<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 [ ]
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>
SHURGARD STORAGE CENTERS, 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
[SHURGARD LOGO]
March 31, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Shurgard Storage Centers, Inc. at 2:00 p.m. on Tuesday, May 12,
1998, at the Sheraton Seattle Hotel, Metropolitan Room, 1400 Sixth Avenue,
Seattle, Washington.
The Notice of Annual Meeting of Stockholders and the Proxy Statement
that follow provide details of the business to be conducted at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, we hope that you
will have your stock represented by completing, signing, dating and returning
your proxy card in the enclosed envelope as soon as possible. Your stock will be
voted in accordance with the instructions you have given in your proxy.
Sincerely,
Charles K. Barbo
Chairman, President and
Chief Executive Officer
IMPORTANT
A proxy card is enclosed. All stockholders are urged to complete and mail the
proxy card promptly. The enclosed envelope for return of the proxy card requires
no postage. Any stockholder attending the Annual Meeting may personally vote on
all matters that are considered in which event the signed proxy will be revoked.
<PAGE> 3
SHURGARD STORAGE CENTERS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
To the Stockholders:
The 1998 Annual Meeting of Stockholders of Shurgard Storage Centers,
Inc. will be held at the Sheraton Seattle Hotel, Metropolitan Room, 1400 Sixth
Avenue, Seattle, Washington on Tuesday, May 12, 1998, at 2:00 p.m. for the
following purposes:
1. To elect three directors to the Company's Board of Directors;
2. To approve amendments to the Amended and Restated Stock
Incentive Plan for Nonemployee Directors; and
3. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
The record date for the Annual Meeting is March 17, 1998. Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting. The list of stockholders entitled
to vote at the meeting will be available at the Company's office at 1201 Third
Avenue, Suite 2200, Seattle, Washington for the ten days immediately prior to
the meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
EVEN IF YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION.
STOCKHOLDERS ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE
PREVIOUSLY RETURNED A PROXY.
By Order of the Board of Directors,
Kristin H. Stred
Secretary
Seattle, Washington
March 31, 1998
<PAGE> 4
SHURGARD STORAGE CENTERS, INC.
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
GENERAL
The enclosed proxy is solicited by the Board of Directors of Shurgard
Storage Centers, Inc. (the "Company") for use at the 1998 Annual Meeting of
Stockholders to be held at 2:00 p.m. on Tuesday, May 12, 1998 at the Sheraton
Seattle Hotel, Metropolitan Room, 1400 Sixth Avenue, Seattle, Washington and at
any postponement or adjournment thereof (the "1998 Annual Meeting"). Only
holders of record of the Company's Class A Common Stock and Class B Common Stock
(collectively, the "Common Stock") at the close of business on March 17, 1998
will be entitled to vote at the 1998 Annual Meeting. On that date, the Company
had 28,480,682 shares of Class A Common Stock and 154,604 shares of Class B
Common Stock outstanding. Each share of Common Stock outstanding on the record
date is entitled to one vote.
The Company began operations on March 1, 1994 through the consolidation
(the "Consolidation") of 17 publicly held limited partnerships that had been
sponsored by Shurgard Incorporated (the "Management Company"). Following the
Consolidation, the Management Company managed the Company's business affairs and
properties. On March 24, 1995, the Management Company was merged with the
Company (the "Merger"), as a result of which the Company became self-managed and
self-administered. Certain information in this Proxy Statement refers to the
Consolidation, the Merger and the Management Company.
The address of the Company's principal executive offices is 1201 Third
Avenue, Suite 2200, Seattle, Washington 98101. This Proxy Statement and the
accompanying proxy card are being mailed to the Company's stockholders on or
about March 31, 1998.
QUORUM
A quorum for the Annual Meeting shall consist of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the 1998
Annual Meeting, present in person or by proxy.
VOTING
Shares of Common Stock for which proxies are properly executed and
returned will be voted at the 1998 Annual Meeting in accordance with the
directions noted thereon or, in the absence of directions, will be voted "FOR"
the election of the nominees for the Board of Directors named herein, provided
that if any of the nominees should become unavailable for election for any
reason, such shares will be voted for the election of such substitute nominee as
the Board of Directors may propose, and "FOR" the amendments to the Amended and
Restated Stock Incentive Plan for Nonemployee Directors (the "Nonemployee
Directors Plan"). The nominees for election to the Board of Directors who
receive the greatest number of votes cast for the election of directors by the
shares present in person or represented by proxy, and entitled to vote, will be
elected as directors. Abstention from voting on the election of directors will
have no impact on the outcome of this proposal since no vote has been cast in
favor of any nominee. The proposal to approve the amendments to the Nonemployee
Directors Plan will be approved if the number of votes cast in favor of the
proposal exceeds the number of votes cast against the proposal. Abstentions from
voting on this proposal will have no impact on the outcome of this proposal
since no vote has been cast for or against it. There can be no broker nonvotes
on either the election of directors or the proposal to approve the amendments to
the Nonemployee Directors Plan since brokers who hold shares for the accounts of
their clients have discretionary authority to vote such shares with respect to
both of these matters.
-2-
<PAGE> 5
REVOCATION
Any stockholder giving a proxy may revoke it at any time before it is
voted by delivering to the Company's Secretary a written notice of revocation or
a duly executed proxy bearing a later date, or by attending the 1998 Annual
Meeting and voting in person.
ELECTION OF DIRECTORS AND DIRECTOR INFORMATION
The Board of Directors is divided into three classes. Each class is
elected for a three-year term and directors in the other classes remain in
office until their respective three-year terms expire. The Company's Board of
Directors presently consists of six members, with two members each in Class 1,
Class 2 and Class 3. Mr. Barbo has served as director of the Company since 1995
and Mr. Hutchinson and Mr. Raymond Johnson have served since 1997. Their terms
as directors will conclude at the 1998 Annual Meeting, unless they are elected
to another term. Mr. Raymond Johnson is being nominated for a two-year term
instead of a three-year term because he was originally appointed to the Board of
Directors to fill a vacancy in a Class 2 director position.
INFORMATION ABOUT THE DIRECTORS NOMINATED FOR ELECTION
TERMS EXPIRE IN 2001 (CLASS 1)
Charles K. Barbo (age 56) has been involved as a principal in the real
estate investment industry since 1969. Mr. Barbo is one of the co-founders of
the Management Company, which was organized in 1972 to provide property
management services for self storage facilities and other real estate and
commercial ventures. Prior to the Merger, he served as Chairman of the Board and
President of the Management Company. Upon the closing of the Merger, he was
named Chairman of the Board, President and Chief Executive Officer of the
Company. Mr. Barbo is a graduate of the Owner/President Management Program of
Harvard Business School and has a Bachelor of Arts degree in history from the
University of Washington. He is an alumnus of the Young Presidents'
Organization. Mr. Barbo is a director of Matthew G. Norton Co., Northwest
Building Corp., Asia-Europe-America's Bank and Homegrocers.com, all of which are
privately held.
George P. Hutchinson (age 59) has served as a director of the Company
since his appointment in December, 1997. Mr. Hutchinson has been involved in the
securities brokerage and international investment banking industries for over 25
years. From 1970 to 1990, he was with Salomon Brothers in New York, London, Hong
Kong, Tokyo, and Zurich. Since 1990, he has been President of G.P. Hutchinson &
Co., in Seattle, which he established to provide investment banking services to
regional companies. Mr. Hutchinson has a Bachelor of Arts degree from the
University of Washington, and a Master of Business Administration degree from
Columbia University. He is a director of Coffee Station, Inc., Chairman of
Northwest Biotherapeutics, LLC, and a trustee of numerous community and
nonprofit organizations.
TERM EXPIRES IN 1999 (CLASS 2)
Raymond A. Johnson (age 56) has served as a director of the Company
since his appointment in September, 1997. He retired from Nordstrom, Inc. as its
Co-chairman and a member of its Board of Directors in 1996. Prior to that, he
was Nordstrom, Inc.'s Co-president, as well as holding a variety of executive
and managerial positions at Nordstrom, Inc. in Washington and California,
stretching back to 1969. He attended Western Washington University.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL THREE
NOMINEES FOR DIRECTOR.
-3-
<PAGE> 6
INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL
MEETING
TERM EXPIRES IN 1999 (CLASS 2)
Howard J. Johnson (age 59) has served as a director of the Company since
May, 1996. Since 1965, he has been the Chairman, President and Chief Executive
Officer of Howard Johnson & Company, an independent consulting and actuarial
firm specializing in employee benefits and compensation. He has been Chairman of
Howard Johnson & Company (UK) Limited and Howard Johnson & Company (Europe)
Limited since 1994. Mr. Johnson attended the University of Washington. Mr.
Johnson is also a director of Smith Barney Fundamental Value Fund, Inc.
TERMS EXPIRE IN 2000 (CLASS 3)
Wendell J. Smith (age 65) has served as a director of the Company since
March, 1994. Mr. Smith is also currently a director of Franchise Finance
Corporation of America, PGA Tour Properties, and Chastain Capital Corporation.
He has previously served on the Western and National Advisory Boards for Federal
National Mortgage Association and the Advisory Board of the Center for Real
Estate Research at the University of California. He retired in 1991 from the
State of California Public Employees Retirement System ("Calpers") after 27
years of employment, the last 21 in charge of all real estate equities and
mortgage acquisitions for Calpers. During those 21 years, Calpers invested over
$8 billion in real estate and mortgages. In 1991, Mr. Smith established W.J.S. &
Associates, which provides advisory and consulting services for pension funds
and pension fund advisors.
Harrell L. Beck (age 41) has served as a director of the Company and as
its Chief Financial Officer and Treasurer since July, 1993. Prior to the closing
of the Merger, Mr. Beck also served as the Company's President. He was named
Senior Vice President of the Company upon the closing of the Merger. He joined
the Management Company in April, 1986 as the Eastern Regional Vice President
and, in 1990, became its Chief Financial Officer and in 1992, its Treasurer.
Prior to joining the Management Company, Mr. Beck was a manager with Touche Ross
& Co., where he was employed for approximately six years, during which time he
provided services primarily to clients in the real estate and aerospace
industries. Mr. Beck has a Bachelor of Arts degree in Business Administration
from Washington State University and is a member of the American Institute of
Certified Public Accountants.
Eight Board of Directors meetings were held in 1997. Each of the
directors attended over 87% of the meetings of the Board of Directors and
committees of which they were members.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established three standing committees of its Board of
Directors--an Audit Committee, a Compensation Committee, and a Nominating and
Organization Committee. Each of these committees is responsible to the full
Board of Directors and its activities are therefore subject to approval of the
Board of Directors. The functions performed by these committees are summarized
as follows:
Audit Committee. The Audit Committee recommends to the Board of
Directors the independent public accountants to be selected to audit the
Company's annual financial statements and approves any special assignments given
to such accountants. The Audit Committee also reviews the planned scope of the
annual audit and independent accountants' letter of comments and management's
responses thereto, major accounting changes made or contemplated and the
effectiveness and efficiency of the Company's internal accounting staff. The
members of the Audit Committee are George P. Hutchinson and W.J. Smith. The
Audit Committee met three times in 1997.
Compensation Committee. The Compensation Committee establishes the
remuneration levels for officers of the Company, reviews management organization
and development, reviews significant employee benefits programs and recommends
and administers executive compensation programs, including bonus plans, stock
option and other equity-based programs, deferred compensation plans and any
other cash or stock incentive programs. The members of the Compensation
Committee are Raymond A.
-4-
<PAGE> 7
Johnson (Chair), Howard J. Johnson, George P. Hutchinson and W.J. Smith. The
Compensation Committee met six times in 1997.
Nominating and Organization Committee. The Nominating and Organization
Committee makes recommendations to the Board of Directors on the size and
composition of the Board of Directors, nominees for directors and on the
organization of the Company, as well as performing other duties as may be
assigned by the Board. The committee will consider nominees recommended by
stockholders in accordance with the procedures governing such nominations set
forth in the Company's Bylaws. The members of the Nominating and Organization
Committee are Charles K. Barbo (Chair), Raymond A. Johnson, Howard J. Johnson,
W.J. Smith, George P. Hutchinson and Harrell L. Beck. The Nominating and
Organization Committee met twice in 1997.
DIRECTOR COMPENSATION
Fees. Directors who are employees of the Company do not receive any fees
for their services as directors. In 1997, Directors who were not employees of
the Company were paid an annual retainer of $15,000 for serving on the Board of
Directors, an additional fee of $1,000 for each meeting of the Board of
Directors attended and $500 for each meeting of a committee of the Board of
Directors attended. The Company reimburses each nonemployee director for travel
expenses incurred in connection with his activities on behalf of the Company.
The annual retainer has been increased to $17,000 for 1998 and the committee fee
has increased to $1,000 for each meeting attended.
Options. At the 1996 Annual Meeting, nonemployee directors also received
stock option grants to purchase 9,000 shares of Class A Common Stock under the
Company's Nonemployee Directors Plan. Such options will vest in 3,000 share
increments over a three-year period, with one increment vesting on the date of
the Company's Annual Meeting in each of 1997, 1998 and 1999, assuming each
director continues to serve until such Annual Meeting. The exercise price of the
options is $25.50 per share. There was no additional grant in 1997 for directors
who joined the Board in 1997. For additional information, please see the
proposal to amend the Amended and Restated Stock Incentive Plan for Nonemployee
Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission"). Officers, directors and greater than 10%
beneficial owners are required by Commission regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the 1997 fiscal
year all filing requirements applicable to its officers and directors were
complied with by such persons.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 3, 1998 certain information
with respect to the beneficial ownership of shares of Class A Common Stock and
Class B Common Stock by each director and executive officer of the Company and
all directors and executive officers of the Company as a group. It also sets
forth, as of March 3, 1998, certain information with respect to stockholders who
beneficially own more than 5% of the shares of Class A Common Stock or Class B
Common Stock. Except as otherwise noted, the Company believes that the
beneficial owners of the shares of Common Stock listed below, based on
information furnished by such owners, have sole voting and investment power with
respect to such shares.
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<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS
- ------------------------------- -------------------- -------------------- --------
<S> <C> <C> <C>
Charles K. Barbo Class A Common Stock 743,669(1) 2.6%
1201 Third Avenue, Suite 2200 Class B Common Stock 78,075(2) 50.5%
Seattle, WA 98101
Arthur W. Buerk Class A Common Stock 384,922 1.3%
1201 Third Avenue, Suite 2000 Class B Common Stock 76,529(2) 49.5%
Seattle, WA 98101
Michael Rowe Class A Common Stock 95,205(3) *
David K. Grant Class A Common Stock 68,677(4) *
Harrell L. Beck Class A Common Stock 36,406(5) *
Kristin H. Stred Class A Common Stock 16,656(6) *
Howard J. Johnson Class A Common Stock 3,000(7) *
Wendell J. Smith Class A Common Stock 10,017(8) *
George P. Hutchinson Class A Common Stock 4,700(9) *
Raymond A. Johnson Class A Common Stock 500 *
All directors and executive Class A Common Stock 978,830 3.4%
officers as a group (9 persons) Class B Common Stock 78,075 50.5%
</TABLE>
- ----------
* Less than 1%.
(1) Includes 4,460 shares held for Mr. Barbo's individual account under the
Company's Employee Retirement Savings Plan and Trust, 3,500 shares held by
trusts of which Mr. Barbo is a trustee, 2,500 shares over which Mr. Barbo's
wife has voting and investment power and 42,302 shares issuable on exercise
of stock options currently exercisable or exercisable within 60 days.
(2) Class B Common Stock entitled Mr. Barbo and Mr. Buerk each to a loan in an
amount necessary to satisfy his general partner capital obligations
resulting from the Consolidation. Class B Common Stock is convertible into
Class A Common Stock at a one-to-one ratio upon repayment of the loan. With
respect to Mr. Barbo, includes 1% of Class B Common Stock held by a
corporation wholly owned by Mr. Barbo.
(3) Includes 21,916 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days, 4,204 shares held for Mr. Rowe's
individual account under the Company's Employee Retirement Savings Plan and
Trust and 266 shares directly owned by Mr. Rowe's wife and children.
(4) Includes 12,246 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 3,402 shares held for Mr.
Grant's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(5) Includes 16,068 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 3,081 shares held for Mr.
Beck's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(6) Includes 12,258 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 498 shares held for Ms.
Stred's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(7) Includes 1,000 shares issuable on exercise of stock options currently
exercisible.
(8) Includes 9,000 shares issuable on exercise of stock options currently
exercisable.
(9) Includes 1,200 shares directly owned by Mr. Hutchinson's wife and children.
-6-
<PAGE> 9
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of all of the independent
nonemployee directors. The Committee is responsible for recommending to the
Board of Directors the compensation philosophy, for setting the Chief Executive
Officer's salary and bonus, and for administering the long term incentive plans
for all executives and key employees.
COMPENSATION PHILOSOPHY AND HISTORY
The Company's compensation system is structured to attract and retain
executives who are entrepreneurial and agree to be compensated, in significant
part, by creating value for stockholders. The Company believes that this
structure is advantageous to stockholders because the fixed costs of salaries
are minimized and executives' and stockholders' interests are aligned.
COMPENSATION POLICIES
For 1997, the Company's compensation policy reflected the continuation
of below-market base salaries, and incentivizing executives to earn total
compensation at or above median levels through the use of bonus and equity
incentives that are performance based.
Salaries. The Committee reviewed summary updates to data provided in
previous years by an independent Compensation Consultant, which original data
included six service industry indices covering hundreds of companies, the
National Association of Real Estate Investment Trusts (NAREIT) compensation
index and a review of proxies of 15 publicly traded REITs with 1993 assets of
between $141 million and $702 million. Some but not all of the companies
included in the NAREIT Equity REIT Index, included in the Cumulative Total
Return Table, were included in this data. These indices were not matched
geographically with the Company, but do cover some of the industries from which
the Company recruits employees, such as retail, fast food, restaurant, leisure
and hospitality. In 1995, compared to the average of this market data, salaries
for Company Executives were below the 25th percentile. For 1997, it was the
Committee's intention to move base salaries to at least the 35th percentile. For
future years, it is the committee's intention to move salaries to approximately
the 50th percentile.
The Compensation Committee reviewed and approved the salaries for the
CEO and each of the named executive officers. The Committee established Mr.
Barbo's annual salary at $200,000, after considering: a) Mr. Barbo's years of
experience in and knowledge of the self storage industry, b) his leadership in
infusing the entire Company with strong corporate values and a common mission
and c) the continued improvement of operating results from the Company's
properties.
Annual Incentive Bonus. The Company established target bonuses and
specific performance criteria for the Company's executive officers based on the
Company's funds from operations for 1997, except in the case of Mr. Grant, whose
performance criteria were established related to European developments and
budget-to-date actual performance. Based on the Company's performance of 100.9%
of its target, the bonus paid to Mr. Barbo for 1997 was $65,700, approximately
109% of the target amount established for him.
Long Term Equity Incentive. Long term equity compensation is the
linchpin of the Company's compensation policy of incentivizing entrepreneurial
interest in the creation of stockholder wealth. For 1997, executives in the
Company, other than Mr. Grant, were granted stock options at fair market value
on January 30, 1997. The options vest in three equal annual installments,
beginning on the first anniversary of the grant. Mr. Barbo was granted options
on 62,642 shares.
Generally, the number of stock options granted to an executive officer
increases in relation to the executive officer's level of responsibility in the
Company and his or her ability to directly impact the profitability of the
Company. The number of options previously granted and other stockholdings by the
named executive officers were not considered in making the awards.
-7-
<PAGE> 10
Policy with Respect to Section 162(m) Limitations. Section 162(m) of the
Internal Revenue Code (the "Code") limits the tax deduction available to public
companies for compensation paid to individual executive officers to $1 million
in any taxable year, unless certain performance, disclosure and shareholder
approval requirements are met. The compensation disclosed in this Proxy
Statement does not exceed the $1 million limit, and executive compensation for
1998 is also expected to qualify for deductibility. The Company's executive
compensation programs are designed to provide awards based on individual and
Company performance measures. To the extent there is no adverse effect on this
performance-related approach or on the Company's ability to provide competitive
compensation, it is the Committee's policy to minimize executive compensation
expense that is non-deductible by the company for tax purposes.
Respectfully submitted,
Raymond A. Johnson, Chair
Howard J. Johnson
W.J. Smith
George P. Hutchinson
STOCK PRICE PERFORMANCE
Set forth below are line graphs comparing the cumulative total return on
the Class A Common Stock during the period beginning on March 28, 1994, and
ending on December 31, 1997, the last day of the Company's 1997 fiscal year,
with the cumulative total return on the Standard & Poor's 500 Index and the
Equity REIT Index prepared by NAREIT. The comparison assumes $100 was invested
on March 28, 1994 and assumes reinvestment of dividends. The stock price
performance shown on the graphs is not necessarily indicative of future price
performance.
The first line graph assumes that the shares of Class A Common Stock
were bought at the Net Asset Value per share of $18.90 contemplated in the
Consolidation. The "Net Asset Value" was the value of the assets, determined by
independent appraisal, less the liabilities (including transaction costs and
liabilities) of the 17 limited partnerships participating in the Consolidation.
Because this was the economic basis for the Consolidation, the Company believes
that this represents the most appropriate starting point for a line graph
comparison. The second line graph assumes that the shares of Class A Common
Stock were bought at the initial trading price on March 28, 1994, the first day
that the Class A Common Stock was publicly traded. On that day, the stock
initially traded at $23.25 per share.
-8-
<PAGE> 11
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHURGARD STORAGE CENTERS, INC.,
STANDARD & POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON THE INITIAL NET ASSET VALUE)
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHURGARD STORAGE CENTERS, INC.,
STANDARD & POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON THE INITIAL TRADING PRICE)
[GRAPH]
<TABLE>
<CAPTION>
DATE [email protected] [email protected] S&P 500 NAREIT-EQUITY
-------- ---------- ---------- ------- -------------
<S> <C> <C> <C> <C>
3/31/94 100 100 100 100
12/30/94 115.22 93.66 105.3 100.15
12/31/95 163.75 133.11 144.83 113.83
12/31/96 190.99 155.25 178.06 141.93
12/31/97 197.51 160.55 237.45 161.09
</TABLE>
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<PAGE> 12
COMPENSATION OF EXECUTIVES
The following table sets forth the compensation for services rendered
during the fiscal years ended December 31, 1997, 1996, and 1995 for the
Company's Chief Executive Officer and for the four other most highly compensated
executive officers of the Company. Although certain of the individuals named
below served as directors or officers of the Company prior to the Merger, they
did not receive any cash compensation for such services from the Company but
instead were compensated by the Management Company. Accordingly, all dollar
amounts shown prior to March 24, 1995 were paid by the Management Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- -------------------------------
SHARES
UNDERLYING
OPTIONS/ ALL OTHER
STOCK OPTION LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS(#) PAYOUTS (2) ($)
- -------------------------------- ---- --------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 1997 200,000 65,700 62,642 5,337(3)
Chairman, President and Chief 1996 190,000 42,200 5,137 5,731
Executive Officer 1995 160,000 35,000 30,000 $250,000 375
Michael Rowe 1997 170,000 49,275 28,474 19,628(3)
Executive Vice President and 1996 140,000 33,760 2,740 19,931
Chief Operating Officer 1995 107,000 35,000 15,000 $177,300 11,337
David K. Grant 1997 140,000 16,000 0 112,897(4)
Executive Vice President and 1996 151,460 30,000 2,740 78,674
Managing Director of European 1995 107,000 30,000 15,000 $141,840 9,592
Operations
Harrell L. Beck 1997 115,000 38,325 13,667 7,279(3)
Director, Senior Vice President, 1996 105,000 25,320 1,370 7,554
Chief Financial Officer, 1995 84,000 25,000 15,000 $141,840 1,516
Principal Accounting Officer
and Treasurer
Kristin H. Stred 1997 115,000 38,325 13,667 6,801(3)
Senior Vice President, General 1996 105,000 25,320 1,370 7,095
Counsel and Secretary 1995 84,000 25,000 15,000 $ 88,650 3,978
</TABLE>
- ----------
(1) Includes bonus awards earned pursuant to the terms of incentive
compensation, discretionary bonus and profit-sharing arrangements.
(2) Immediately prior to the Merger, the Management Company made distributions
of Management Company Common Stock to certain of its executive officers
and employees under a long-term incentive plan (except with respect to Mr.
Barbo, whose distribution under the plan was made in cash instead of
Management Company Common Stock). The amounts shown in this column
represent the value of the Class A Common Stock into which such Management
Company shares were converted in the Merger, based on the market price of
the Class A Common Stock at the time of the Merger (with respect to Mr.
Barbo, the amount shown in the column is the amount of cash paid to him
under the plan).
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<PAGE> 13
(3) For the year ended December 31, 1997, with respect to Mr. Barbo, Mr. Rowe,
Mr. Beck and Ms. Stred, includes: $4,837, $4,837, $4,192 and $4,215,
respectively, contributed by the Company under its Employee Retirement
Savings Plan (ESOP); employer-matching contributions made by the Company
under its Employee Retirement Savings Plan (401(k)) of $500 per person;
with respect to Mr. Rowe includes $10,920 relating to interests in cash
distributions from investments in certain partnerships, and, with respect
to Mr. Rowe, Mr. Beck and Ms. Stred, includes payments of $3,371, $2,587
and $2,086, respectively, paid annually towards insurance premiums on an
executive disability plan.
(4) For the year ended December 31, 1997, with respect to Mr. Grant, includes:
employer-matching contributions made by the Company under its 401(k) plan
of $500, $4,837 contributed by the Company under its ESOP and $10,560
relating to interests in cash distributions from investments in certain
partnerships. Other compensation amounts relating to Mr. Grant's
relocation in connection with the Company's European joint venture
include: $24,000 housing adjustment expense, $45,000 educational expense
allowance, and $28,000 cost of living adjustment expense.
LONG-TERM INCENTIVE PLANS - PERFORMANCE AWARDS IN LAST FISCAL YEAR
The following table sets forth certain information regarding long-term
cash performance awards to the Company's executive officers during the fiscal
year ended December 31, 1997.
<TABLE>
<CAPTION>
PERFORMANCE OR OTHER
PERIOD UNTIL MINIMUM MAXIMUM
NAME MATURATION ($) ($)
- ---------------------- --------------------- ------- -------
<S> <C> <C> <C>
Charles K. Barbo(1) 3 years 0 275,000
Michael Rowe(1) 3 years 0 125,000
Harrell L. Beck(1) 3 years 0 60,000
Kristin H. Stred(1) 3 years 0 60,000
- ----------
</TABLE>
(1) Payout amount, if any, for Mr. Barbo, Mr. Rowe, Mr. Beck and Ms. Stred,
will be based on achievement of specified financial performance goals
during the three year period ending December 31, 1999. Such performance
goals are based on FFO per share, among other factors.
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<PAGE> 14
OPTION GRANTS
The following table sets forth certain information regarding options to
purchase shares of Class A Common Stock granted to the Company's executive
officers during the fiscal year ended December 31, 1997.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------- ------------- ------------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 62,642 24.66% $28.25 1/30/2007 $ 1,112,915 $ 2,820,345
Michael Rowe 28,474 11.21 28.25 1/30/2007 505,877 1,281,991
Harrell L. Beck 13,667 5.38 28.25 1/30/2007 242,812 615,332
Kristin H. Stred 13,667 5.38 28.25 1/30/2007 242,812 615,332
All Stockholders N/A N/A N/A N/A 518,538,055 1,314,077,241
</TABLE>
- -----------
(1) Options were granted at the fair market value on the date of grant. Each
option vests in annual installments of 33.33% commencing on the first
anniversary of the date of grant. In the event of certain business
combinations, the vesting of outstanding options will be accelerated. See
"Executive Compensation-Employment Agreements; Change-in-Control
Arrangements."
(2) The actual value, if any, the named executive officer or any other
individual may realize will depend on the excess of the stock price over
the exercise price on the date the option is exercised. The gain for "All
Stockholders" is calculated by using ($29.00) the closing price per share
of Class A Common Stock as reported by the New York Stock Exchange on
December 31, 1997, and 28,431,826 shares, the number of shares of Class A
Common Stock outstanding as of the Company's fiscal year-end. There can be
no assurance that the actual value per share realized by the named
executive officer or by all stockholders will approximate the potential
realizable values set forth in the table.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding options
exercised during the fiscal year ended December 31, 1997, and options held as of
December 31, 1997 by each of the Company's executive officers.
OPTION EXERCISES AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)(2)
EXERCISE REALIZED --------------------------- -------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo(3) -- -- 13,711 84,068 $ 108,314 $ 214,140
Michael Rowe -- -- 8,112 40,102 66,588 113,637
David K. Grant -- -- 8,112 11,628 66,474 92,053
Harrell L. Beck -- -- 7,656 24,381 64,104 97,556
Kristin H. Stred 300 2,630 4,156 24,381 34,304 97,556
</TABLE>
- ------------
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<PAGE> 15
(1) This amount is the aggregate number of outstanding options multiplied by
the difference between $29.00 (the closing price of Class A Common Stock
on December 31, 1997) and the exercise price of such options.
(2) This amount includes dividend equivalents of $3.32/share as of December
31, 1997, payable to the option holder upon exercise of the following
total number of exercisable stock options: Mr. Barbo, 1,711; Mr. Rowe,
912; Mr. Grant, 912; Mr. Beck, 456; Ms. Stred, 456. The following total
number of unexercisable stock options carry a dividend equivalent: Mr.
Barbo, 3,426; Mr. Rowe, 1,828; Mr. Grant, 1,828; Mr. Beck, 914 and Ms.
Stred, 914.
(3) 30,000 stock option shares held by Mr. Barbo include a bonus of $2.25 per
share, payable in cash upon exercise. Such bonus amount is included in the
value of the options at fiscal year end.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOAN RELATING TO CLASS B COMMON STOCK
On March 1, 1994, as a part of the Consolidation, the Company made a
$1,981,000 interest-free loan to Mr. Barbo to enable him to make certain capital
contributions that were required in connection with the Consolidation. Mr.
Barbo's shares of Class B Common Stock have been pledged as collateral for the
loan. Upon repayment of the loan, a percentage of the Class B Common Stock equal
to the percentage of the loan principal being repaid will be released from the
pledge and Mr. Barbo will then have the option to convert his Class B Common
Stock, on a share-for-share basis, into Class A Common Stock. As of December 31,
1997, the entire principal amount of the loan remained outstanding.
SHURGARD STORAGE TO GO, INC.
To date, Shurgard Storage Centers, Inc. has invested approximately
$4,200,000 in Shurgard Storage To Go, Inc., a Washington corporation ("Shurgard
To Go") whose business is to provide services ancillary to self storage,
including but not limited to containerized storage services involving picking up
and delivering customer goods to storage. The following officers of the Company
have invested the following amounts in Shurgard Storage To Go, Inc.: Charles K.
Barbo, $51,250; Michael Rowe, $38,750; Harrell L. Beck, $9,375; Kristin H.
Stred, $14,375. These four officers currently own an aggregate of 41% of
Shurgard To Go's outstanding shares of voting, Series A Common Stock. The
majority of the remaining voting shares are owned by other individuals who are
key employees of the Company. The Company currently owns 78% of Shurgard To Go's
outstanding shares of non-voting, Series B Common Stock. The Company and Mr.
Barbo have each entered into an agreement with an unaffiliated third party
pursuant to which they have the right and may have an obligation to acquire,
over the next three years, additional shares of Series A Common Stock and Series
B Common Stock, respectively.
INTERMATION, INC.
Charles K. Barbo and Michael Rowe are directors of InterMation, Inc.
("Intermation") and Mr. Barbo is the beneficial owner of 29.6% of the
outstanding common stock of InterMation. The Company leased a facility to
InterMation at a monthly rental of approximately $24,200. The aggregate amount
paid to the Company under this lease in the year ended December 31, 1997 was
$281,300. Under the lease, either party had the right to terminate it on 18
months' notice. On September 11, 1996, InterMation gave the Company notice that
it intended to terminate the lease, effective March 31, 1998.
EMPLOYMENT AGREEMENTS; CHANGE-IN CONTROL ARRANGEMENTS
1993 Stock Option Plan. The 1993 Stock Option Plan provides that, upon
the occurrence of certain transactions, including certain mergers and other
business combinations involving the Company, outstanding options will become
fully exercisable. Such options, if not exercised, will terminate upon
consummation of such transactions. In the alternative, at the discretion of the
Company and the corporation(s) participating in such transactions, such options
may be assumed by the acquiring or surviving corporation.
1995 Long-Term Incentive Plan. In the event of certain mergers or
consolidations involving the Company, a sale, lease, exchange, or other transfer
of all or substantially all of the Company's assets, or a
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<PAGE> 16
liquidation or dissolution of the Company, outstanding options, stock
appreciation rights and restricted stock under the 1995 Incentive Plan will
become fully exercisable, subject to certain exceptions. In addition, the
Compensation Committee may take such further action as it deems necessary or
advisable, and fair to participants, with respect to outstanding awards under
the 1995 Incentive Plan.
Business Combination Agreements. In 1996, the Company entered into an
agreement with each of its officers that provides for payments in the event that
the employee's employment is terminated by the Company other than for cause or
by the employee for good reason within two years after certain business
combination transactions, including but not limited to changes of control. The
agreements provide for the continuation of benefits and continued employment or
pay for two and one-half years of annual salary and average bonus, and, in the
event of certain taxation of payments made under these agreements, additional
payments necessary for the officers to receive the benefits contemplated by the
agreements.
PROPOSAL TO APPROVE AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR
NONEMPLOYEE DIRECTORS
INTRODUCTION
The purposes of the Nonemployee Directors Plan are to attract and retain
the services of experienced and knowledgeable nonemployee directors of the
Company and to provide an incentive for such directors to increase their
proprietary interest in the Company's long-term success and progress. The Board
of Directors believes that the additional flexibility provided by the proposed
amendments to the Nonemplyee Directors Plan would enable the Company to better
achieve these purposes.
The Company's Nonemployee Directors Plan currently provides for the
grant of options to purchase 9,000 shares of Class A Common Stock at the time a
person is first elected by the shareholders as a director and thereafter
following every third annual meeting of stockholders. The periodic grant of
9,000 shares was last made in 1996, and these options vest in 3,000 share
increments over a three-year period, with one increment vesting on the date of
the Company's annual meeting in each of 1997, 1998 and 1999. Only members of the
Board of Directors who are not otherwise employees of the Company or any parent
or subsidiary corporation (each, an "Eligible Director") may participate in the
Nonemployee Directors Plan. As of the date of this Proxy Statement, 136,400
shares remained available for issuance under the Nonemployee Directors Plan. THE
PROPOSED AMENDMENT DOES NOT CHANGE THE NUMBER OF SHARES AUTHORIZED OR AVAILABLE
UNDER THE PLAN.
Based on research by an independent compensation specialist, the Board
believes additional grants are necessary to bring total compensation to the
independent directors up to a level competitive with other companies of similar
size. On January 27, 1998 , the Company's Board of Directors unanimously adopted
amendments to the Nonemployee Directors Plan that, subject to stockholder
approval, would eliminate the periodic grant to directors as of the date of the
1998 Annual Meeting and grant the Plan Administrator exclusive authority, in its
sole discretion, to grant options to eligible individuals in such amounts as it
so elects. The Board intends to grant options at fair market value for an
additional 2,000 shares to each independent director who previously received a
grant that will vest in 1998, bringing the total number of options to vest per
year to 5,000 shares per director. In addition, the Board believes that the
flexibility to award grants to directors appointed midway through a year is
appropriate, and intends to grant options for 1,500 shares to each of Mr. George
Hutchinson and Mr. Raymond Johnson, who joined the Board in the fall of 1997,
for their services up to the annual shareholders meeting, and options for 5,000
shares for the year following the 1998 shareholders meeting. The Board intends
to use its discretion in the future to adjust to changing market conditions for
directors' compensation.
A copy of the Nonemployee Directors Plan as proposed to be amended and
restated is attached to this Proxy Statement as Appendix A and is incorporated
herein by reference. The following description of the Nonemployee Directors Plan
is a summary and does not purport to be fully descriptive. See Appendix A for
more detailed information.
-14-
<PAGE> 17
DESCRIPTION OF PLAN
Shares Subject to the Nonemployee Directors Plan. An aggregate of up to
200,000 shares of Class A Common Stock is authorized for issuance under the
Nonemployee Directors Plan, subject to adjustment from time to time for stock
dividends and certain other changes in capitalization as provided in the
Nonemployee Directors Plan. The Class A Common Stock issued under the
Nonemployee Directors Plan will be from authorized but unissued shares. As of
the date of this Proxy Statement, 136,400 shares remained available for issuance
under the Nonemployee Directors Plan. The proposed amendment does not change the
number of shares authorized or available under the Plan.
Stock Options. Assuming approval of this proposal, beginning on the date
of the 1998 Annual Meeting, the Plan Administrator will have the exclusive
authority, in its sole discretion, to grant options to eligible individuals in
such amounts as it so elects.
If not otherwise established in the option grant, options expire on the
earlier of 10 years from the date of grant or one year after an Eligible
Director's termination of service as a director. The option exercise price for
an option granted under the Nonemployee Directors Plan is fair market value of
the shares at the time the option is granted. For purposes of the Nonemployee
Directors Plan, "fair market value" is the closing price of the Class A Common
Stock on the New York Stock Exchange on the day prior to the date of the grant.
Election to Receive Stock in Lieu of Cash Compensation. Each Eligible
Director may elect to reduce all or a portion of the cash compensation otherwise
payable for his or her services as a director, including the annual retainer and
any fees payable for serving on the Board of Directors or a committee of the
Board, by a specified dollar amount or percentage and to receive in lieu thereof
a number of shares of Class A Common Stock on the date the cash compensation
would have been paid.
Administration. The administrator of the Nonemployee Directors Plan (the
"Plan Administrator") is the Company's Board of Directors. Subject to the terms
of the Nonemployee Directors Plan, the Plan Administrator has the power to
construe the provisions of the Nonemployee Directors Plan, to determine all
questions arising under the Nonemployee Directors Plan, and to adopt and amend
such rules and regulations for the administration of the Nonemployee Directors
Plan as it may deem desirable.
Amendment and Termination. The Board of Directors may amend, terminate
or suspend the Nonemployee Directors Plan at any time, provided that no such
amendment shall impair or diminish any rights of an optionee or obligations of
the Company, without the consent of the optionee.
Term of Plan. The Nonemployee Directors Plan will continue in effect
until it is terminated by action of the Board of Directors or the Company's
stockholders, but such termination shall not affect the terms of any
then-outstanding options.
Voting Requirements. The proposal to approve the amendments to the
Nonemployee Directors Plan will be approved if the number of votes cast in favor
of the proposal exceeds the number of votes cast against the proposal.
Abstentions from voting on this proposal will have no impact on the outcome of
this proposal since no vote has been cast for or against it. There can be no
broker nonvotes on the amendments to the Nonemployee Directors Plan since
brokers who hold shares for the accounts of their clients have discretionary
authority to vote such shares with respect to this matter.
Federal Income Tax Consequences. The material U.S. federal income tax
consequences to the Company and to any person granted an award under the
Nonemployee Directors Plan who is subject to taxation in the United States under
the existing applicable provisions of the Code and the underlying Treasury
Regulations are substantially as follows. The following summary is based on the
Code, the underlying Treasury Regulations and administrative interpretations as
in effect on the date hereof and judicial precedents relating thereto, all of
which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax considerations discussed herein. The following
summary does not address state, local or foreign tax consequences.
-15-
<PAGE> 18
Options granted under the plan will constitute "nonqualified stock
options" for federal income tax purposes. Under present law and regulations, no
income will be recognized by an Eligible Director upon the grant of stock
options.
Upon the exercise of a nonqualified stock option, the Eligible Director
will recognize taxable ordinary income in an amount equal to the excess of the
fair market value of the shares acquired over the option price. Upon a later
sale of those shares, the Eligible Director will have short-term, mid-term or
long-term capital gain or short-term or long-term capital loss, as the case may
be, in an amount equal to the difference between the amount realized on such
sale and the tax basis of the shares sold. If payment of the option price is
made entirely in cash, the tax basis of the shares will be equal to their fair
market value on the exercise date (but not less than the option price), and the
shares' holding period will begin on the day after the exercise date.If the
Eligible Director uses already-owned shares to pay the exercise price of an
option in whole or in part, the transaction will not be considered to be a
taxable disposition of the already-owned shares. The Eligible Directors' tax
basis and holding period of the already-owned shares will be carried over to the
equivalent number of shares received upon exercise. The tax basis of the
additional shares received upon exercise will be the fair market value of the
shares on the exercise date (but not less than the amount of cash, if any, used
in payment), and the holding period for such additional shares will begin on the
day after the exercise date.
The Company will be entitled to a deduction at the same time and in the
same amount as the Eligible Director recognizes ordinary income.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDED AND RESTATED
STOCK INCENTIVE PLAN FOR NONEMPLOYEE DIRECTORS.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, which audited the Company's accounts for the last
fiscal year, has been the Company's independent auditor since the Company's
inception. Representatives of Deloitte & Touche LLP are expected to attend the
1998 Annual Meeting and will have an opportunity to make a statement and respond
to appropriate questions from stockholders.
SOLICITATION OF PROXIES
The proxy card accompanying this Proxy Statement is solicited by the
Board of Directors. Proxies may be solicited by officers, directors and regular
supervisory and executive employees of the Company, none of whom will receive
any additional compensation for their services. D. F. King & Co., Inc. may
solicit proxies at an approximate cost of $10,000, plus reasonable expenses.
Such solicitations may be made personally, or by mail, facsimile, telephone,
telegraph or messenger. The Company will reimburse persons holding shares of
Common Stock in their names or in the names of nominees, but not owning such
shares beneficially, such as brokerage houses, banks and other fiduciaries, for
the expense of forwarding solicitation materials to their principals. All the
costs of soliciting proxies will be paid by the Company.
OTHER MATTERS
The Company knows of no other matters that are likely to be brought
before the 1998 Annual Meeting. If, however, other matters not now known or
determined come before the 1998 Annual Meeting, the persons named in the
enclosed proxy or their substitutes will vote such proxy in accordance with
their judgment in such matters.
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<PAGE> 19
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders must be received in written form to be
considered for inclusion in the Proxy Statement and proxy card for the Company's
1999 Annual Meeting of Stockholders by the Secretary of the Company no later
than December 2, 1998.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report has been mailed to each
stockholder of record. Additional copies of the annual report may be obtained
without charge by writing or calling the Company's Investor Relations Department
at (800) 955-2235.
By Order of the Board of Directors,
Kristin H. Stred
Secretary
Seattle, Washington
March 31, 1998
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<PAGE> 20
APPENDIX A
SHURGARD STORAGE CENTERS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR NONEMPLOYEE DIRECTORS
SECTION 1. PURPOSES
The purposes of the Shurgard Storage Centers, Inc. Stock Incentive Plan
for Nonemployee Directors (the "Plan") are to attract and retain the services of
experienced and knowledgeable nonemployee directors of Shurgard Storage Centers,
Inc. (the "Corporation") and to provide an incentive for such directors to
increase their proprietary interests in the Corporation's long-term success and
progress.
SECTION 2. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 7 hereof, the total
number of shares of the Corporation's Class A Common Stock, $0.001 par value per
share (the "Common Stock"), which may be issued under the Plan is 200,000 (the
"Shares"). The Shares shall be shares presently authorized but unissued or
subsequently acquired by the Corporation and shall include shares representing
the unexercised portion of any option granted under the Plan that expires or
terminates without being exercised in full.
SECTION 3. ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the
Board of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable.
SECTION 4. ELIGIBILITY TO PARTICIPATE IN THE PLAN
Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall be eligible to participate in the Plan.
SECTION 5. STOCK OPTION GRANTS
5.1 PERIODIC GRANTS
Each Eligible Director in office immediately following the 1996 Annual
Meeting of Stockholders shall automatically receive the grant of an option (a
"Periodic Grant") to purchase 9,000 Shares immediately following the 1996 Annual
Meeting of Stockholders, and each Eligible Director elected for the first time
after the 1996 Annual Meeting of Stockholders but before the 1998 Annual Meeting
of Shareholders shall automatically receive a Periodic Grant immediately
following his or her election for the first time by the stockholders at an
Annual Meeting of Stockholders, such option to vest and become exercisable in
three equal annual installments upon the optionee's continued service as a
director until each of the following three Annual Meetings of Stockholders after
the date of grant.
5.2 DISCRETIONARY GRANTS
Beginning on the date of the 1998 Annual Meeting, and except for the
terms and conditions explicitly set forth in the Plan, for all other grants of
options ("Discretionary Grants"), the Plan Administrator shall have the
exclusive authority, in its discretion, to determine all matters relating to
Discretionary Grants under the Plan, including the selection of individuals to
be granted Discretionary
-18-
<PAGE> 21
Grants, the number of Shares subject to a Discretionary Grant, all terms,
conditions, restrictions and limitations, if any, of a Discretionary Grant and
the terms of any instrument that evidences the Discretionary Grant.
5.3 OPTION TERMS
Each option granted to an Eligible Director under the Plan and the
issuance of Shares thereunder shall be subject to the following terms:
5.3.1 OPTION NOTICE
Each option granted under the Plan shall be evidenced by an option
agreement, notice, or other instrument approved by the Plan Administrator (a
"Notice") and duly executed on behalf of the Corporation. Each Notice shall
comply with and be subject to the terms and conditions of the Plan. Any Notice
may contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Plan Administrator.
5.3.2 OPTION EXERCISE PRICE
The option exercise price for each Periodic Grant and Discretionary
Grant granted under the Plan shall be the fair market value of the Shares
covered by the option at the time the option is granted. For purposes of the
Plan, "fair market value" as of a given date shall be: (i) the closing price of
a share of the Common Stock on the principal exchange on which the Common Stock
is then trading, if any, on the day previous to such date or, if no Common Stock
was traded on such date, on the next preceding date on which Common Stock was so
traded; or (ii) if the Common Stock is not traded on an exchange, the average of
the high and low sales prices at which the Common Stock was sold on the day
previous to such date as reported in the Wall Street Journal for the New York
Stock Exchange--Composite Transactions (or similar successor consolidated
transactions report) on such date or, if no Common Stock was traded on such
date, on the next preceding date on which Common Stock was so traded.
5.3.3 TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from
time to time; provided, however, that no fewer than 50 Shares (or the remaining
Shares then purchasable under the option, if less than 50 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by payment in
full for such Shares, which payment may be in whole or in part (i) in cash or by
check, (ii) in shares of Common Stock already owned for at least six months by
the person exercising the option, valued at fair market value at the time of
such exercise, or (iii) by delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, to properly deliver to the
Corporation the amount of sale or loan proceeds to pay the exercise price, all
in accordance with the regulations of the Federal Reserve Board.
5.3.4 TERM OF OPTIONS
If not otherwise established in the instrument evidencing the award of
an option granted after the date of the 1998 Annual Meeting, each option shall
expire ten years from the date of the granting thereof, but shall be subject to
earlier termination as follows:
(a) In the event that an optionee ceases to be a director of the
Corporation for any reason other than the death of the optionee, the vested
portion of the options granted to such optionee may be exercised by him or her
only within one year after the date such optionee ceases to be a director of the
Corporation.
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<PAGE> 22
(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the one-year period referred to in
Section 5.3.4(a), the vested portion of the options granted to such optionee
shall be exercisable, and such options shall expire unless exercised within one
year after the date of the optionee's death, by the legal representatives or the
estate of such optionee, by any person or persons whom the optionee shall have
designated in writing on forms prescribed by and filed with the Corporation or,
if no such designation has been made, by the person or persons to whom the
optionee's rights have passed by will or the laws of descent and distribution.
5.3.5 TRANSFERABILITY
During an Optionee's lifetime, an option may be exercised only by the
Optionee or a permitted assignee or transferee (as provided below). Options
granted under this Plan and the rights and privileges conferred thereby shall
not be subject to execution, attachment or similar process and may not be
transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by (a) will or the applicable laws of
descent and distribution; (b) designation by the optionee in writing during the
Optionee's lifetime of a beneficiary to receive and exercise options in the
event of the Optionee's death (as provided in Section 5.3.4(b)); or (c) gift or
other transfer without consideration to either (i) a spouse, child or grandchild
("Immediate Family Member") or (ii) any trust, partnership or other entity in
which the optionee or such Immediate Family Member has a substantial beneficial
interest; provided, however, that any option so assigned or transferred shall be
subject to all the same terms and conditions contained in the instrument
evidencing the option. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or of any right or privilege
conferred thereby, contrary to the provisions of this Plan, or the sale or levy
or any attachment or similar process upon the rights and privileges conferred
hereby, shall be null and void.
SECTION 6. ELECTION TO RECEIVE STOCK IN LIEU OF CASH COMPENSATION
Commencing on May 14, 1996, each Eligible Director may elect to reduce
all or a portion of the cash compensation otherwise payable for services to be
rendered by him or her as a director (including the annual retainer and any fees
payable for serving on the Board or a Committee of the Board, but excluding any
expense reimbursement) by a specified dollar amount or percentage and to receive
in lieu thereof a whole number of Shares equal in value to the amount of the
reduction divided by the fair market value of the Common Stock on the date the
cash compensation would have been paid. Such Shares shall be delivered to each
such Eligible Director as soon as practicable after the date the cash
compensation would have been paid. The value of any fractional Shares shall be
paid to the Eligible Director in cash on the date the Shares are delivered.
Any such election shall be made in writing on a form provided by the
Company and shall state the dollar amount or percentage by which the Eligible
Director desires to reduce the cash compensation.
SECTION 7. CAPITAL ADJUSTMENTS
The aggregate number and class of Shares which may be issued under the
Plan, as provided in Section 2, the number and class of Shares covered by each
option grant and each outstanding option and the exercise price per share
thereof (but not the total price), shall all be proportionately adjusted for any
stock dividends, stock splits, recapitalizations, combinations or exchanges of
shares, split-ups, spin-offs or other similar changes in capitalization. Upon
the effective date of a dissolution or liquidation of the Corporation, or of a
reorganization, merger or consolidation of the Corporation with one or more
corporations that results in more than 80% of the outstanding voting shares of
the Corporation being owned by one or more affiliated corporations or other
affiliated entities, or of a transfer of all or substantially all of the assets
or more than 80% of the then outstanding shares of the Corporation to another
corporation or other entity, this Plan and all options granted hereunder shall
terminate. In the event of such dissolution, liquidation, reorganization,
merger, consolidation, transfer of assets, or transfer of stock, (i) each
optionee shall be entitled, for a period of 20 days prior to the effective date
of such transaction, to purchase the full number of Shares under his or her
option that he or she otherwise would have been entitled to purchase during the
remaining term of such option, and (ii) all cash compensation which has been
earned by an
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<PAGE> 23
Eligible Director who has elected to receive Shares in lieu of cash compensation
but which has not yet been converted into Shares, shall be paid immediately in
cash.
Adjustment under this Section 7 shall be made by the Plan Administrator,
whose determination shall be final. In the event of any adjustment in the number
of Shares covered by any option, any fractional Shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full Shares resulting from such option.
SECTION 8. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares. An Eligible
Director who has made an election to receive Shares in lieu of cash compensation
shall not have any rights as a stockholder of the Corporation until such cash
compensation is converted into Shares and such person becomes a holder of record
of such Shares.
SECTION 9. LIMITATION AS TO DIRECTORSHIP
Neither the Plan, nor the granting of an option, nor the making of an
election to receive Shares in lieu of cash compensation, nor any other action
taken pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an Eligible Director has a right to
continue as a director for any period of time or at any particular rate of
compensation.
SECTION 10. REGULATORY APPROVAL AND COMPLIANCE
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or pursuant to an Eligible Director's election to receive Shares in lieu of cash
compensation, or to record as a holder of record of Shares the name of the
individual exercising an option under the Plan, or who has made an election to
receive stock in lieu of cash compensation, without obtaining to the complete
satisfaction of the Plan Administrator the approval of all regulatory bodies
deemed necessary by the Plan Administrator, and without complying, to the Plan
Administrator's complete satisfaction, with all rules and regulations under
federal, state or local law deemed applicable by the Plan Administrator.
SECTION 11. EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan
shall be borne by the Corporation; none of such expenses shall be charged to any
optionee.
SECTION 12. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon approval of the Corporation's
shareholders. The Plan shall continue in effect until it is terminated by action
of the Board or the Corporation's shareholders, but such termination shall not
affect the then-outstanding terms of any options.
SECTION 13. TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that the Board may not amend
the Plan without the approval of the Corporation's stockholders to materially
increase the number of shares that may be issued under the Plan. Any amendment
of the Plan shall not impair or diminish any rights of an optionee or
obligations of the Company under such option, regardless of when such option was
granted, without the consent of the optionee.
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<PAGE> 24
SHURGARD STORAGE CENTERS, INC.
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles K. Barbo and Harrell L. Beck, and each
of them, as Proxies with full power of substitution and hereby authorizes them
to represent and to vote as designated below all the shares of Class A Common
Stock and Class B Common Stock, par value $.001 per share (collectively, the
"Common Stock"), of Shurgard Storage Centers, Inc. held of record by the
undersigned on March 17, 1998, at the 1998 Annual Meeting of Stockholders to be
held on May 12, 1998, or any adjournment or postponement thereof, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEM 2.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
Election of the following three nominees to serve as directors for the
terms shown below or until their successors are elected and qualified:
CHARLES K. BARBO GEORGE P. HUTCHINSON RAYMOND A. JOHNSON
(Class 1, Three-Year Term) (Class 1, Three-Year Term) (Class 2, Two-Year Term)
( ) FOR all nominees ( ) WITHHOLD AUTHORITY to ( ) WITHHOLD AUTHORITY to vote for the
vote for all nominees following only: (write the name(s) of
the nominee(s) in this space)
-------------------------------------
2. APPROVAL TO AMEND THE AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR
NONEMPLOYEE DIRECTORS
( ) FOR ( ) AGAINST ( ) ABSTAIN
</TABLE>
IMPORTANT - PLEASE DATE AND SIGN ON THE OTHER SIDE
<PAGE> 25
In their discretion, the Proxies are authorized to vote upon such other business
as may properly be brought before the meeting or any adjournment or postponement
thereof. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2.
The undersigned acknowledges receipt from the Company prior to the execution of
this Proxy of a Notice of Annual Meeting of Stockholders and a Proxy Statement
dated March 31, 1998.
PLEASE SIGN BELOW EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. When shares
are held jointly, each person must sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. An
authorized person should sign on behalf
of corporations, partnerships and
associations and give his or her title.
Dated: , 1998
--------------------------
----------------------------------------
Signature
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Signature, if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL
HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
