
examination, consider recommendations of the independent auditors, recommend to
the Board the appointment of independent auditors for the year and review the
sufficiency of the Company's system of internal controls with the financial
officers and the independent auditors. The Audit Committee held two meetings
during the fiscal year ended December 31, 1997.
The Board has a Stock Option Committee which is composed of Mr. Benatar and
Ms. Jones. The function of the Stock Option Committee is to administer the
Company's stock option plans. The Stock Option Committee held one meeting during
the fiscal year ended December 31, 1997.
The Board does not have a nominating or compensation committee. Shareholder
nominations for director must comply with the procedures for shareholder
nominations set forth in Article III, Section 3 of the Company's Bylaws.
6
<PAGE> 9
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS
Set forth below are the names and ages of all executive officers of the
Company as of February 28, 1998. All positions and offices with the Company held
by each such person are also indicated. Officers are elected annually for
one-year terms or until their successors are elected and qualified. All
executive officers are United States citizens.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND PRINCIPAL OCCUPATION
NAME (AGE) DURING THE PAST FIVE YEARS
- ---------- --------------------------------------------------
<S> <C>
R. Charles Loudermilk, Sr. (70).............. Chairman of the Board of Directors and Chief
Executive Officer of the Company.*
Robert C. Loudermilk, Jr. (38)............... President and Chief Operating Officer of the
Company.*
Gilbert L. Danielson (51).................... Vice President, Finance and Chief Financial
Officer of the Company.*
Keith C. Groen (55).......................... Vice President, Legal and Secretary of the
Company.*
William K. Butler, Jr. (45).................. Mr. Butler joined the Company in 1974 as a Store
Manager. He served as Vice President of the
Aaron's Rental Purchase Division from 1986 to 1995
and currently is President of that Division.
Brian E. Stahl (41).......................... Mr. Stahl joined the Company in 1981 as an
Assistant Store Manager. He served as Regional
Vice President of the Northeastern Region of the
Aaron Rents' Rent-to-Rent Division from 1990 to
1995 and currently is President of that Division.
Robert P. Sinclair, Jr. (36)................. Mr. Sinclair has served as Controller of the
Company since 1990 and as Chief Financial Officer
of the Aaron's Rental Purchase Division since
1995.
</TABLE>
- ---------------
* Messrs. Loudermilk, Sr., Loudermilk, Jr., Danielson and Groen are directors of
the Company. For additional information concerning those individuals, see
ELECTION OF DIRECTORS (Item 1) above.
7
<PAGE> 10
EXECUTIVE COMPENSATION SUMMARY
The following table provides certain summary information for the last three
fiscal years of the Company concerning compensation paid or accrued by the
Company and its subsidiaries to or on behalf of the Company's Chief Executive
Officer and the four other most highly paid executive officers of the Company
who earned in excess of $100,000 in salary and bonus during the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------
ANNUAL COMPENSATION NUMBER OF
FISCAL ------------------------------------- SECURITIES
YEAR OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION ENDED(1) SALARY BONUS COMPENSATION(2) STOCK OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- -------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr.... 12/31/97 $454,000 $305,430 -- 45,000 $84,042(3)
Chairman and 12/31/96 454,000 254,290 -- 200,000 72,725(4)
Chief Executive Officer 12/31/95 340,500 160,720 -- -0- 64,733(5)
Robert C. Loudermilk, Jr..... 12/31/97 155,000 -0- -- 10,000 2,018(6)
President and Chief 12/31/96 152,500 -0- -- 60,000 1,792(6)
Operating Officer 12/31/95 94,750 -0- -- -0- 1,260(6)
Gilbert L. Danielson......... 12/31/97 187,500 -0- -- 10,000 6,008(7)
Vice President, Finance 12/31/96 177,500 -0- -- 100,000 31,325(8)
and Chief Financial Officer 12/31/95 123,500 -0- -- -0- 36,659(9)
William K. Butler, Jr........ 12/31/97 169,125 -0- -- 10,000 2,200(6)
President, Rental 12/31/96 162,500 -0- -- 60,000 1,909(6)
Purchase Division 12/31/95 111,250 -0- -- -0- 1,271(6)
Brian E. Stahl............... 12/31/97 169,125 -0- -- 10,000 2,200(6)
President, Rent-to-Rent 12/31/96 162,500 -0- -- 60,000 25,436(10)
Division 12/31/95 110,000 -0- -- -0- 32,942(11)
</TABLE>
- ---------------
(1) The Company changed its fiscal year from March 31 to December 31, effective
December 31, 1995. Amounts shown for the year ended December 31, 1995 are
for the nine month period from April 1, 1995 to December 31, 1995.
(2) Excludes perquisites that do not exceed the lesser of $50,000 or 10% of the
executive's salary and bonus.
(3) Includes a matching contribution of $4,622 made by the Company to the
executive's account in the Company's 401(k) plan, club dues of $6,205 and
$73,215 representing a portion of the premiums paid, and reimbursement of
the executive's resulting income tax liability, with respect to the split
dollar life insurance policies described in COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION below.
(4) Includes a matching contribution of $3,758 made by the Company to the
executive's account in the Company's 401(k) plan, club dues of $7,320 and
$61,647 representing a portion of the premiums paid, and reimbursement of
the executive's resulting income tax liability, with respect to the split
dollar life insurance policies described in COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION below.
(5) Includes a matching contribution of $1,040 made by the Company to the
executive's account in the Company's 401(k) plan, club dues of $6,080 and
$57,613 representing a portion of the premiums paid, and reimbursement of
the executive's resulting income tax liability, with respect to the split
dollar life insurance policies described in COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION below.
(6) Represents a matching contribution made by the Company to the executive's
account in the Company's 401(k) plan.
(7) Includes a matching contribution of $2,438 made by the Company to the
executive's account in the Company's 401(k) plan and club dues of $3,570.
8
<PAGE> 11
(8) Includes a matching contribution of $2,330 made by the Company to the
executive's account in the Company's 401(k) plan, club dues of $3,650 and
$25,345 representing the reimbursement of the executive's income tax
liability resulting from club dues paid by the Company in the prior fiscal
year.
(9) Includes a matching contribution of $1,379 made by the Company to the
executive's account in the Company's 401(k) plan and club dues of $35,280.
(10) Includes a matching contribution of $1,843 made by the Company to the
executive's account in the Company's 401(k) plan and $23,593 representing
the reimbursement of the executive's income tax liability resulting from
moving expenses paid by the Company in the prior fiscal year.
(11) Includes a matching contribution of $1,667 made by the Company to the
executive's account in the Company's 401(k) plan and reimbursement of
$31,275 for moving expenses.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally are
made by the entire Board of Directors, based upon the recommendation of the
Chief Executive Officer. The Company has no separate compensation committee.
Pursuant to rules of the Securities and Exchange Commission designed to enhance
disclosure of public company policies toward executive compensation, set forth
below is a report submitted by the Board of Directors addressing the Company's
executive compensation policies.
GENERAL. The objectives of the Company's compensation program are to
enhance the profitability of the Company, and thus shareholder value, by
aligning executive compensation with the Company's business goals and
performance and by attracting, retaining and rewarding executive officers who
contribute to the long-term success of the Company. In determining the
compensation to be paid to the executive officers of the Company, the directors
rely upon their own knowledge of compensation paid to executives of companies of
comparable size and complexity and consider the performance of the Company and
the merits of the individual under consideration. It is the Company's intention
that the compensation to be paid to its executive officers will not exceed the
present maximum allowable amount for purposes of deductibility as set forth in
the Internal Revenue Code.
SALARY AND BONUS. The Chief Executive Officer makes recommendations
annually to the Board of Directors regarding the base salary and bonus, if any,
for the Company's executive officers, including the Chief Executive Officer,
based upon the profitability of the Company and the level of responsibility,
time with the Company, contribution and performance of the executive officer.
Evaluation of these factors is subjective, and no fixed, relative weights are
assigned to the factors considered. The beginning point for determining such
salaries is the salary the executive officer received in the prior fiscal year.
The Chief Executive Officer received a salary of $454,000 during the fiscal year
ended December 31, 1997, which represented no change in his salary from the
fiscal year ended December 31, 1996. At its February, 1997 meeting, the Board of
Directors approved a bonus plan (the "Plan") for the Chief Executive Officer for
the fiscal year. Under the Plan, a bonus was to be given to the Chief Executive
Officer in an amount equal to 1% of the Company's pre-tax earnings for the
fiscal year ended December 31, 1997 (without giving effect to his bonus under
the Plan) if the Company's pre-tax earnings for such fiscal year (after giving
effect to his bonus under the Plan) exceeded pre-tax earnings for the fiscal
year ended December 31, 1996, which goal ultimately was achieved. Factors
considered in setting the Chief Executive Officer's salary and bonus included
the continued improvement in the Company's financial condition and Common Stock
trading prices during the fiscal year, and his dual role as both Chairman of the
Board of Directors and Chief Executive Officer of the Company.
STOCK OPTIONS. The Company in the past has used grants of stock options to
its key employees and executive officers to more closely align the interests of
such employees and officers with the interests of its shareholders. Under the
Company's 1996 Stock Option and Incentive Award Plan, options to purchase
322,000 shares of Common Stock were awarded to the Chief Executive Officer and
other officers and employees during the fiscal year ended December 31, 1997.
Options granted to the Chief Executive Officer
9
<PAGE> 12
and the other Named Executive Officers during the fiscal year ended December 31,
1997 and the two prior fiscal years are reflected in the Summary Compensation
Table above.
THE BOARD OF DIRECTORS
R. Charles Loudermilk, Sr.
Gilbert L. Danielson
Keith C. Groen
Earl Dolive
Robert C. Loudermilk, Jr.
Ronald W. Allen
Leo Benatar
Ingrid Saunders Jones
J. Rex Fuqua
M. Collier Ross
R.K. Sehgal
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
Set forth below is a line graph comparing, for the last five fiscal years
of the Company, the yearly percentage change in the cumulative total shareholder
return (assuming reinvestment of dividends) on the Company's Common Stock with
that of (i) all U.S. companies quoted on Nasdaq and (ii) non-financial companies
quoted on Nasdaq.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE NASDAQ STOCK MARKET
AND NASDAQ NON-FINANCIAL STOCKS
<TABLE>
<CAPTION>
NASDAQ NON-
MEASUREMENT PERIOD NASDAQ (US) FINANCIAL STOCK
(FISCAL YEAR COVERED) AARON RENTS, INC. STOCK INDEX INDEX
<S> <C> <C> <C>
3/31/93 100 100 100
3/31/94 127 108 113
3/31/95 147 120 107
12/31/95 197 156 119
12/31/96 273 192 132
12/31/97 458 235 169
</TABLE>
10
<PAGE> 13
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Messrs. Loudermilk, Sr., Loudermilk, Jr., Danielson, Groen, Butler, Stahl,
and Sinclair have each entered into employment agreements with the Company. The
agreements provide that each executive's employment with the Company will
continue until terminated by either party for any reason upon 60 days notice, or
by either party for just cause at any time. Each such executive has agreed not
to compete with the Company for a period of one year after the termination of
his employment.
DIRECTOR COMPENSATION
Outside directors received $2,000 for each Board meeting attended during
the fiscal year ended December 31, 1997, and Audit Committee members received
fees of $500 for each Audit Committee meeting attended. Each outside director
also was paid a quarterly retainer of $1,000. Beginning in 1998, outside
directors will receive a quarterly retainer of $2,000. Directors who are
employees of the Company receive no compensation for attendance at Board or
committee meetings.
OPTION GRANTS
The following table sets forth information with respect to grants of stock
options under the Company's 1996 Stock Option and Incentive Award Plan during
the last fiscal year to the Company's Chief Executive Officer and the Named
Executive Officers. In addition, the hypothetical gains or "option spreads" that
would exist for the respective options, based on assumed rates of annual,
compound stock appreciation of 5% and 10% from the date the options were granted
over the full option term, are also reflected:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk,
Sr................... 45,000 14.0% $15.9375 11/17/07 $451,148 $1,143,012
Robert C. Loudermilk,
Jr................... 10,000 3.1% $15.9375 11/17/07 100,255 254,003
Gilbert L. Danielson... 10,000 3.1% $15.9375 11/17/07 100,255 254,003
William K. Butler,
Jr................... 10,000 3.1% $15.9375 11/17/07 100,255 254,003
Brian E. Stahl......... 10,000 3.1% $15.9375 11/17/07 100,255 254,003
</TABLE>
- ---------------
(1) These amounts represent assumed rates of appreciation only. Actual gains, if
any, on stock option exercises and holdings of Common Stock are dependent
upon the future performance of the shares and overall market conditions.
There can be no assurance that the amounts reflected in this table will be
achieved.
(2) These options were granted pursuant to the Company's 1996 Stock Option and
Incentive Award Plan and consist of options to acquire Common Stock. Such
options have terms of ten years from the date of grant and will vest on the
third anniversary of the date of grant, or earlier upon the occurrence of a
change of control of the Company.
11
<PAGE> 14
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows for the Company's Chief Executive Officer and the
Named Executive Officers information with respect to the exercise of options
during the fiscal year ended December 31, 1997, the number of shares covered by
both exercisable and non-exercisable stock options as of December 31, 1997, and
the values of "in-the-money" options, based on the positive spread between the
exercise price of any such existing stock options and the year-end price of the
Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES DECEMBER 31, 1997 OPTIONS AT
ACQUIRED ON VALUE (NO. OF SHARES) DECEMBER 31, 1997(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME CLASS (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr...... Common -0- -0- -- 245,000 $ -0- $2,054,688
Robert C. Loudermilk, Jr ...... Common -0- -0- 180,000 70,000 2,283,750 604,375
Gilbert L. Danielson........... Common -0- -0- 94,000 110,000 1,227,625 984,375
William K. Butler, Jr.......... Common 10,000 $105,000 54,000 70,000 703,250 604,375
Brian E. Stahl................. Common 2,000 20,000 62,000 70,000 777,875 604,375
</TABLE>
- ---------------
(1) Aggregate market value (based on a December 31, 1997 closing stock price of
$19.375 per share for the Common Stock) of the shares covered by the
options, less aggregate exercise price payable by the executive.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no compensation committee. The Board of Directors of the
Company, upon the recommendation of the Chairman and Chief Executive Officer,
determines the annual compensation payable to its executive officers. The
following directors of the Company served as officers or employees of the
Company or its subsidiaries during the last fiscal year or prior thereto: R.
Charles Loudermilk, Sr., Robert C. Loudermilk, Jr., Gilbert L. Danielson and
Keith C. Groen.
The Company leases a 49,000 square foot building housing two stores in
Alexandria, Virginia from a general partnership of which Mr. Loudermilk, Sr. is
a 25% partner under a lease expiring in 1999 at a basic monthly rental of
$17,726, subject to escalation every five years based on the consumer price
index, but not to exceed 5%. All insurance, taxes, assessments and other charges
related to the property are paid by the Company as additional rent under the
lease. The building was constructed by the Company at a cost of $1,200,000 and
was purchased by the partnership at the Company's cost upon the building's
completion in May 1980.
The Company leased a 27,000 square foot building housing one store and a
subtenant in College Station, Texas from a general partnership composed of
Messrs. Loudermilk, Sr. and Loudermilk, Jr. under a lease which was to expire in
1999 at a basic monthly rental of $6,000, less the monthly rent of $1,500 from
the partial subtenant. All insurance, taxes, assessments and other charges
related to the property were paid by the Company as additional rent under the
lease. The partnership sold the building to a party unrelated to either the
Company or either of them on March 10, 1998, but the Company continues to lease
the building from the new owner.
The Company leased a 22,000 square foot building housing one store in
Webster, Texas from Robert C. Loudermilk, Jr., under a lease which was to expire
June 30, 2005 at a basic monthly rental of $8,031. All insurance, taxes, repairs
and assessments and other charges relating to the property were paid by the
Company as additional rent under the Lease. The Company had spent $114,836 on
improvements to accommodate its use of the building. Mr. Loudermilk, Jr. sold
the building to a party unrelated to either the Company or Mr. Loudermilk, Jr.
on June 13, 1997, but the Company continues to lease the building from the new
owner.
12
<PAGE> 15
The Company believes that the property sales and lease terms described
above are as favorable as those that could have been obtained at the same time
from unaffiliated parties.
Each of two irrevocable trusts holds a cash value life insurance policy on
the life of Mr. Loudermilk, Sr., the aggregate face value of which is
$4,400,000. The Company and the Trustee of such trusts are parties to
split-dollar agreements pursuant to which the Company has agreed to make all
payments on the policies until Mr. Loudermilk, Sr.'s death. Upon his death, the
Company will receive the aggregate cash value of those policies, which as of
December 31, 1997 represented $795,999, and the balance of such policies will be
payable to the trusts or beneficiaries of such trusts. The premiums paid by the
Company on these policies during the fiscal year ended December 31, 1997 totaled
$184,876.
AUDIT MATTERS
Ernst & Young served as auditors of the Company for the fiscal year ended
December 31, 1997. A representative of that firm is expected to be present at
the Annual Meeting and will have an opportunity to make a statement and respond
to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In accordance with the provisions of Rule 14a-8(a)(3)(i) of the Securities
and Exchange Commission, proposals of shareholders intended to be presented at
the Company's 1999 annual meeting must be received by December 10, 1998 in order
to be eligible for inclusion in the Company's proxy statement and form of proxy
for that meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
brought before the Annual Meeting. However, if other matters should properly
come before the Annual Meeting, it is the intention of each person named in the
proxy to vote such proxy in accordance with his judgment of what is in the best
interest of the Company.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE FURNISHED TO SHAREHOLDERS UPON REQUEST WITHOUT
CHARGE. REQUESTS FOR FORM 10-K REPORTS SHOULD BE SENT TO GILBERT L. DANIELSON,
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER, AARON RENTS, INC., 309 E.
PACES FERRY ROAD, N.E., ATLANTA, GEORGIA 30305-2377.
BY ORDER OF THE BOARD OF DIRECTORS
Keith C. Groen
Vice President, Legal and Secretary
April 9, 1998
13
<PAGE> 16
AARON RENTS, INC.
<PAGE> 17
APPENDIX
AARON RENTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 5, 1998
CLASS A COMMON STOCK PROXY
The undersigned shareholder of Aaron Rents, Inc. hereby constitutes and
appoints R. Charles Loudermilk, Sr. and Keith C. Groen, or either of them, the
true and lawful attorneys and proxies of the undersigned with full power of
substitution and appointment, for and in the name, place and stead of the
undersigned, to vote all of the undersigned's shares of Class A Common Stock of
Aaron Rents, Inc. at the Annual Meeting of the Shareholders to be held in
Atlanta, Georgia on Tuesday, the 5th day of May, 1998, at 10:00 a.m., and at any
and all adjournments thereof as follows:
(1) [ ] FOR all nominees listed below (except as marked to the contrary below):
NOMINEES: R. Charles Loudermilk, Sr., Robert C. Loudermilk, Jr.,
Gilbert L. Danielson, Keith C. Groen, Earl Dolive, Ronald W. Allen, Leo
Benatar, Ingrid Saunders Jones, J. Rex Fuqua and M. Collier Ross.
[ ] WITHHOLD AUTHORITY to vote for all nominees listed.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
--------------------------------------------------------------------------
(2) For the transaction of such other business as may lawfully come before the
meeting, hereby revoking any proxies as to said shares heretofore given by
the undersigned and ratifying and confirming all that said attorneys and
proxies may lawfully do by virtue hereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH OF THE NOMINEES LISTED ABOVE
AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THE
PROXY WILL BE SO VOTED.
It is understood that this proxy confers discretionary authority in respect
to matters not known or determined at the time of the mailing of the notice of
the meeting to the undersigned.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders dated April 9, 1998 and the Proxy Statement furnished therewith.
Dated and signed: , 1998
-------
------------------------------
------------------------------
(Signature should agree with
the name(s) hereon. Executors,
administrators, trustees,
guardians and attorneys should
so indicate when signing. For
joint accounts, each owner
should sign. The full name of
a corporation should be signed
by a duly authorized officer.)
This proxy is revocable at or at any time prior to the meeting. Please sign
and return this proxy to SunTrust Bank, Atlanta, Attn: Corporate Trust
Department, P.O. Box 4625, Atlanta, Georgia 30302, in the accompanying prepaid
envelope.
