<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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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):
[ ] 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 2, 2000
The 2000 Annual Meeting of Shareholders of Aaron Rents, Inc. (the
"Company") will be held on Tuesday, May 2, 2000, at 10:00 a.m., Atlanta time, at
the SunTrust Plaza, 303 Peachtree Street, N.E., 10th Floor, Atlanta, Georgia
30303, for the purpose of considering and voting on the following:
(1) The election of nine directors to constitute the Board of
Directors until the next annual meeting and until their successors are
elected and qualified;
(2) Approval of an amendment to the Company's Articles of
Incorporation to permit the conversion of Class A Common Stock into Common
Stock; and
(3) 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 10, 2000 are entitled to vote at the meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
JAMES L. CATES
Vice President, Risk Management
and Secretary
Atlanta, Georgia
April 4, 2000
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 2, 2000
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors of Aaron
Rents, Inc. (the "Company") for use at the 2000 annual meeting (the "Annual
Meeting") of shareholders to be held on May 2, 2000, 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 affirmative vote of holders of a majority of the
outstanding shares of the Company's Class A Common Stock, in person or by proxy,
at the Annual Meeting will be necessary to approve the proposed amendment to the
Company's Articles of Incorporation. 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. Abstentions and broker non-votes will
have the effect of a vote against the proposal to approve the amendment to the
Company's Articles of Incorporation. 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 10, 2000 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 10, 2000, the Company had 3,829,506 shares of Class A
Common Stock and 15,962,041 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, the
proposed amendment to the Company's Articles of Incorporation 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 4, 2000.
<PAGE> 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of February 15, 2000 (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 2,384,362 62.26%
309 E. Paces Ferry Road................ Common 2,687,252(2) 16.71%
Atlanta, Georgia
Gabelli Funds, Inc....................... Class A 341,700(3) 8.92%
One Corporate Center................... Common --(4)
Rye, New York
Reich & Tang Asset Mgt. L.P.............. Class A 315,000(5) 8.23%
600 Fifth Avenue
New York, New York
Gilbert L. Danielson..................... Class A 2,000 *
Common 183,540(6) 1.14%
J. Rex Fuqua............................. Class A -0- --
Common 15,000 *
Earl Dolive.............................. Class A 86,374 2.26%
Common 122,702 *
Robert C. Loudermilk, Jr. ............... Class A 1,500(7) *
Common 584,676(8) 3.64%
Ronald W. Allen.......................... Class A 5,000 *
Common -0- --
Leo Benatar.............................. Class A 2,500 *
Common 2,500 *
Ingrid Saunders Jones.................... Class A 100 *
Common -0- --
M. Collier Ross.......................... Class A -0- --
Common 1,000 *
William K. Butler, Jr.................... Class A -0- --
Common 89,586(9) *
Brian E. Stahl........................... Class A 740 *
Common 103,509(10) *
All executive officers and 2,482,576 64.83%
directors as a group................... Class A 3,837,626(11) 23.86%
(a total of 15 persons) Common
</TABLE>
- ---------------
* Less than 1%
(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
2
<PAGE> 5
should the outstanding shares of Class A Common Stock fall below 10% of the
aggregate outstanding shares of both classes.
(2) Includes currently exercisable options to purchase 200,000 shares of Common
Stock and 4,973 shares of Common Stock held by Mr. Loudermilk, Sr.'s
spouse.
(3) As reported by Gabelli Funds, Inc.
(4) Gabelli Funds, Inc. is not required to disclose its holdings of non-voting
Common Stock.
(5) As reported on Schedule 13G filed with the Securities and Exchange
Commission on December 31, 1999.
(6) Includes currently exercisable options to purchase 130,000 shares of Common
Stock, and 700 shares of Common Stock held by Mr. Danielson's spouse.
(7) Includes 1,500 shares of Class A Common Stock held by certain trusts for
the benefit of Mr. Loudermilk, Jr.'s children, of which Mr. Loudermilk, Jr.
serves as trustee.
(8) Includes currently exercisable options to purchase 60,000 shares of Common
Stock, 69,327 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 16,223 shares of Common Stock held by Mr. Loudermilk, Jr.'s
spouse.
(9) Includes currently exercisable options to purchase 80,000 shares of Common
Stock.
(10) Includes currently exercisable options to purchase 100,000 shares of Common
Stock.
(11) Includes currently exercisable options to purchase 612,000 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, 1999.
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 nine 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 a tenth or eleventh nominee for director, which will result
in two vacancies on the Board until the Board names additional nominees or
reduces the size of the Board to nine 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.... 72 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..... 40 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......... 53 Mr. Danielson has served as Vice President, Finance 1990
and Chief Financial Officer and Director of the
Company since 1990. He was named Executive Vice
President in 1998.
Ronald W. Allen.............. 58 Mr. Allen has served as a Director of the Company
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 Airlines 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.
Leo Benatar+*................ 70 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, John's Manville Corporation and JPS
Packaging. He previously served as Chairman of the
Federal Reserve Bank of Atlanta.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR PAST DIRECTOR
NAME AGE FIVE YEARS AND OTHER DIRECTORSHIPS SINCE
---- --- ---------------------------------- --------
<S> <C> <C> <C>
Earl Dolive+................. 82 Mr. Dolive has served as a Director of the Company 1977
since 1977. He currently serves as a Director of
Pameco Corp. and Greenway Medical Technologies, Inc.,
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................. 50 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*....... 54 Ms. Jones has served as a Director of the Company
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+............. 73 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.
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 1999. All of the incumbent directors
attended at least 75% of the meetings of the Board and committees on which they
served.
The Board has a standing Audit Committee which is composed of Messrs.
Benatar, Dolive and Ross. 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 1999.
5
<PAGE> 8
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 four meetings
during 1999.
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
APPROVAL OF THE ADOPTION OF AN AMENDMENT TO
THE COMPANY'S ARTICLES OF INCORPORATION
TO PROVIDE A CONVERSION RIGHT TO
THE HOLDERS OF CLASS A COMMON STOCK
(ITEM 2)
The Board of Directors of the Company has approved and is submitting for
shareholder approval an amendment to the Company's Articles of Incorporation to
provide that each record holder of shares of Class A Common Stock may, at the
holder's option, convert any or all of such shares into an equal number of
shares of Common Stock (the "Conversion Amendment"). The text of the Conversion
Amendment is attached as Exhibit A to this Proxy Statement. The foregoing
summary of the proposed Conversion Amendment should be read in conjunction with,
and is qualified in its entirety by reference to, the full text of the
Conversion Amendment set forth in Exhibit A.
PURPOSE OF THE CONVERSION AMENDMENT
The purpose of the Conversion Amendment is to improve the liquidity of the
Company's Class A Common Stock. Under the Company's Articles of Incorporation,
the holders of the Class A Common Stock are generally entitled to the same
rights and preferences as the holders of the Common Stock, except that the Class
A Common Stock has one vote per share and the Common Stock generally has no
voting rights. Both classes of common stock are registered under the Securities
Act of 1934, as amended, and are publicly traded on the New York Stock Exchange.
Since the recapitalization of the Company's original class of common stock
into Common Stock and Class A Common Stock in 1992, the Company has through
public offerings, stock dividends and employee stock options, issued
significantly more shares of Common Stock than Class A Common Stock. This has
resulted in a disproportionate increase in the market liquidity for the Common
Stock. As of the record date, there were 3,829,506 shares of Class A Common
Stock and 15,962,041 shares of Common Stock outstanding. During the four weeks
preceding the record date, the average weekly trading volume of the Class A
Common Stock was 4,225 shares per week, as compared to 216,275 shares per week
for the Common Stock. The Class A Common Stock has traded over the years at both
a disproportionate premium and discount to the Common Stock, primarily the
result of its low liquidity. The Board of Directors of the Company has
determined that the conversion right should increase the liquidity of all of the
shares of common stock without adversely affecting either class.
If the Conversion Amendment is approved by the shareholders at the Annual
Meeting, holders of the Class A Common Stock will be able to convert any or all
of their shares of Class A Common Stock into an equal number of shares of Common
Stock by surrendering the certificates for such shares together with written
notice of such conversion in proper form to the Company. Upon conversion of
shares of Class A Common Stock into Common Stock, the converted shares will no
longer be entitled generally to vote, and the Common Stock received upon such
conversion will not be entitled to convert back into voting Class A Common Stock
shares.
FEDERAL INCOME TAX CONSEQUENCES
The Company's shareholders will not recognize gain or loss upon the
effectiveness of the Conversion Amendment for Federal income tax purposes.
Shareholders should consult their own tax advisors concerning any state, local
or foreign tax consequences of the Conversion Amendment.
VOTE REQUIRED; BOARD RECOMMENDATION
Approval of the Conversion Amendment requires the affirmative vote of
holders of a majority of the shares of Class A Common Stock outstanding as of
the Record Date. The holders of the shares of Common Stock are not entitled to
vote on this matter.
The Board of Directors of the Company recommends a vote "FOR" the adoption
of the Conversion Amendment.
7
<PAGE> 10
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 15, 2000. 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.(72)............... Chairman of the Board of Directors and Chief
Executive Officer of the Company.*
Robert C. Loudermilk, Jr.(40)................ President and Chief Operating Officer of the
Company.*
Gilbert L. Danielson(53)..................... Executive Vice President and Chief Financial
Officer of the Company.*
James L. Cates(49)........................... Mr. Cates has served as Director of Risk
Management since 1990, Vice President since 1994
and Secretary of the Company since 1999.
William K. Butler, Jr.(47)................... 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(43)........................... Mr. Stahl joined the Company in 1981 as an
Assistant Store Manager. He served as Regional
Vice President of the Northeastern Region of the
Rent-to-Rent Division from 1990 to 1995 and
currently is President of that division.
David M. Rhodus(51).......................... Mr. Rhodus has served as Vice President, Legal
since 1999. He was a senior attorney for Alumax,
Inc., an aluminum products manufacturing company,
from 1998 to 1999 and Vice President and General
Counsel for Atlantax Systems, Inc., a business tax
services company, from 1993 to 1998.
B. Lee Landers(41)........................... Mr. Landers has served as Vice President, Chief
Information Officer since 1999. From 1981, he held
various engineering and technology management
positions with the Southern Company.
Robert P. Sinclair, Jr.(38).................. Mr. Sinclair has served as Controller of the
Company since 1990, Chief Financial Officer of the
Aaron's Rental Purchase Division from 1995 to 1999
and Vice President, Corporate Controller since
1999.
</TABLE>
- ---------------
* Messrs. Loudermilk, Sr., Loudermilk, Jr., and Danielson are directors of the
Company. For additional information concerning those individuals, see ELECTION
OF DIRECTORS (Item 1) above.
8
<PAGE> 11
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
----------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------------------------- UNDERLYING
YEAR OTHER ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION ENDED SALARY BONUS COMPENSATION(1) (#) COMPENSATION
- --------------------------- ------ -------- -------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr....... 1999 $454,000 $391,826 -- -0- $92,172(2)
Chairman and Chief 1998 454,000 355,527 -- -0- 82,975(3)
Executive Officer 1997 454,000 305,430 -- 45,000 77,837(4)
Robert C. Loudermilk, Jr........ 1999 205,000 -0- -- 10,000 2,719(5)
President and Chief 1998 200,000 -0- -- -0- 2,107(5)
Operating Officer 1997 155,000 -0- -- 10,000 2,018(5)
Gilbert L. Danielson............ 1999 235,000 25,000 -- 54,000 2,665(5)
Executive Vice President and 1998 230,000 -0- -- -0- 2,001(5)
Chief Financial Officer 1997 187,500 -0- -- 10,000 2,438(5)
William K. Butler, Jr........... 1999 210,000 50,000 -- 20,000 3,472(5)
President, Rental 1998 200,000 -0- -- -0- 2,200(5)
Purchase Division 1997 169,125 -0- -- 10,000 1,909(5)
Brian E. Stahl.................. 1999 200,000 -0- -- 6,000 2,500(5)
President, Rent-to-Rent 1998 200,000 -0- -- -0- 1,875(5)
Division 1997 169,125 -0- -- 10,000 2,200(5)
</TABLE>
- ---------------
(1) Excludes perquisites that do not exceed the lesser of $50,000 or 10% of the
executive's salary and bonus.
(2) Includes a matching contribution of $2,656 made by the Company to the
executive's account in the Company's 401(k) plan and $89,516 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.
(3) Includes a matching contribution of $2,000 made by the Company to the
executive's account in the Company's 401(k) plan and $80,975 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 $4,622 made by the Company to the
executive's account in the Company's 401(k) plan 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.
(5) Represents a matching contribution made by the Company to the executive's
account in the Company's 401(k) plan.
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
9
<PAGE> 12
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 set forth in the
Internal Revenue Code.
SALARY AND BONUS. The Chairman and Chief Executive Officer makes
recommendations annually to the Board of Directors regarding the base salary,
for the Company's executive officers, including the Chief Executive Officer, and
the bonus plan for 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, 1999,
which represented no change in his salary from the fiscal year ended December
31, 1998. At its February 1999 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,
1999 (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, 1998,
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 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
230,250 shares of Common Stock were awarded to officers and employees during the
fiscal year ended December 31, 1999. Options granted to the Chief Executive
Officer and the other Named Executive Officers during the fiscal year ended
December 31, 1999 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
Robert C. Loudermilk, Jr.
Ronald W. Allen
Leo Benatar
Earl Dolive
J. Rex Fuqua
Ingrid Saunders Jones
M. Collier Ross
10
<PAGE> 13
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) the Russell 2000 Index, (ii) the Dow Jones Retailers-All Specialty
Index, (iii) the S&P SmallCap 600 Index, and (iv) a group of publicly-traded
rental purchase, rent-to-rent and credit furniture retailer companies (the "Peer
Group"). In 1999 the Company became part of the S&P SmallCap 600 Index and has
elected to use this index to replace the Russell 2000 Index. The Company also
feels a Peer Group consisting of companies in the rental purchase, rent-to-rent,
and credit furniture retailer industries would be more representative than the
Dow Jones Retailers-All Specialty Index. For 1999 the Peer Group consisted of
Rent-A-Center Inc., Rent-Way, Inc., CORT Business Services Corporation, Globe
Business Resources, Inc., and Heilig-Meyers Company Although the Company in
future years will no longer use the Dow Jones Retailers-All Specialty or Russell
2000 indices, the Company is required by SEC rules to show the prior indices for
one year for comparison purposes.
<TABLE>
<CAPTION>
AARON RENTS, INC. RUSSELL 2000 INDEX DOW JONES PEER GROUP
----------------- ------------------ RETAILERS-ALL S & P SMALLCAP ----------
SPECIALTY 600 INDEX
------------- --------------
<S> <C> <C> <C> <C> <C>
3/95 100 100 100 100 100
12/95 132 122 103 124 101
12/96 174 148 124 151 99
12/97 285 195 185 189 118
12/98 223 182 312 194 107
12/99 262 180 347 218 69
</TABLE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Messrs. Loudermilk, Sr., Loudermilk, Jr., Danielson, Butler and Stahl, 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 regular Board meeting attended
during the fiscal year ended December 31, 1999, and Audit Committee members
received fees of $500 for each Audit Committee meeting
11
<PAGE> 14
attended. Each outside director also was paid a quarterly retainer of $2,000.
Directors who are employees of the Company receive no compensation for
attendance at Board or committee meetings.
OPTION GRANTS
The following table lists Company grants of stock options made by the
Company during the last fiscal year to the Company's Chief Executive Officer and
the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------- PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($) VALUE ($)
---- ----------- ------------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr....... -0- -0- -0- n/a $ -0- $ -0- $ -0-
Robert C. Loudermilk, Jr........ 10,000 4.34% $13.125 02/02/2009 213,792 340,429 131,250
Gilbert L. Danielson............ 54,000 23.45% 13.125 02/02/2009 1,154,479 1,838,315 708,750
William K. Butler, Jr........... 10,000 4.34% 13.125 02/02/2009 213,792 340,429 131,250
William K. Butler, Jr........... 10,000 4.34% 18.250 11/22/2009 297,273 340,429 182,500
Brian E. Stahl.................. 6,000 2.61% 13.125 02/02/2009 128,275 204,257 78,750
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows for the Company's Chief Executive Officer and the
Named Executive Officers information with respect to the exercise of options
during the fiscal year ended December 31, 1999, the number of shares covered by
both exercisable and non-exercisable stock options as of December 31, 1999, and
the values of "in-the-money" options, based on the positive spread between the
exercise price of any such existing stock options and the year-end price of the
Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SHARES DECEMBER 31, 1999 IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE (NO. OF SHARES) AT DECEMBER 31, 1999(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME CLASS (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr...... Common -0- $ -0- 200,000 45,000 $1,575,000 $ 81,562
Robert C. Loudermilk, Jr....... Common -0- -0- 60,000 20,000 472,500 64,375
Gilbert L. Danielson........... Common 54,000 626,875 130,000 64,000 1,111,875 267,875
William K. Butler, Jr.......... Common 10,000 108,260 80,000 30,000 688,750 59,375
Brian E. Stahl................. Common 16,000 166,508 100,000 16,000 905,000 45,875
</TABLE>
- ---------------
(1) Aggregate market value (based on a December 31, 1999 closing stock price of
$17.75 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
12
<PAGE> 15
Company or its subsidiaries during the last fiscal year or prior thereto: R.
Charles Loudermilk, Sr., Robert C. Loudermilk, Jr. and Gilbert L. Danielson.
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 ten-year lease expiring May 31, 2008 at a basic monthly
rental of $17,726, subject to escalation at the end of five years based on the
consumer price index, but not to exceed 25%. All insurance, taxes, assessments
and other charges related to the property are paid by the Company as additional
rent under the lease. The Company believes that these lease terms 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, 1999 represented $1,169,675, 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, 1999
totaled $195,050.
AUDIT MATTERS
Ernst & Young LLP served as auditors of the Company for the fiscal year
ended December 31, 1999. 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 2001 ANNUAL MEETING
In accordance with the provisions of Rule 14a-8(e)(2) of the Securities and
Exchange Commission, proposals of shareholders intended to be presented at the
Company's 2001 annual meeting must be received by December 6, 2000 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,
EXECUTIVE VICE PRESIDENT 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
James L. Cates
Vice President, Risk Management and
Secretary
April 4, 2000
13
<PAGE> 16
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION
TO PROVIDE A CONVERSION RIGHT TO
THE HOLDERS OF CLASS A COMMON STOCK
That Section 1, clause (c) of the Articles of Incorporation be, and the
same hereby is, amended by adding a new subparagraph (4) to read as follows:
"(4) So long as such conversion would not cause the number of outstanding
shares of Class A Common Stock as reflected on the stock transfer records of the
Corporation to fall below 10% of the aggregate number of outstanding shares of
Class A Common Stock and Common Stock, each record holder of shares of Class A
Common Stock may convert any or all of such shares into an equal number of
shares of Common Stock by surrendering the certificates for such shares,
properly endorsed and accompanied by payment of documentary, stamp or similar
issue or transfer taxes, if any, along with a written notice by such record
holder to the Corporation stating that such record holder desires to convert
such shares into the same number of shares of Common Stock and requesting that
the Corporation issue all of such Common Stock to the persons named therein,
setting forth the number of shares of Common Stock to be issued to each such
person and the denominations in which the certificates therefor are to be
issued."
A-1
<PAGE> 17
AARON RENTS, INC.
<PAGE> 18
AARON RENTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 2, 2000
CLASS A COMMON STOCK PROXY
The undersigned shareholder of Aaron Rents, Inc. hereby constitutes and
appoints R. Charles Loudermilk, Sr. and James L. Cates, 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 2nd day of May, 2000, 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, 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 approval of an Amendment to the Company's Articles of
Incorporation permitting the conversion of Class A Common Stock
into Common Stock.
(3) [ ] 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 A VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION, 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 4, 2000 and the Proxy Statement furnished therewith.
Dated and signed:
-------------------------------------------------------------------,
2000
------------------------------
------------------------------
(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.
