<PAGE> 1
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:
[ ] 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 240.14a-11(c) or 240.14a-12
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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
1155 Valley Street
Seattle, Washington 98109
[SHURGARD LOGO] Phone 206 624 8100
Fax 206 624 1645
www.shurgard.com
March 31, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Shurgard Storage Centers, Inc. at 2:00 p.m. on Tuesday, May 11,
1999, at the Company's corporate headquarters located at 1155 Valley Street,
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,
/s/ Charles K. Barbo
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 11, 1999
To the Stockholders:
The 1999 Annual Meeting of Stockholders of Shurgard Storage Centers,
Inc. will be held at the Company's corporate headquarters located at 1155 Valley
Street, Seattle, Washington on Tuesday, May 11, 1999, at 2:00 p.m. for the
following purposes:
1. To elect two directors to the Company's Board of Directors;
2. 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 16, 1999. 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 offices at 1155 Valley
Street, Suite 400, 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,
/s/ Kristin H. Stred
Kristin H. Stred
Secretary
Seattle, Washington
March 31, 1999
<PAGE> 4
SHURGARD STORAGE CENTERS, INC.
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MAY 11, 1999
GENERAL
The enclosed proxy is solicited by the Board of Directors of Shurgard
Storage Centers, Inc. (the "Company") for use at the 1999 Annual Meeting of
Stockholders to be held at 2:00 p.m. on Tuesday, May 11, 1999 at the Company's
corporate headquarters located at 1155 Valley Street, Seattle, Washington and at
any postponement or adjournment thereof (the "1999 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 16, 1999
will be entitled to vote at the 1999 Annual Meeting. On that date, the Company
had 28,875,477 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 1155 Valley
Street, Suite 400, Seattle, Washington 98109. This Proxy Statement and the
accompanying proxy card are being mailed to the Company's stockholders on or
about March 31, 1999.
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 1999
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 1999 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. 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. There can be no broker nonvotes on the
election of directors since brokers who hold shares for the accounts of their
clients have discretionary authority to vote such shares with respect to
election of directors.
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 1999 Annual
Meeting and voting in person.
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<PAGE> 5
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 in Class 1, two
members in Class 2 and two members in Class 3.
INFORMATION ABOUT THE DIRECTORS NOMINATED FOR ELECTION
TERM EXPIRES IN 2002 (CLASS 2)
W. Thomas Porter (age 65) has served as a director of the Company since
his appointment in March 1999. He retired as an Executive Vice President and
member of the senior management committee of Seafirst Bank in March 1999, after
15 years in numerous leadership positions with Rainier Bank, Security Pacific
Bank and Seafirst Bank (a unit of Bank of America). Prior to his career in
banking, for 15 years he was with Touche Ross in New York and Seattle and was
National Partner for Professional Development and Planning. He also was the
National Partner in charge of Executive Financial Counseling. He was a Professor
of Management Control at the University of Washington for 9 years and for one
year at the North Europe Management Institute in Oslo, Norway. Dr. Porter has a
Bachelor of Science degree from Rutgers University, a Master of Business
Administration degree from the University of Washington, and a Doctor of
Philosophy degree from Columbia University. He is a director of AEI Music
Network, Inc. and Lifesport Inc. and a trustee of several community and
non-profit organizations.
TERM EXPIRES IN 2002 (CLASS 2)
Raymond A. Johnson (age 57) 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 BOTH
NOMINEES FOR DIRECTOR.
INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL
MEETING
TERMS EXPIRE IN 2000 (CLASS 3)
Wendell J. Smith (age 66) has served as a director of the Company since
March, 1994. Mr. Smith is also currently a director of 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 equity and $13
billion in 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 42) 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
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<PAGE> 6
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.
TERMS EXPIRE IN 2001 (CLASS 1)
Charles K. Barbo (age 57) 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 60) 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, Wilder Construction Co., Bite LLC, and a trustee
of numerous community and nonprofit organizations.
Eight Board of Directors meetings were held in 1998. Each of the
directors attended all 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, W.J. Smith, and (as of
March 9, 1999) W. Thomas Porter. The Audit Committee met three times in 1998.
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. Johnson (Chair), George P. Hutchinson, W.J. Smith and
(as of March 9, 1999) W. Thomas Porter. The Compensation Committee met three
times in 1998.
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,
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<PAGE> 7
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, W.J. Smith, George P. Hutchinson and Harrell L. Beck. The Nominating
and Organization Committee met one time in 1998.
DIRECTOR COMPENSATION
Fees. Directors who are employees of the Company do not receive any fees
for their services as directors. In 1998, Directors who were not employees of
the Company were paid an annual retainer of $17,000 for serving on the Board of
Directors, an additional fee of $1,000 for each meeting of the Board of
Directors attended and $1,000 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.
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.
Based on research done in 1997 by an independent compensation
specialist, the Board believed additional grants were necessary to bring total
compensation to the independent directors up to a level competitive with other
companies of similar size. On May 12, 1998 the Board granted options at fair
market value on the grant date ($28.25) for an additional 2,000 shares to each
independent director who previously received a three-year grant, bringing the
total number of options to vest per year to 5,000 shares per director. In
addition, the Board granted 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 partial year's service, and options for 5,000 shares for the year
following the 1998 shareholders meeting.
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 required for those
persons, the company believes that during the 1998 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, 1999 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, 1999, 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
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------ -------------------- -------------------- --------
<S> <C> <C> <C>
Charles K. Barbo Class A Common Stock 911,141(1) 3.19%
1155 Valley Street, Suite 400 Class B Common Stock 78,075(2) 50.5%
Seattle, WA 98109
Arthur W. Buerk Class A Common Stock 417,597 1.47%
801 SW 150th Street, #212 Class B Common Stock 76,529(2) 49.5%
Seattle, WA 98166
Michael Rowe Class A Common Stock 137,145(3) *
David K. Grant Class A Common Stock 77,864(4) *
Harrell L. Beck Class A Common Stock 60,887(5) *
Kristin H. Stred Class A Common Stock 33,949(6) *
Wendell J. Smith Class A Common Stock 15,017(7) *
George P. Hutchinson Class A Common Stock 11,800(8) *
Raymond A. Johnson Class A Common Stock 7,000(9) *
W. Thomas Porter Class A Common Stock 3,000(10) *
All directors and executive Class A Common Stock 1,227,942 4.42%
officers as a group (9 persons) Class B Common Stock 78,075 50.5%
</TABLE>
- ----------
* Less than 1%.
(1) Includes 5,010 shares held for Mr. Barbo's individual account under the
Company's Employee Retirement Savings Plan and Trust, 4,000 shares held by
trusts of which Mr. Barbo is a trustee, and 129,734 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 53,376 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days, 4,733 shares held for Mr. Rowe's
individual account under the Company's Employee Retirement Savings Plan and
Trust and 272 shares directly owned by Mr. Rowe's wife and children.
(4) Includes 16,739 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 3,866 shares held for Mr.
Grant's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(5) Includes 38,602 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 3,496 shares held for Mr.
Beck's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(6) Includes 27,691 shares issuable on exercise of stock options currently
exercisable or exercisable within 60 days and 705 shares held for Ms.
Stred's individual account under the Company's Employee Retirement Savings
Plan and Trust.
(7) Includes 14,000 shares issuable on exercise of stock options currently
exercisable.
(8) Includes 1,200 shares directly owned by Mr. Hutchinson's wife and children,
and 6,500 shares issuable on exercise of stock options currently
exercisable.
(9) Includes 6,500 shares issuable on exercise of stock options currently
exercisable.
(10) Includes 1,000 shares issuable on exercise of stock options exercisable
within 60 days.
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<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. In the
fall of 1997, the Committee engaged an independent consultant to review the
compensation philosophy of the corporation and the compensation levels for the
senior executives and board members, in order to ensure that the compensation
system remains aligned with these considerations and corporate goals.
COMPENSATION POLICIES
For 1998, the Company's compensation policy reflected the movement from
below market toward market level 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 the report of the independent
Compensation Consultant, which included data from eight surveys in the REIT,
retail and service industries, and a review of proxies of 14 publicly traded
REITs with estimated 1997 assets of between $811 million and $2.9 billion. 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. For 1997, compared to the average of this
market data, salaries for Company Executives were at or below the 25th
percentile. For 1998, it was the Committee's intention to move base salaries
closer to the 50th 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 $220,000, 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 1998, 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 its
target, the bonus paid to Mr. Barbo for 1998 was $129,525.44, approximately 129%
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 1998, executives in the
Company other than Mr. Grant were granted stock options at fair market value on
January 27, 1998. The options vest in four installments, beginning six months
after the grant and vesting completely on the third anniversary of the grant.
Mr. Barbo was granted options on 141,200 shares.
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<PAGE> 10
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.
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
1999 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
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, 1998, the last day of the Company's 1998 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 $23.25 per share.
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<PAGE> 11
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHURGARD STORAGE CENTERS, INC.,
STANDARD AND POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON THE INITIAL NET ASSET VALUE)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
DATE [email protected] S&P 500 NAREIT-Equity
- -------- ------------ --------- ---------------
<S> <C> <C> <C>
3/31/94 100.00 100.00 100.00
12/30/94 115.22 105.30 100.15
12/31/95 163.75 144.83 113.83
12/31/96 190.99 178.06 141.93
12/31/97 197.51 237.45 161.09
12/31/98 188.98 305.31 134.31
</TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHURGARD STORAGE CENTERS, INC.,
STANDARD AND POOR'S 500 STOCK INDEX AND NAREIT EQUITY REIT INDEX
(BASED ON THE INITIAL TRADING PRICE)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
DATE [email protected] S&P 500 NAREIT-Equity
- -------- ------------ --------- ---------------
<S> <C> <C> <C>
3/31/94 100.00 100.00 100.00
12/30/94 93.66 105.30 144.83
12/31/95 133.11 144.83 113.83
12/31/96 155.25 178.06 141.93
12/31/97 160.55 237.45 161.09
12/31/98 153.62 305.31 134.31
</TABLE>
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<PAGE> 12
COMPENSATION OF EXECUTIVES
The following table sets forth the compensation for services rendered
during the fiscal years ended December 31, 1998, 1997, and 1996 for the
Company's Chief Executive Officer and for the four other most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- --------------------------
SHARES
UNDERLYING
OPTIONS/
STOCK ALL OTHER
OPTION LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS(#) PAYOUTS ($)
- --------------------------- ------- ---------- ------------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 1998 220,000 129,525 141,200 74,056(2) 8,000(3)
Chairman, President and
Chief Executive Officer 1997 200,000 65,700 62,642 5,337
1996 190,000 42,200 5,137 5,731
Michael Rowe 1998 190,000 99,207 45,900 39,467(2) 25,768(3)
Executive Vice President
and Chief Operating 1997 170,000 49,275 28,474 19,628
Officer
1996 140,000 33,760 2,740 19,931
David K. Grant 1998 140,000 16,800 -0- -0- 118,855(4)
Executive Vice President
and Managing Director of 1997 140,000 25,200 -0- -0- 112,897
European Operations
1996 151,460 -0- 2,740 78,674
Harrell L. Beck 1998 144,000 65,420 35,300 19,721(2) 9,971(3)
Director, Senior Vice
President, Chief 1997 115,000 38,325 13,667 7,279
Financial Officer,
Principal Accounting 1996 105,000 25,320 1,370 7,554
Officer and Treasurer
Kristin H. Stred 1998 145,000 60,901 24,000 19,721(2) 9,474(3)
Senior Vice President,
General Counsel and 1997 115,000 38,325 13,667 6,801
Secretary
1996 105,000 25,320 1,370 7,095
</TABLE>
- ----------
(1) Includes bonus awards earned during 1998 pursuant to the terms of incentive
compensation, discretionary bonus and profit-sharing arrangements.
(2) Represents the value at December 31, 1998 for long term compensation earned
under a formula established in 1995 (and modified slightly in 1997 to take
into consideration the start up of the containerized storage business). The
measurement period for the award was 1996-1998.
(3) For the year ended December 31, 1998, with respect to Mr. Barbo, Mr. Rowe,
Mr. Beck and Ms. Stred, includes: $4,800, $4,800, $4,210 and $4,210,
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 $3,200 per person;
with respect to Mr. Rowe includes $13,495 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 $4,273, $2,561 and
$2,064, respectively, paid annually towards insurance premiums on an
executive disability plan.
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<PAGE> 13
(4) For the year ended December 31, 1998, with respect to Mr. Grant, includes:
employer-matching contributions made by the Company under its 401(k) plan of
$3,200, $4,800 contributed by the Company under its ESOP and $13,855
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
$28,000 cost of living adjustment expense.
OPTION GRANTS
The following table sets forth certain information regarding options to
purchase shares of Class A Common Stock granted to the Company's executive
officers during the fiscal year ended December 31, 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------
NUMBER OF PERCENT OF VALUE AT ASSUMED ANNUAL
SHARES TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM(*)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---------------- -------------- -------------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo 141,200(1) 33.82% $29.00 1/27/2008 2,575,198 $ 6,526,057
Michael Rowe 45,900(2) 10.99% 29.00 1/27/2008 837,122 2,121,431
Harrell L. Beck 35,300(3) 8.46% 29.00 1/27/2008 643,799 1,631,514
Kristin H. Stred 24,000(4) 5.75% 29.00 1/27/2008 437,711 1,109,245
All Stockholders N/A N/A N/A N/A 518,635,118 1,314,323,216
</TABLE>
(1) Options were granted at the fair market value on the date of grant. Of
these options 17,655 vest in 6 months and the remainder vest in three equal
annual installments 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) Options were granted at the fair market value on the date of grant. Of
these options, 3,531 vest in 6 months and the remainder vest in three equal
annual installments 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."
(3) Options were granted at the fair market value on the date of grant. Of
these options, 3,531 vest in 6 months and the remainder vest in three equal
annual installments 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."
(4) Options were granted at the fair market value on the date of grant. The
options vest 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."
(*) 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 $29.00, the closing price per share of
Class A Common Stock as reported by the New York Stock Exchange on January
27, 1998, the date the options were granted and 28,437,148 shares, the
number of shares of Class A Common Stock outstanding as of that date. There
can be no assurance that the actual value per share realized by the named
executive officer or by all stockholders will approximate the potential
realizable values set forth in the table.
-11-
<PAGE> 14
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding options
exercised during the fiscal year ended December 31, 1998, and options held as of
December 31, 1998 by each of the Company's executive officers.
OPTION EXERCISES AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)(2)
EXERCISE REALIZED ---------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles K. Barbo(3) -- -- 59,960 179,019 105,534 67,955
Michael Rowe -- -- 25,449 68,665 64,308 36,983
David K. Grant -- -- 12,427 7,313 64,080 36,869
Harrell L. Beck -- -- 19,600 47,737 60,465 35,061
Kristin H. Stred 1,290 10,795 11,279 39,968 33,256 35,061
</TABLE>
- ----------
(1) This amount is the aggregate number of outstanding options multiplied by
the difference between $25.8125 (the closing price of Class A Common Stock
on December 31, 1998) and the exercise price of those options that are
below $25.81.
(2) This amount includes dividend equivalents of $5.27 per share as of December
31, 1998, payable to the option holder upon exercise of the following total
number of exercisable stock options: Mr. Barbo, 3,425; Mr. Rowe, 1,827; Mr.
Grant, 1,827; Mr. Beck, 913; Ms. Stred, 913. The following total number of
unexercisable stock options carry a dividend equivalent: Mr. Barbo, 1,712;
Mr. Rowe, 913; Mr. Grant, 913; Mr. Beck, 457 and Ms. Stred, 457.
(3) 30,000 stock option shares held by Mr. Barbo, 18,000 of which are
exercisable, 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,
1998, the entire principal amount of the loan remained outstanding.
SHURGARD STORAGE TO GO, INC.
During 1998, Shurgard Storage Centers, Inc. invested $6,550,000 in debt
and equity 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. The following
officers of the Company have invested the following amounts in Shurgard Storage
To Go, Inc.: Charles K. Barbo, $63,750; Michael Rowe, $38,750; Harrell L. Beck,
$9,375; Kristin H. Stred, $14,375. These four officers currently own an
aggregate of 44% of Shurgard To Go's outstanding shares of voting Series A
Common Stock. The majority of the remaining voting shares is owned by other
individuals who are key employees of the Company. The Company currently owns 87%
of Shurgard To Go's outstanding shares
-12-
<PAGE> 15
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.
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 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.
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
1999 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 $10,500, 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 1999 Annual Meeting. If, however, other matters not now known or
determined come before the 1999 Annual Meeting, the persons named in the
enclosed proxy or their substitutes will vote such proxy in accordance with
their judgment in such matters.
-13-
<PAGE> 16
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
2000 Annual Meeting of Stockholders by the Secretary of the Company no later
than December 1, 1999.
In addition, the Company's Bylaws include advance notice provisions that
require shareholders desiring to bring nominations or other business before an
annual shareholder meeting to do so in accordance with the terms of the advance
notice provisions. These advance notice provisions require that, among other
things, shareholders give timely written notice to the Secretary of the Company
regarding such nominations or other business. To be timely, a notice must be
delivered to the Secretary at the principal executive offices of the Company no
later than 90 days prior to the date of such annual meeting (or, if the annual
meeting is not held on the second Tuesday of May and the Company provides less
than 90 days' notice of such meeting, no later than 10 days after the date of
the notice.).
Accordingly, subject to the exception noted above, a shareholder who
intends to present a proposal at the 2000 Annual Meeting without inclusion of
the proposal in the company's proxy materials must provide written notice of the
nominations or other business they wish to propose to the Secretary no later
than February 9, 2000. The Company reserves the right to reject, rule out of
order, or take other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.
ANNUAL REPORT
A copy of the Company's 1998 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,
/s/ Kristin H. Stred
Kristin H. Stred
Secretary
Seattle, Washington
March 31, 1999
-14-
<PAGE> 17
SHURGARD STORAGE CENTERS, INC.
PROXY FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 11, 1999
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 16, 1999, at the 1999 Annual Meeting of stockholders to be
held on May 11, 1999, or any adjournment or postponement thereof, as follows:
The Board of Directors recommends a vote "FOR all nominees" listed below.
1. ELECTION OF DIRECTORS
Election of the following two nominees to serve as directors for the terms
shown below or until their successors are elected and qualified:
<TABLE>
<S> <C> <C> <C>
W. Thomas Porter Raymond J. Johnson
(Class 2. Three-Year Term) (Class 2, Three-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)
_________________________
</TABLE>
IMPORTANT - PLEASE DATE AND SIGN ON THE OTHER SIDE
<PAGE> 18
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".
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, 1999.
<TABLE>
<S> <C>
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:_____________________________________, 1999
_________________________________________________
Signature
_________________________________________________
Signature, if held jointly
</TABLE>
YOUR VOTE IS IMPORTANT, PROMPT RETURN OF THIS PROXY CARD WILL
HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
