<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Summit Properties, 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
(SUMMIT PROPERTIES LETTERHEAD)
March 30, 1998
Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of Summit
Properties Inc. to be held on Tuesday, May 12, 1998 at 10:30 a.m. at First Union
National Bank, 12th Floor Auditorium, 301 South Tryon Street, Charlotte, North
Carolina. The business to be conducted at the meeting is set forth in the formal
notice that follows. At the meeting we will review Summit's operations, report
on 1997 financial results and discuss Summit's plans for the future. Our
directors and management team will be available to answer any questions you may
have from the floor.
Your vote is important to us. We hope that you will take the time to complete,
sign and return the enclosed proxy card in the return envelope provided. Summit
relies upon its stockholders to promptly complete, sign and return the cards in
order to avoid costly proxy solicitation expenses. If you attend the meeting, as
we hope you do, you may continue to have your shares voted as instructed in the
proxy or you may withdraw your proxy at the meeting and vote your shares in
person from the floor.
Thank you for your interest in Summit.
Sincerely,
Summit Properties Inc.
/s/ William F. Paulsen
William F. Paulsen
President
(LOGO)
<PAGE> 3
SUMMIT PROPERTIES INC.
212 SOUTH TRYON STREET
SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Summit Properties Inc. (the "Company") will be held
Tuesday, May 12, 1998 at 10:30 a.m. at Two First Union Center, 301 South Tryon
Street, 12th Floor, Charlotte, North Carolina for the following purposes:
1. To elect two directors of the Company to serve until the 2001
annual meeting of stockholders and until their respective successors are
duly elected and qualified.
2. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or postponements
thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on March 2, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock, $.01 par value per
share, at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
/s/ Michael G. Malone
Michael G. Malone, Esq.
Secretary
Charlotte, North Carolina
March 30, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID
ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF
YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
SUMMIT PROPERTIES INC.
212 SOUTH TRYON STREET
SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
------------------------------------
PROXY STATEMENT
------------------------------------
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
MARCH 30, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Summit Properties Inc. (the "Company") for
use at the 1998 Annual Meeting of Stockholders of the Company to be held on
Tuesday, May 12, 1998, and at any adjournments or postponements thereof (the
"Annual Meeting"). At the Annual Meeting, stockholders will be asked to vote
upon the election of two directors of the Company and to act upon any other
matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are first being sent to stockholders on or about March 30, 1998. The
Board of Directors has fixed the close of business on March 2, 1998 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting (the "Record Date"). Only stockholders of record of
the Company's common stock, par value $.01 per share (the "Common Stock"), at
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. As of the Record Date, there were 24,232,070 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting. Holders
of Common Stock outstanding as of the close of business on the Record Date will
be entitled to one vote for each share held by them.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker non-votes (as defined below) will be
counted in determining the presence of a quorum. The affirmative vote of a
plurality of votes cast at a meeting at which a quorum is present is sufficient
for the election of directors. Abstentions and broker non-votes will be
disregarded in determining the "votes cast" for purposes of electing directors
and any other matter. Broker "non-votes" are proxies from brokers or other
nominees indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote the shares which are the
subject of the proxy on a particular matter with respect to which the broker or
other nominee does not have discretionary voting power.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED PRIOR TO
SUCH TIME AND NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE
ELECTION OF THE TWO NOMINEES FOR THE BOARD OF DIRECTORS OF THE
1
<PAGE> 5
COMPANY NAMED IN THIS PROXY STATEMENT. IT IS NOT ANTICIPATED THAT ANY MATTERS
OTHER THAN THOSE SET FORTH IN THIS PROXY STATEMENT WILL BE PRESENTED AT THE
ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1997 Annual Report, including financial statements for the
fiscal year ended December 31, 1997, is being mailed to stockholders
concurrently with this Proxy Statement. The Annual Report, however, is not part
of the proxy solicitation material. A COPY OF THE COMPANY'S ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE SECRETARY OF THE COMPANY AT THE FOLLOWING ADDRESS: 212 SOUTH
TRYON STREET, SUITE 500, CHARLOTTE, NC 28281, ATTN: MICHAEL G. MALONE.
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six members. At the
Annual Meeting, two Class I directors will be elected to serve until the 2001
annual meeting of stockholders or until their successors are duly elected and
qualified. The Board of Directors has nominated James H. Hance, Jr. and Henry H.
Fishkind (the "Nominees") for election as Class I directors at the Annual
Meeting. The Board of Directors anticipates that each of the Nominees will
serve, if elected, as a director. However, if any person nominated by the Board
of Directors is unable to accept election, the proxies will be voted for the
election of such other person or persons as the Board of Directors may
recommend. The Board of Directors will consider a nominee for election to the
Board of Directors recommended by a stockholder of record if the stockholder
submits the nomination in compliance with the requirements of the Company's
Bylaws. See "Other Matters -- Stockholder Proposals" for a summary of these
requirements.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THEIR NOMINEES, JAMES H.
HANCE, JR. AND HENRY H. FISHKIND.
INFORMATION REGARDING NOMINEES, OTHER DIRECTORS AND EXECUTIVE OFFICERS
The following table and biographical descriptions set forth certain
information with respect to the two Nominees for re-election as Class I
directors at the Annual Meeting, the continuing directors whose terms expire at
the annual meetings of stockholders in 1999 and 2000 and the executive officers
of the Company who are not directors, based on information furnished to the
Company by such directors and executive officers. There is no family
relationship between any director or executive officer of the Company. The
following information is as of December 31, 1997, unless otherwise specified.
2
<PAGE> 6
<TABLE>
<CAPTION>
Number of Shares Percent of
Director and Units All Shares
Name Age Since Beneficially Owned and Units(1)
- ---- --- -------- ------------------ ------------
<S> <C> <C> <C> <C>
Class I Nominees for Election at 1998
Annual Meeting
(Term to Expire in 2001)
- -------------------------
James H. Hance, Jr....................... 53 1994 15,994(2) *
Henry H. Fishkind........................ 48 1994 15,795(3) *
Class II Continuing Directors
(Term to Expire in 1999)
- -------------------------
Nelson Schwab III........................ 53 1994 29,000(3) *
John Crosland, Jr........................ 69 1995 1,161,843(4) 4.2%
Class III Continuing Directors
(Term to Expire in 2000)
- -------------------------
William B. McGuire, Jr................... 53 1994 920,294(5) 3.4%
William F. Paulsen....................... 51 1994 956,722(6) 3.5%
</TABLE>
- ---------------
* Less than one percent
(1) Assumes that all units of limited partnership interest ("Units") of Summit
Properties Partnership, L.P., a Delaware limited partnership and the
Company's principal operating subsidiary (the "Operating Partnership"), held
by the person are presented to the Operating Partnership for redemption and
acquired by the Company for shares of Common Stock. The total number of
shares of Common Stock and Units used in calculating this percentage assumes
that all of the Units outstanding held by all persons other than the Company
are presented to the Operating Partnership for redemption and acquired by
the Company for shares of Common Stock.
(2) The indicated ownership includes 1,000 shares of Common Stock held jointly
by Mr. Hance and his spouse, and 9,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(3) The indicated ownership includes 9,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(4) The indicated ownership includes 6,000 shares of Common Stock subject to
stock options exercisable within 60 days. The indicated ownership also
includes (a) 307,311 Units owned by JMJ Associates Limited Partnership, a
limited partnership in which Mr. Crosland owns an equity interest and
indirectly serves as the general partner, (b) 387,646 Units owned by The
Crosland Group, Inc., a corporation in which Mr. Crosland owns an equity
interest (the "Crosland Group"), (c) 51,101 Units owned by Crosland-Erwin &
Associates, No. VI, a general partnership in which the Crosland Group owns
an equity interest, (d) 108,554 Units, 86,125 Units and 91,162 Units owned
by Westbury Place Associates, Westbury Woods Associates and Westbury Park
Associates, respectively, each a limited partnership with respect to which
Mr. Crosland serves as co-general partner, (e) 2,381 Units owned by Crosland
Investors, Inc., a corporation in which Mr. Crosland owns an equity interest
and (f) 11,566 shares owned by the John Crosland, Sr. Trust, a trust with
respect to which Mr. Crosland serves as co-trustee, as to all of which Mr.
Crosland disclaims beneficial interest. Mr. Crosland owns 106,877 Units
directly.
(5) The indicated ownership includes 620,313 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 5,900 shares of
restricted stock awarded under the Company's 1994 Stock Option and Incentive
Plan (the "1994 Plan") that vest in five equal annual installments beginning
in January 1996, 156,984 shares of Common Stock owned by certain related
family trusts and 15,280 shares
3
<PAGE> 7
of Common Stock owned by a related family foundation with respect to which
shares of Common Stock Mr. McGuire disclaims beneficial ownership.
(6) The indicated ownership includes 596,045 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 11,700 shares of
restricted stock awarded under the 1994 Plan that vest in five equal annual
installments beginning in January 1996, and 39,535 shares of Common Stock
owned by Mr. Paulsen's spouse and 92,958 shares of Common Stock owned by
certain related family trusts with respect to which shares of Common Stock
Mr. Paulsen disclaims beneficial ownership.
Nominees for Election as Directors
JAMES H. HANCE, JR. Mr. Hance has been a director of the Company since
1994. Mr. Hance is a Vice Chairman and the Chief Financial Officer of
NationsBank Corporation, where he is responsible for NationsBanc Services
Company, which performs NationsBank Corporation's operations functions, the
Management Services Group, and NationsBank Corporation's finance group. He also
has responsibility for NationsBank's non-bank consumer and commercial credit
companies, NationsCredit Consumer Corporation and NationsCredit Commercial
Corporation, and serves as Managing Director of several of NationsBank's banks
and subsidiaries. Mr. Hance joined NationsBank Corporation in 1987. Mr. Hance is
a Member of the Board of Visitors of the Duke University Fuqua School of
Business and he is a Trustee of Washington University and a member of the
Washington University National Council for the John M. Olin School of Business.
He is on the Board of Directors of Caraustar Industries, Inc., Family Dollar
Stores, Inc. and Lance, Inc. Additionally, Mr. Hance is a certified public
accountant, a 1988 International Business Fellow, former Chairman of the
Charlotte Chamber of Commerce and is the vice chairman of the Board of Trustees
of the Charlotte Country Day School. Mr. Hance is 53 years old.
HENRY H. FISHKIND. Dr. Fishkind has been a director of the Company since
1994. He is the President of Fishkind & Associates, Inc., a private economic and
financial consulting firm based in Orlando, Florida that he founded in 1987. Dr.
Fishkind is a member of the Board of Directors of Engle Homes. Dr. Fishkind
served on the Florida Governor's Economic Advisory Board from 1979 to 1981. He
is 48 years old.
Incumbent Directors -- Term Expiring in 1999
NELSON SCHWAB III. Mr. Schwab has been a director of the Company since
1994. He has been a Managing Director of Carousel Capital, a merchant banking
firm based in Charlotte, North Carolina specializing in middle market
acquisitions since 1996. Mr. Schwab served as Chairman and Chief Executive
Officer of Paramount Parks from 1992 to 1995. Mr. Schwab is a Member of the
Board of Directors of First Union National Bank, Silver Dollar City, Inc.,
Griffin Corporation, Illum Elex Corp., MJD Communications Inc., Critical Care
Concepts and Burlington Industries. Mr. Schwab previously served as the Chairman
of the Carolinas Partnership and the Charlotte Chamber of Commerce. Mr. Schwab
is 53 years old.
JOHN CROSLAND, JR. Mr. Crosland has been a director of the Company since
1995. He has been Chairman and Chief Executive Officer of The Crosland Group,
Inc., a fully diversified real estate development company, since 1971. Mr.
Crosland is a member of the Board of Directors of First Union National Bank,
Turnberry Homes and Crosland Patton Smith. He has been active in the
home-building industry holding office at local, state and national levels. From
1977 to 1989 he served as Chairman of the North Carolina Housing Finance Agency.
Among his diverse civic involvement, Mr. Crosland was a founder and first
Chairman of Charlotte's Habitat for Humanity; currently serves on the Habitat
for Humanity International Affiliates Advisory Committee; was 1996 Chairman of
the Davidson College Board of Visitors and is a member of the Davidson Board of
Trustees. Mr. Crosland was honored by the home building industry by being named
1985 Builder of
4
<PAGE> 8
the Year by Professional Builder Magazine and has been inducted into both the
National and North Carolina Housing Halls of Fame. Mr. Crosland is 69 years old.
Incumbent Directors -- Terms Expiring in 2000
WILLIAM B. MCGUIRE, JR. Mr. McGuire has served as the Chairman of the
Board of the Company since 1994. Prior to the formation of the Company, Mr.
McGuire served as a senior partner of the predecessor to the Company and as a
general partner of each of the partnerships which transferred multifamily
apartment communities (the "Communities") to the Company when it was formed. Mr.
McGuire founded the predecessor to the Company in 1972. Mr. McGuire also founded
McGuire Properties, Inc., a real estate brokerage firm, in 1972. He has been
active in the following professional and community organizations: Residential,
Multifamily and Urban Development Mixed Use Councils of the Urban Land
Institute; Charlotte Advisory Board of NationsBank of North Carolina, N.A.; and
The Charlotte City Club, serving on its Board of Governors as President. He was
a Trustee of the North Carolina Nature Conservancy; a Founder and Director of
Habitat for Humanity of Charlotte; and the Founder and President of The
Neighborhood Medical Clinic. Mr. McGuire is 53 years old.
WILLIAM F. PAULSEN. Mr. Paulsen is the President and Chief Executive
Officer and a director of the Company, Vice President of Summit Management
Company and Vice President of Summit Apartment Builders Inc. He has held these
positions since 1994. Prior to the formation of the Company, Mr. Paulsen was a
senior partner and the Chief Executive Officer of the predecessor to the Company
and a general partner of each of the partnerships which transferred Communities
to the Company when it was formed. Mr. Paulsen joined the predecessor to the
Company in 1981. He was selected as North Carolina Entrepreneur of the Year in
1990. In addition to his responsibilities with the Company, Mr. Paulsen is a
full Member and Residential Council Member of the Urban Land Institute. He is a
Member of the Board of Directors of The Beach Company, a real estate investment
company specializing primarily in commercial and resort development in the
southeastern United States and is a trustee of The Asheville School. Mr. Paulsen
also served as a Vice President of the Charlotte Apartment Association. He is 51
years old.
Executive Officers Who Are Not Directors
RAYMOND V. JONES. Mr. Jones has served as Executive Vice
President/Development and Construction of the Company since 1994; however, he
has notified the Company that he will be terminating his employment with the
Company on or about May 1, 1998. Prior to the formation of the Company, Mr.
Jones served as regional partner for the Charlotte division of the predecessor
to the Company, as well as a general partner of several of the partnerships
which transferred Communities to the Company when it was formed. Mr. Jones
joined the predecessor of the Company in 1984. Mr. Jones is a member of the
Board of Directors and Chairman of the Charlotte Mecklenburg Housing
Partnership, a non-profit venture organized to provide low income housing.
Additionally, he is a member of the Board of Directors of Golf Trust of America,
Inc. a recently formed real estate investment trust listed on the American Stock
Exchange. He also served as President of the Charlotte Apartment Association and
the Apartment Association of North Carolina. Mr. Jones is 50 years old.
MICHAEL L. SCHWARZ. Mr. Schwarz is an Executive Vice President and Chief
Financial Officer of the Company. Prior to joining the Company in 1994, Mr.
Schwarz was a co-founder and spent five years as the Senior Vice President and
Chief Financial Officer of Industrial Developments International, Inc., a
developer of industrial real estate. He is a certified public accountant. Mr.
Schwarz served as the Chairman of the Board of The Study Hall of Emmaus House, a
non-profit educational facility serving inner-city youths. Mr. Schwarz is 37
years old.
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<PAGE> 9
WILLIAM B. HAMILTON. Mr. Hamilton is an Executive Vice President/Property
Management of the Company and President of Summit Management Company, the
Company's management subsidiary. Prior to joining the Company in December of
1996, Mr. Hamilton spent one year as a Senior Vice President with Insignia
Management Group in Atlanta, Georgia where he was responsible for property and
asset management for 50,000 multifamily apartments. For the four years
immediately prior thereto, Mr. Hamilton was the President of NPI Property
Management Corporation, where his management portfolio consisted of 31,000
multifamily apartments. Mr. Hamilton's experience in the property and asset
management field for multifamily apartments has spanned more than 20 years. Mr.
Hamilton has been designated a certified property manager by the Institute of
Real Estate Management and a Certified Apartment Supervisor by the National
Apartment Association. Mr. Hamilton is 49 years old.
DAVID F. TUFARO. Mr. Tufaro has served as Executive Vice President of the
Company since 1994. From 1994 to 1996, Mr. Tufaro served as Chief Operating
Officer/Mid-Atlantic Region. Since then, Mr. Tufaro has assumed the position of
Chief Investment Officer. Prior to the formation of the Company, Mr. Tufaro
served as regional partner for the Baltimore division of the predecessor to the
Company, as well as a general partner of several of the partnerships which
transferred Communities to the Company when it was formed. Mr. Tufaro joined the
predecessor of the Company in 1984. Mr. Tufaro currently serves as President of
the Board of Directors of the Baltimore Corporation for Housing Partnerships, a
non-profit housing sponsor for low income families, and is President of the
Board of Directors of the Roland Park Community Foundation. Mr. Tufaro is 51
years old.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. The Company is managed by a six member Board of
Directors, a majority of whom are independent of the Company's management. The
Company's Board of Directors is divided into three classes, and the members of
each class serve for staggered three year terms. The Board is composed of two
Class I directors (Messrs. Hance and Fishkind), two Class II directors (Messrs.
Schwab and Crosland), and two Class III directors (Messrs. Paulsen and McGuire).
The Class I directors are up for election at the Annual Meeting. The terms of
the Class II and III directors will expire upon the election and qualification
of directors at the annual meetings of stockholders in 1999 and 2000,
respectively. At each annual meeting of stockholders, directors will be
reelected or elected for a full term of three years to succeed those directors
whose terms are expiring. The Board of Directors met four times in 1997.
Audit Committee. The Board has established an Audit Committee consisting
of Henry H. Fishkind, James H. Hance, Jr., Nelson Schwab III and John Crosland,
Jr. The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. The
Audit Committee met twice during 1997.
Compensation Committee. The Board of Directors has established a
Compensation Committee to determine compensation for the Company's executive
officers. The members of the Compensation Committee are Henry H. Fishkind, James
H. Hance, Jr., Nelson Schwab III and John Crosland, Jr. The Compensation
Committee exercises all powers of the Board of Directors in connection with
compensation matters, including incentive compensation and benefit plans. The
Compensation Committee also has authority to grant awards under the Company's
1994 Stock Option Plan to the employee directors, management and other employees
of the Company and its subsidiaries. The Compensation Committee met once during
1997.
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<PAGE> 10
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.
Each of the directors with the exception of Mr. Hance attended 100% of the
total number of meetings of the Board of Directors and of the committees of the
Board of which he was eligible to attend during 1997. Mr. Hance attended two
meetings of the Board of Directors, one meeting of the Audit Committee, and was
not able to attend the Compensation Committee meeting.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Directors of the Company who are also employees receive no additional
compensation for their services as directors. Non-employee directors of the
Company (the "Independent Directors") received an annual director's fee of
$12,000 in 1997. Each Independent Director also receives $1,000 for each regular
meeting of the Board of Directors attended, $1,000 for each special meeting of
the Board of Directors attended, $250 for each committee meeting attended if
held concurrently with a Board of Directors regular or special meeting and $500
for each committee meeting attended if not held concurrently with a Board of
Directors regular or special meeting. Under the 1994 Plan, following each annual
meeting of stockholders, each Independent Director also receives a non-qualified
option to purchase 2,000 shares of Common Stock at a price equal to the market
price of the Common Stock on the date of grant.
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<PAGE> 11
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company whose
compensation exceeded $100,000 during the fiscal year ended December 31, 1997
(together with the Chief Executive Officer, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual -----------------------
Compensation Restricted Securities
----------------- Stock Underlying All Other
Salary Bonus Awards Options Compensation
Name and Principal Position Year ($)(1) $ ($) (#) ($)(2)
- --------------------------- ---- ------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William F. Paulsen................ 1997 244,500 122,250 24,442(3) 0 4,750
President and Chief Executive 1996 232,875 0 228,150(4) 0 4,750
Officer 1995 232,875 72,491 0 0 4,620
Raymond V. Jones.................. 1997 173,000 86,000 0 0 4,750
Executive Vice President/ 1996 165,000 60,000 152,100(5) 0 4,750
Development and Construction 1995 155,250 100,359 0 0 4,620
Michael L. Schwarz................ 1997 173,000 86,500 196,775(6) 0 4,750
Executive Vice President and 1996 155,250 38,812 0 0 4,750
Chief Financial Officer 1995 155,250 63,414 0 30,000 0
David F. Tufaro................... 1997 155,250 20,000 0 0 4,750
Executive Vice President and 1996 155,250 43,112 152,100(7) 0 4,750
Chief Investment Officer 1995 155,250 40,000 0 0 4,130
William B. Hamilton(8)............ 1997 173,000 43,250 179,375(9) 0 0
Executive Vice
President/Property 1996 13,308 0 0 0 0
Management and President of
Summit Management Company
</TABLE>
- ---------------
(1) Includes amounts deferred under the Company's 401(k) plan. Under the plan,
employees generally are permitted to invest up to 17% of their salary on a
pre-tax basis, subject to a statutory maximum.
(2) Amounts represent matching contributions made by the Company to the Named
Executive Officer's account under the Company's 401(k) plan.
(3) Pursuant to a Company policy which requires any cash bonus earned in excess
of 50% of base salary to be paid in the form of Common Stock, Mr. Paulsen
received an award of 1,157 shares of restricted stock on January 1, 1998
under the 1994 Plan that vests in two equal annual installments beginning in
January 1999. The value of vested and unvested shares of such restricted
stock as of December 31, 1997 was $24,442. Dividends will be paid on the
shares of restricted stock.
(4) Mr. Paulsen received an award of 11,700 shares of restricted stock on
January 12, 1996 under the 1994 Plan that vests in five equal annual
installments beginning in January 1996. The value of vested and unvested
shares of such restricted stock as of December 31, 1997 was $247,163.
Dividends will be paid on the shares of restricted stock.
(5) Mr. Jones received an award of 7,800 shares of restricted stock on January
12, 1996 under the 1994 Plan that vests in five equal annual installments
beginning in January 1996. The value of vested and unvested shares of such
restricted stock as of December 31, 1997 was $164,775. Dividends will be
paid on the shares of restricted stock.
8
<PAGE> 12
(6) Mr. Schwarz received an award of 7,908 shares of restricted stock on January
2, 1997 under the 1994 Plan that vests in four equal annual installments
beginning in January 1998. The value of vested and unvested shares of such
restricted stock as of December 31, 1997 was $167,057. Pursuant to a Company
policy which requires any cash bonus earned in excess of 50% of base salary
to be paid in the form of Common Stock, Mr. Schwarz received an award of
1,126 shares of restricted stock on January 1, 1998 under the 1994 Plan that
vests in two equal annual installments beginning in January 1999. The value
of vested and unvested shares of such restricted stock as of December 31,
1997 was $23,787. Dividends will be paid on the shares of restricted stock.
(7) Mr. Tufaro received an award of 7,800 shares of restricted stock on January
12, 1996 under the 1994 Plan that vests in five equal annual installments
beginning in January 1996. The value of vested and unvested shares of such
restricted stock as of December 31, 1997 was $164,775. Dividends will be
paid on the shares of restricted stock.
(8) Mr. Hamilton began employment on December 5, 1996.
(9) Mr. Hamilton received an award of 8,200 shares of restricted stock on
January 2, 1997 under the 1994 Plan that vests in four equal annual
installments beginning in January 1998. The value of vested and unvested
shares of such restricted stock as of December 31, 1997 was $173,225.
Dividends will be paid on the shares of restricted stock.
Option Grants in Fiscal Year 1997. No options have been or will be granted
to executive officers of the Company with respect to the fiscal year ended
December 31, 1997.
Option Exercises and Year-End Holdings. The following table sets forth the
aggregated number of options to purchase shares of Common Stock exercised in
1997 and the value of options to purchase shares of Common Stock held on
December 31, 1997 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND
FISCAL YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised in-the-Money
Shares Options at Fiscal Options at Fiscal
Acquired On Year-End(#) Year-End($)(1)
Exercise Value Exercisable/ Exercisable/
Name (#) Realized($) Unexercisable Unexercisable
- ---- ----------- ----------- ------------------------ -----------------
<S> <C> <C> <C> <C>
William F. Paulsen.......... 0 0 40,000/0 125,000/0
Raymond V. Jones............ 0 0 27,000/0 84,375/0
David F. Tufaro............. 0 0 27,000/0 84,375/0
Michael L. Schwarz.......... 0 0 39,000/18,000 105,374/72,000
William B. Hamilton......... 0 0 0/0 0/0
</TABLE>
- ---------------
(1) Based on a closing price of $21.125 per share of Common Stock on December
31, 1997, the last 1997 trading day for the Company's Common Stock.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with each of Messrs. Paulsen, Jones, Tufaro, Schwarz and Hamilton.
The agreements with Messrs. Paulsen, Jones, and Tufaro will expire on February
15, 1999 unless otherwise extended, although these officers can resign at any
9
<PAGE> 13
time after giving 180 days' prior written notice, without breaching such
agreements. The agreement with Mr. Schwarz had an original term through February
16, 1996, and has been automatically extended until such time as terminated
pursuant to the terms of such agreement. Mr. Hamilton's agreement will expire on
December 5, 1998 unless otherwise extended pursuant to the terms of the
agreement. The Employment Agreements provide that the officers will be paid the
base salaries set forth next to their names in the Summary Compensation Table
above, which amounts may be increased or decreased (subject to certain
limitations) at the Compensation Committee's discretion, plus any other amounts
the Compensation Committee, in its discretion, determines to award. The
Employment Agreements also provide for certain severance benefits. If the
employment of Messrs. Paulsen, Jones or Tufaro is terminated by either the
Company without "cause" or by the employee for "cause" (as defined in the
Employment Agreements) during the original term of the Employment Agreement, the
terminated employee will be entitled to receive as severance an amount equal to
his base salary, as in effect on the date of termination, through the remainder
of his original term of employment under his Employment Agreement, payable over
time. If the employment of Mr. Hamilton is terminated by the Company without
"cause" or by Mr. Hamilton for "cause" (as defined in the Employment
Agreements), Mr. Hamilton will be entitled to receive as severance an amount
equal to his base salary as in effect on the date of termination for a period of
twelve months, payable over time, if such termination occurs during the original
term of his Employment Agreement, or for a period of six months, payable over
time, if such termination occurs subsequent to the original term of his
Employment Agreement. Upon the termination of the employment of Messrs. Paulsen,
Jones or Tufaro by reason of death or disability, his estate or he, as the case
may be, will be entitled to receive a payment equal to his base salary, as in
effect on the date of termination, through the remainder of his original term of
employment under his Employment Agreement, except that in the case of
termination by reason of disability the amount of such benefit shall be offset
by the proceeds of any disability plan awards provided by the Company. Upon the
termination of the employment of Mr. Hamilton by reason of death or disability,
his estate or he, as the case may be, will be entitled to receive a payment
equal to his base salary, as in effect on the date of termination, for a period
of twelve months, except that in the case of termination by reason of disability
the amount of such benefit shall be offset by the proceeds of any disability
plan awards provided by the Company. The Employment Agreements provide that if
any of Messrs. Paulsen, Jones, Tufaro or Hamilton are terminated by the Company
for "cause" or if they voluntarily terminate their employment (as defined in the
Employment Agreements), no severance amount will be payable. If the employment
of any of Messrs. Paulsen, Jones, Schwarz, Hamilton or Tufaro is terminated for
any reason after the original term of his employment, no severance amount will
be payable other than as provided in the Severance Agreements (as defined below)
of Messrs. Paulsen, Jones, Schwarz and Hamilton.
Each of these officers also entered into noncompetition agreements (the
"Noncompetition Agreements") with the Company. These agreements (except for the
agreements with Mr. Schwarz and Mr. Hamilton), subject to certain limited
exceptions, prohibit such individuals from engaging, directly or indirectly,
during the noncompetition period (the "Noncompetition Period") in any business
which engages or attempts to engage in, directly or indirectly, the acquisition,
development, construction, operation, management or leasing of any multifamily
apartment residential real estate property within a 30 mile radius of any
property that the Company owns, operates or manages or that the Company has
undertaken to acquire, develop, construct, operate, manage or lease. The
Noncompetition Period is the period beginning on the date of termination of
employment and ending on the latest of (i) one year from the termination of
their employment with the Company or (ii) the date on which the severance
amounts described above cease. Prior to their termination of employment, subject
to certain limited exceptions, the Noncompetition Agreements prohibit all of the
executive officers from engaging in any businesses other than those of the
Company without the prior written consent of the Board of Directors (or in the
case of Mr. Schwarz and Mr. Hamilton, without the prior written consent of the
President of Summit Properties Inc.). The Noncompetition Agreements with each of
the officers also prohibit such officers for certain periods after their
termination from the Company from hiring
10
<PAGE> 14
certain key employees of the Company or participating in any efforts to persuade
such employees to leave the Company and from engaging in any manner, directly or
indirectly, in any business which engages or attempts to engage in the
acquisition, development, construction, operation, management or leasing of any
of the Company's then existing communities or development or acquisition
opportunities. Under the Noncompetition Agreements, such officers are prohibited
from disclosing trade secrets and, for certain periods, other confidential
information of the Company. Mr. Jones has notified the Company that he will be
terminating his employment with the Company on or about May 1, 1998. Under the
circumstances pursuant to which he has elected to terminate his employment, Mr.
Jones will not be entitled to any payments or benefits under his Employment
Agreement; however, Mr. Jones will be subject to the terms of a Noncompetition
Agreement.
SEVERANCE AGREEMENTS
On January 2, 1997, the Company entered into Severance Agreements with each
of Messrs. Paulsen, Jones, Schwarz, Hamilton and McGuire (the "Severance
Agreements"). The Severance Agreements provide for the payment of severance
benefits of up to three times such officer's annual base salary and cash bonus
in the event of the termination of the officer's employment under certain
circumstances following certain "change in control" or "combination
transactions" involving a consolidation or merger. The benefits payable under
the terms of the Severance Agreements are subject to reduction by the amount of
any severance benefits payable under applicable Employment Agreements.
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph provides a comparison, from the Company's Initial
Offering on February 15, 1994 through December 31, 1997, of the cumulative total
stockholder return (assuming reinvestment of any dividends) among the Company,
the Standard & Poor's 500 Index (the "S&P 500 Index") and the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT") Equity REIT Total
Return Index (the "NAREIT Index"), an industry index of 177 REITs (including the
Company). The NAREIT Index includes REITs with 75% or more of their gross
invested book value of assets invested directly or indirectly in the equity
ownership of real estate. Upon written request, the Company will provide any
stockholder with a list of the REITs included in the NAREIT Index. The
historical information set forth below is not necessarily indicative of future
performance. Data for the NAREIT Index and the S&P 500 Index were provided to
the Company by SNL Securities LC.
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SUMMIT PROPERTIES NAREIT ALL
(FISCAL YEAR COVERED) INC. S&P 500 EQUITY REIT INDEX
<S> <C> <C> <C>
2/8/94 100.00 100.00 100.00
12/31/94 106.14 100.06 98.81
12/31/95 119.20 137.66 113.76
12/31/96 143.42 169.13 154.40
12/31/97 147.55 225.58 185.68
</TABLE>
12
<PAGE> 16
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Responsibilities of the Company's Compensation Committee. The Company's
Executive Compensation Program is administered under the direction of the
Compensation Committee of the Board of Directors of the Company, which is
composed of all four Independent Directors. The specific responsibilities of the
Compensation Committee are to:
1. Administer the Company's Executive Compensation Program.
2. Review and approve compensation awarded to the Company's executive
officers pursuant to the Executive Compensation Program.
3. Monitor the performance of the Company in comparison to performance by
executive officers in conjunction with executive officer compensation.
4. Monitor compensation awarded to executive officers of the Company in
comparison to compensation received by executive officers of the
Company's Comparative Compensation Peer Group, as defined below.
Compensation determinations pursuant to the Executive Compensation Program
are generally made at or shortly after the end of the fiscal year. At the end of
the fiscal year, incentive cash bonuses are calculated pursuant to the funds
from operations ("FFO") growth criteria which was contained in the respective
Summit Properties Inc. Incentive Compensation Plan approved by the Compensation
Committee prior to or at the beginning of the fiscal year. Payment of a cash
bonus is subject to audited confirmation of Company financial performance, which
occurs immediately after the end of the fiscal year. Also at the end of the
fiscal year, base salaries and grants of long-term equity based compensation
under the 1994 Plan are set for the following fiscal year.
In fulfilling its responsibilities, the Compensation Committee takes into
account recommendations from management as well as the specific factors
enumerated herein for specific elements of compensation. The Compensation
Committee periodically reviews comparative compensation data which includes data
on the Company's Comparative Compensation Peer Group as well as data from other
companies with attributes comparable to the Company.
The Philosophy of the Compensation Committee. The philosophy of the
Compensation Committee as reflected in the specific compensation plans included
in the Executive Compensation Program is to:
1. Attract, retain and reward experienced, highly motivated executive
officers who are capable of effectively leading and continuing the
growth of the Company.
2. Place more emphasis on short and long-term incentive compensation which
is dependent upon both Company and individual performance rather than
base salary.
3. Reward and encourage executive officer activity that results in enhanced
value for stockholders.
4. Link both short-term and long-term incentive compensation as much as
possible to the achievement of specific individual and Company goals.
Elements of Compensation. It is the belief of the Compensation Committee
that the above philosophy can best be implemented through three separate
components of executive compensation with each component designed to reward
different performance goals, yet with all three components working together to
satisfy the ultimate goal of enhancing stockholder value. The three elements of
executive compensation are:
1. Salary, which compensates the executive for performing the basic job
description through the performance of routine designated tasks.
13
<PAGE> 17
2. Cash bonus, which rewards the executive for commendable performance of
specially designated tasks or outstanding performance of routine
designated tasks during the fiscal year.
3. Stock options and/or stock grants, which provide long-term rewards to
the executive in a manner directly related to the enhancement of
stockholder value through an appreciated stock price.
In administering each element of compensation, the Compensation Committee
considers the integration of that element not only with the other two elements
of compensation, but also with additional benefits available to the executive
such as the 1996 Non-Qualified Employee Stock Purchase Plan, Company provided
insurance benefits, and Company sponsored retirement savings plans.
Base Salary. Base salaries for executive officers are set based on the
following factors:
1. Comparison to executive officer base salaries for the Comparative
Compensation Peer Group (as defined below) to the extent such data is
available.
2. Individual performance of the routine designated tasks assigned.
3. Overall experience of the executive officer.
4. Historical relationship with the Company.
As a result of the Compensation Committee's philosophy of focusing the
compensation of the Company's executive officers on performance-based rewards,
the base salaries of the executive officers are lower than the Comparative
Compensation Peer Group.
Base salary increases for executive officers are considered annually by the
Compensation Committee. The granting of salary increases is dependent upon:
1. The executive's performance in the following areas:
a. Accomplishing the routine designated tasks of the position.
b. Promoting Company values.
c. Development and training of subordinate Company employees.
d. Leadership abilities and team member abilities.
e. The satisfaction of the executive officer's respective internal or
external customers.
2. Increased or revised job responsibilities.
3. Comparison to the Comparative Compensation Peer Group.
Based upon the above criteria, Messrs. Paulsen, Jones, and Schwarz were
each awarded an increase in their 1997 base salary (as set forth in the above
Summary Compensation Table).
Cash bonuses. The Company's 1997 Incentive Compensation Plan rewards
Company executives with annual cash bonuses based on favorable performance by
both the Company and the individual executive. This plan was formulated to
foster a team performance among the executive officers in accomplishing goals
for growth in FFO per share of Common Stock ("per share FFO") while at the same
time aligning executive annual cash incentive goals with stockholder goals
through the translation of per share FFO growth into an appreciated share price.
For 1997, 100% of Mr. Paulsen's cash bonus was dependent upon growth in per
share FFO over the previous fiscal year. Mr. Schwarz's cash bonus was dependent
in large part on per share FFO growth over the prior fiscal year and a minority
portion of his cash bonus was dependent upon commendable performance of
specially assigned tasks and outstanding performance of routine duties. The
majority of
14
<PAGE> 18
Mr. Hamilton's cash bonus for 1997 was dependent on the attainment of certain
stabilized property operating income goals. The remainder of Mr. Hamilton's cash
bonus was dependent upon commendable performance of specially assigned tasks and
outstanding performance of routine duties. For 1997, the majority of Mr. Jones'
cash bonus was dependent upon the success of new development projects and the
achievement of targeted financial returns in excess of the Company's cost of
capital. The remainder of Mr. Jones' cash bonus was comprised of (i) an
objective component based on the achievement of certain property specific
operating income and leasing goals and (ii) a subjective component based on his
performance in promoting team building within the Company. For 1997, Mr.
Tufaro's cash bonus was dependent upon his success in achieving specific results
with respect to special projects assigned to him.
Management has informed the Compensation Committee that to further promote
the Company's philosophy of performance-based compensation for 1997, certain
non-executive senior level officers also have cash bonus elements of
compensation, wherein the majority of that cash bonus is dependent on per share
FFO growth over the prior fiscal year.
The 1997 Incentive Compensation Plan was approved by the Compensation
Committee in September of 1996, thereby establishing the specific per share FFO
growth criteria and requisite financial returns on development communities upon
which executive officers' cash bonuses were dependent. For fiscal year 1997, the
threshold per share FFO growth criteria was achieved. As a result, Mr. Paulsen
received a cash bonus and Mr. Schwarz received the majority of his cash bonus,
which was dependent on growth in per share FFO as well as that portion of his
cash bonus based upon commendable performance of specially assigned tasks and
outstanding fulfillment of routine duties. In fiscal year 1997, the required
operating income growth goals for stabilized properties was not achieved and
therefore Mr. Hamilton did not receive that portion of his cash bonus dependent
upon such goals. Mr. Hamilton did, however, receive that portion of his cash
bonus dependent upon commendable performance of specially assigned tasks and
outstanding performance of routine duties. In fiscal year 1997, the required
financial returns for certain development projects were achieved and Mr. Jones
did receive a bonus relative to that performance. Furthermore, operating income
growth and lease-up thresholds for certain properties developed by Mr. Jones
were achieved and therefore he did receive that component of his cash bonus. Mr.
Tufaro did receive a cash bonus relative to his success on certain special
projects.
Stock Options and Stock Grants. The Compensation Committee believes that
awards of stock options or stock grants provide long-term incentive compensation
to executive officers that is aligned most directly with the achievement of
enhanced value for stockholders through an appreciating stock price. As such,
the Compensation Committee believes that awards of stock options or stock grants
should be made to executive officers in meaningful amounts on a regular basis.
When granting stock, it is the intention of the Compensation Committee to
utilize restricted stock grants subject to a three to five year vesting period,
other than in instances where stock is granted in lieu of cash compensation, in
which case the Compensation Committee may award unrestricted stock which is not
subject to vesting.
The number of stock options or stock grants awarded to an executive officer
is based on the following criteria:
1. Overall responsibility of the executive officer.
2. Overall ability to contribute to an increase in FFO.
3. Level of base salary component of compensation.
4. Level of incentive cash bonus, in that any fiscal year cash bonus
amounts in excess of 50% of the respective executive officer's base
salary will be paid to that executive in restricted stock of comparable
value.
15
<PAGE> 19
The Compensation Committee considers the awards of stock options or
restricted stock grants on a current basis only. The existing stockholdings of
an individual executive are not taken into consideration when awarding stock
options or restricted stock grants.
In 1997, no stock options were granted. However, effective January 1, 1997,
the cash bonuses of Messrs. Paulsen and Schwarz exceeded 50% of their respective
base salaries, and each such executive received restricted stock awards of
comparable value. The shares of such restricted stock will vest 50% on January
1, 1999, and the remaining 50% will vest on January 1, 2000. In addition,
effective January 1, 1997, Messrs. Schwarz and Hamilton received restricted
stock awards. The shares of such restricted stock vested 25% on January 1, 1998
and will vest 25% on January 1st of each of the next three years.
Definition of Funds from Operations (FFO). As noted above, certain
elements of executive compensation are based on achieving specific goals in per
share FFO growth. FFO is defined as income or loss before minority interest of
unitholders of the Operating Partnership, extraordinary items and non-recurring
formation expenses and certain non-cash items, primarily depreciation. Industry
analysts consider FFO to be an appropriate measure of the performance of an
equity REIT.
Compensation of the Chief Executive Officer. Mr. Paulsen's total
compensation for fiscal year 1997 consisted of base salary and a cash bonus.
Based on per share FFO growth performance for fiscal year 1997, Mr. Paulsen
received a cash bonus. The Compensation Committee believes that compared to the
market, Mr. Paulsen's base salary and potential maximum cash bonus based on per
share FFO growth of the Company, are each respectively and when combined,
conservative in comparison to the Comparative Compensation Peer Group.
Comparative Compensation Peer Group. The Compensation Committee compares
both the individual components as well as total compensation of executive
officers to compensation practices in the comparative market by periodically
reviewing data on the Comparative Compensation Peer Group provided by management
or outside consultants. The Comparative Compensation Peer Group is primarily a
sampling of REITs with similar characteristics to the Company as well as some
similar sized companies from other industries. Utilization of this comparative
data provides assurance to both executive officers and the Company's
stockholders that executive officers are being compensated adequately yet
reasonably in the context of the overall market. While comparative market data
is valuable in providing assurance of reasonable compensation for executive
officers, the Company's stated policy of emphasizing performance-based
compensation will result in base salaries for executive officers being below the
comparative norm.
A portion of the REITs that comprise the Comparative Compensation Peer
Group as defined above are also included in the NAREIT equity index that is the
basis for the Company Performance Graph contained elsewhere in this Proxy
Statement, however, not all of those REITs are included in the Comparative
Compensation Peer Group. The Compensation Committee believes that the equity
REITs that comprise the Comparative Compensation Peer Group are the most direct
comparisons for the Company and its Executive Compensation Program.
Deduction Limit of $1 million Pursuant to Section 162(m). The Securities
and Exchange Commission (the "SEC") requires that this report comment upon the
Company's policy with respect to Section 162(m) of the Internal Revenue Code
which limits the deductibility on the Company's tax return of compensation over
$1 million to any of the Named Executive Officers of the Company unless, in
general, the compensation is paid pursuant to a plan which is performance
related, non-discretionary and has been approved by the Company's stockholders.
The Committee's policy with respect to Section 162(m) is to make every
reasonable effort to insure that compensation is deductible to the extent
permitted, while simultaneously providing Company
16
<PAGE> 20
executives with appropriate awards for their performance. The Company did not
pay any compensation during 1997 that would be subject to Section 162(m).
Submitted by the Compensation Committee:
Henry H. Fishkind
James H. Hance, Jr.
Nelson Schwab III
John Crosland, Jr.
The foregoing report should not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference and shall not otherwise be deemed filed under such
Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Fishkind, Hance, Schwab and
Crosland. None of these individuals has served as an officer of the Company.
Messrs. Hance, Schwab and Crosland serve as officers and directors of lending
institutions that have provided financing and related services to the Company.
James H. Hance, Jr. is a Vice Chairman and the Chief Financial Officer of
NationsBank Corporation ("NationsBank") and Nelson Schwab III and John Crosland,
Jr. are members of the Board of Directors of First Union National Bank ("First
Union"). NationsBank and First Union have provided the Company with credit
enhancements on certain of the Company's communities financed with tax-exempt
bonds. First Union is also the joint provider of the Company's $150 million
unsecured credit facility.
17
<PAGE> 21
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock for
(i) directors, the Chief Executive Officer and the other four most highly
compensated executive officers of the Company, (ii) the directors (including
Independent Directors) and such executive officers of the Company as a group,
and (iii) each other person who is a stockholder of the Company holding more
than a 5% beneficial interest in the Company. Unless otherwise indicated in the
footnotes, all of such interests are owned directly, and the indicated person or
entity has sole voting and investment power. The number of shares listed
represents the number of shares of Common Stock the person holds plus the number
of shares for which Units held by the person are redeemable (if the Company
elects to issue Common Stock rather than pay cash upon such redemption). The
extent to which the persons hold shares of Common Stock as opposed to Units is
set forth in the footnotes.
<TABLE>
<CAPTION>
Number of
Shares and Units Percent of Percent of
Name and Business Address Beneficially All All
of Beneficial owners* Owned(1) Shares(2) Shares/Units(3)
- ------------------------- ---------------- ---------- ---------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
William B. McGuire, Jr.(4)..................... 920,294 3.8% 3.4%
William F. Paulsen(5).......................... 956,722 4.0% 3.5%
Raymond V. Jones(6)............................ 420,502 1.8% 1.5%
David F. Tufaro(7)............................. 360,765 1.5% 1.3%
Michael L. Schwarz(8).......................... 57,506 ** **
William B. Hamilton............................ 14,194 ** **
Henry H. Fishkind(9)........................... 15,795 ** **
James H. Hance, Jr.(10)........................ 15,994 ** **
Nelson Schwab III(9)........................... 29,000 ** **
John Crosland, Jr.(11)......................... 1,161,843 4.7% 4.2%
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (10 PERSONS)............. 3,952,615 15.1% 14.4%
5% HOLDERS
Franklin Resources, Inc.(12)................... 3,601,801 15.4% 13.1%
Mutuelles AXA, AXA, and The Equitable
Companies Incorporated(13)................... 1,223,600 5.2% 4.5%
</TABLE>
- ---------------
* Unless otherwise indicated, the address is: c/o Summit Properties Inc., 212
South Tryon Street, Suite 500, Charlotte, NC, 28281.
** Less than one percent.
(1) The information in the above chart was provided by the stockholders listed
and reflects their beneficial ownership known by the Company as of December
31, 1997.
(2) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock. The total number of shares outstanding used in calculating this
percentage assumes that none of the Units held by other persons are
presented to the Operating Partnership for redemption and acquired by the
Company for shares of Common Stock.
(3) Assumes that all Units held by the person are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock. The total number of shares of Common Stock and Units used in
18
<PAGE> 22
calculating this percentage assumes that all of the Units outstanding held
by all persons other than the Company are presented to the Operating
Partnership for redemption and acquired by the Company for shares of Common
Stock.
(4) The indicated ownership includes 620,313 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 5,900 shares of
restricted stock awarded under the 1994 Plan that vest in five equal annual
installments beginning in January 1996, 156,984 shares of Common Stock
owned by certain related family trusts and 15,280 shares of Common Stock
owned by a related family foundation with respect to which shares of Common
Stock Mr. McGuire disclaims beneficial ownership.
(5) The indicated ownership includes 596,045 Units, 40,000 shares of Common
Stock subject to stock options exercisable within 60 days, 11,700 shares of
restricted stock awarded under the 1994 Plan that vest in five equal annual
installments beginning in January 1996, and 39,535 shares of Common Stock
owned by Mr. Paulsen's spouse and 92,958 shares of Common Stock owned by
certain related family trusts with respect to which shares of Common Stock
Mr. Paulsen disclaims beneficial ownership.
(6) The indicated ownership includes 274,526 Units, 27,000 shares of Common
Stock subject to stock options exercisable within 60 days, 7,800 shares of
restricted stock awarded under the 1994 Plan that vest in five equal annual
installments beginning in January 1996, and 38,652 shares of Common Stock
owned by certain related family trusts with respect to which shares of
Common Stock Mr. Jones disclaims beneficial ownership.
(7) The indicated ownership includes 206,388 Units, 27,000 shares of Common
Stock subject to stock options exercisable within 60 days, 7,800 shares of
restricted stock awarded under the 1994 Plan that vest in five equal annual
installments beginning in January 1996, and 19,920 shares of Common Stock
owned by Mr. Tufaro's spouse and 41,361 shares of Common Stock owned by
certain related family trusts with respect to which shares of Common Stock
Mr. Tufaro disclaims beneficial ownership.
(8) The indicated ownership includes 45,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(9) The indicated ownership includes 9,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(10) The indicated ownership includes 1,000 shares of Common Stock held jointly
by Mr. Hance and his spouse, and 9,000 shares of Common Stock subject to
stock options exercisable within 60 days.
(11) The indicated ownership includes 6,000 shares of Common Stock subject to
stock options exercisable within 60 days. The indicated ownership also
includes (a) 307,311 Units owned by JMJ Associates Limited Partnership, a
limited partnership in which Mr. Crosland owns an equity interest and
indirectly serves as the general partner, (b) 387,646 Units owned by The
Crosland Group, Inc., a corporation in which Mr. Crosland owns an equity
interest (the "Crosland Group"), (c) 51,101 Units owned by Crosland-Erwin &
Associates, No. VI, a general partnership in which the Crosland Group owns
an equity interest, (d) 108,554 Units, 86,125 Units and 91,162 Units owned
by Westbury Place Associates, Westbury Woods Associates and Westbury Park
Associates, respectively, each a limited partnership with respect to which
Mr. Crosland serves as co-general partner, (e) 2,381 Units owned by
Crosland Investors, Inc., a corporation in which Mr. Crosland owns an
equity interest and (f) 11,566 shares owned by the John Crosland, Sr.
Trust, a trust with respect to which Mr. Crosland serves as co-trustee, as
to all of which Mr. Crosland disclaims beneficial interest. Mr. Crosland
owns 106,877 Units directly.
(12) The information reported is based upon an amended Schedule 13G filed with
the SEC on February 10, 1998 reporting beneficial ownership as of December
31, 1997. The amended Schedule 13G indicates that these shares are
beneficially owned as a group by Franklin Resources, Inc., Charles B.
Johnson, Rupert H. Johnson, Jr., Templeton Global Advisors Limited and
certain direct and indirect investment advisor subsidiaries of Franklin
Resources, Inc. (the "Advisor Subsidiaries"). Templeton Global Advisors
Limited has sole voting and dispositive power over 2,284,900 shares. The
following Advisor Subsidiaries have sole voting and dispositive power with
respect to the following numbers of shares: Templeton Investment Counsel,
Inc. (571,361 shares); Franklin Advisers, Inc. (255,000 shares); Templeton
Investment Management Limited (215,300 shares); Templeton Management
Limited ("TML") (172,000 shares); Templeton Investment Management
(Australia) Limited (22,000 shares); and an account advised by TML under a
sub-advisor agreement (1,500 shares). Franklin Resources, Inc., Charles B.
Johnson and Rupert H. Johnson, Jr. are deemed to be beneficial owners of
2,284,900 shares through their direct or indirect ownership of Templeton
Global Advisors Limited and the Advisor Subsidiaries. The principal
business address of Franklin Resources, Inc., Charles B. Johnson and Rupert
H. Johnson, Jr. is 777 Mariners Island Boulevard, San Mateo, CA 94404. The
principal business address of Templeton Global Advisors Limited is Lyford
Cay, P.O. Box N-7759, Nassau, Bahamas.
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<PAGE> 23
(13) The information reported is based upon an amended Schedule 13G filed with
the SEC on February 17, 1998 reporting beneficial ownership as of December
31, 1997. The amended Schedule 13G indicates that these shares are
beneficially owned as a group by Alpha Assurances I.A.R.D. Mutuelle, Alpha
Assurances Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle and AXA Courtage Assurance Mutuelle (collectively, the
"Mutuelles AXA"), AXA, The Equitable Companies Incorporated, The Equitable
Life Assurance Society of the United States and Alliance Capital Management
L.P. The Equitable Companies Incorporated, The Equitable Life Assurance
Society of the United States and Alliance Capital Management L.P. shall be
collectively referred to as the "Equitable Companies." The indicated
ownership includes 113,000 shares over which Mutuelles AXA, AXA and The
Equitable Companies have shared voting power. The Equitable Life Assurance
Society of the United States has sole dispositive power with respect to
113,000 shares, and Alliance Capital Management L.P. has sole voting power
with respect to 1,744,900 shares and sole dispositive power with respect to
1,772,000 shares. The principal business address of Alpha Assurances
I.A.R.D. Mutuelle and Alpha Assurances Vie Mutuelle is 100-101 Terrasse
Boieldieu, 92042 Paris La Defense France. The principal business address of
AXA Assurances I.A.R.D. Mutuelle and AXA Assurances Vie Mutuelle is 21 Rue
de Chateaudun 75009, Paris France. The principal business address of AXA
Courtage Assurance Mutuelle is 26 Rue Louis le Grand, 75002 Paris France.
The principal business address of AXA is 23 Avenue Matignon, 75008 Paris
France. The principal business address of The Equitable Companies
Incorporated is 787 Seventh Avenue, New York, NY 10019.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act, as amended (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
are beneficial owners of 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 "SEC"). Officers, directors and greater
than 10% beneficial owners are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, the executive officers, directors and greater
than 10% beneficial owners, all Section 16(a) filing requirements were
satisfied, except that: (i) Mr. Schwarz inadvertently filed a Form 5 one week
late; (ii) Messrs. Crosland and Schwab each inadvertently filed a Form 5 one
month late; (iii) Mr. Moore inadvertently failed to report on Form 5 an
acquisition of Common Stock pursuant to the Company's dividend reinvestment
plan; (iv) Messrs. Fishkind and Hance each inadvertently failed to report on
Form 5 a stock option grant; (v) Mr. Hamilton inadvertently filed a Form 3 to
report his ownership of shares of Common Stock instead of filing a Form 5 to
report two acquisitions of shares of Common Stock; (vi) Mr. Paulsen
inadvertently failed to report on Form 5 acquisitions of Common Stock, pursuant
to the Company's dividend reinvestment plan for himself directly as well as
indirectly for the Katherine C. Paulsen Trust and the Caroline E. Paulsen Trust;
(vii) Mr. Paulsen inadvertently failed to file two Forms 4, one with respect to
an indirect acquisition of shares of Common Stock by each of the Katherine C.
Paulsen Trust and the Caroline E. Paulsen Trust and a second with respect to an
indirect disposition of shares of Common Stock by each of the Katherine C.
Paulsen Trust and the Caroline E. Paulsen Trust; and (viii) Mr. Tufaro
inadvertently failed to file a Form 4 with respect to an acquisition of shares
of Common Stock. Each of the above transactions was subsequently reported.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As discussed above, Messrs. Hance and Schwab serve as officers and
directors of lending institutions that have provided financing and related
services to the Company. James H. Hance, Jr. is a Vice Chairman and the Chief
Financial Officer of NationsBank, and Nelson Schwab III is a member of the Board
of Directors of First Union. Both NationsBank and First Union provided the
Company with credit enhancements on certain of its communities financed with
tax-exempt bonds. First Union is also the joint provider of the Company's $150
million unsecured credit facility.
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LOANS TO OFFICERS AND EMPLOYEES
The Board of Directors of the Company, including the Compensation Committee
thereof, believes that ownership of the Company's Common Stock by executive
officers and certain other qualified employees of the Company and its
subsidiaries aligns the interest of such officers and employees with the
interest of the stockholders of the Company in appreciating stock price. To
further such goal of aligning the interest of such officers and employees with
the interest of the stockholder of the Company, the Board of Directors on
September 8, 1997 approved and the Company instituted a loan program under which
the Company may lend amounts to or on behalf of certain of the Company's
executive officers and key employees (hereinafter, a "Loan") for one or more of
the following purposes: (i) to finance the purchase of Common Stock (A) by
executive officers on the open market at then-current market prices and (B) by
other eligible employees through the Company's 1996 Non-Qualified Employee Stock
Purchase Plan; (ii) to finance an employee's payment of the exercise price of
one or more stock options to purchase shares of Common Stock granted to such
employee under the Company's 1994 Plan; or (iii) to finance the annual tax
liability or other expenses of Messrs. Schwarz and Hamilton related to the
vesting of shares of Common Stock which constitute a portion of a restricted
stock award granted to such employee under the 1994 Plan. The maximum aggregate
amount the Company may loan to an executive officer is $500,000, and the maximum
aggregate amount the Company may loan to a qualified employee is $100,000.
Currently, Messrs. Schwarz and Hamilton are the only executive officers to whom
Loans have been extended for the purpose of financing the purchase of Common
Stock or the payment of the annual tax liability related to the vesting of
shares of Common Stock which constitute a portion of a restricted stock award.
The relevant employee shall execute a Promissory Note and Security
Agreement (the "Note") related to each Loan made by the Company. Each Note will
bear interest at the applicable federal rate, as established by the Internal
Revenue Service (the "Applicable Federal Rate"), in effect on the date of the
Note and such rate shall be fixed and the Note shall become due and payable in
full on the tenth anniversary of the Note (the "Maturity Date"). Shares of
Common Stock which are the subject of a Loan serve as collateral (the
"Collateral Stock") for the Note until such time as the Note has been paid in
full. Until the Maturity Date, the employee to whom a Loan has been extended
will only be required to repay such Loan through the application to the
outstanding Loan balance of all dividends and distributions related to the
Collateral Stock, first to interest, and the remainder, if any, to outstanding
principal. Such employee may prepay the whole or any part of the principal
amount of the Loan from time to time without premium or penalty. The Company's
recourse against an employee under a Note for satisfaction of the Loan and all
other amounts due is limited to the Company's rights to the Collateral Stock and
25% of the principal of the Note for which the employee is personally liable in
the event of any deficiency which may arise upon a foreclosure and sale or other
disposition of the Collateral Stock.
As of February 28, 1998, the Company had extended Loans totaling
$904,023.15 to its employees, including the amounts of $499,979.64 and
$404,043.51 which were extended to Messrs. Hamilton and Schwarz, respectively.
Loans to Mr. Hamilton in the amount of (i) $109,236.63 bear interest at 6.13%
per year (i.e., the Applicable Federal Rate for Loans made in January 1998) and
(ii) $390,743.01 bear interest at 5.93% per year (i.e., the Applicable Federal
Rate for Loans made in February 1998). Loans to Mr. Schwarz in the amount of (i)
$93,077.13 bear interest at 6.13% per year (i.e., the Applicable Federal Rate
for Loans made in January 1998) and (ii) $310,966.38 bear interest at 5.93% per
year (i.e., the Applicable Federal Rate for Loans made in February 1998).
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<PAGE> 25
OTHER MATTERS
INDEPENDENT AUDITORS
The accounting firm of Deloitte & Touche LLP has served as the Company's
and its predecessors' independent auditors since August 15, 1993. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
paid by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without additional compensation for such activities.
The Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
STOCKHOLDER PROPOSALS
Stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for
inclusion in the Company's proxy statement and form of proxy for the 1999 annual
meeting of stockholders must have been received in writing by the Company by
November 14, 1998. Such proposals must also comply with the requirements as to
form and substance established by the Securities and Exchange Commission if such
proposals are to be included in the proxy statement and form of proxy. Any such
proposals should be mailed to: Summit Properties Inc., 212 South Tryon Street,
Suite 500, Charlotte, NC 28281, Attn: Secretary.
Stockholder proposals to be presented at the 1999 annual meeting of
stockholders, other than stockholder proposals submitted pursuant to Exchange
Act Rule 14a-8, must be received in writing by the Company not earlier than
January 13, 1999 nor later than February 11, 1999, unless the 1999 annual
meeting of stockholders is scheduled to take place before March 13, 1999. The
Company's Bylaws provide that any stockholder wishing to nominate a director or
have a stockholder proposal, other than a stockholder proposal submitted
pursuant to Exchange Act Rule 14a-8, considered at an annual meeting must
provide written notice of such nomination or proposal and appropriate supporting
documentation, as set forth in the Bylaws, to the Company not less than 90 days
nor more than 120 days prior to the anniversary of the immediately preceding
annual meeting of stockholders (the "Anniversary Date"); provided, however, that
in the event that the annual meeting is scheduled to be held more than 60
calendar days prior to the Anniversary Date, such nominations or proposals must
be delivered to the Company not earlier than 120 days or later than 90 days
prior to the earlier date or, if later, the tenth day following the date on
which public announcement of the date of such meeting is first made.
Notwithstanding the foregoing, in the event the number of directors of the
Company is increased and there is no public announcement made by the Company
naming all of the nominees for director or specifying the size of the increased
Board of Directors at least 70 days prior to the Anniversary Date, stockholder
nominations for such directors may be delivered to the Company not later than
the tenth day following the date on which such public announcement is first made
by the Company. Any such proposals should be mailed to: Summit Properties Inc.,
212 South Tryon Street, Suite 500, Charlotte, NC 28281, Attn: Secretary.
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OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
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<PAGE> 27
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS OF SUMMIT PROPERTIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby appoints Michael L. Schwarz and Michael G. Malone,
and each of them acting separately, proxies, each with full power of
substitution, for and in the name of the undersigned at the Annual Meeting of
Stockholders of Summit Properties Inc. to be held on May 12, 1998 and at any and
all adjournments and postponements thereof, to vote all shares of the capital
stock of Summit Properties Inc. held of record by the undersigned on March 2,
1998, as if the undersigned were present and voting shares. The undersigned
hereby revokes any proxy previously given in connection with such meeting and
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement and the 1997 Annual Report to Stockholders.
1. To elect two Class I directors to hold office until the 2001 annual meeting
of stockholders and until their successors are duly elected and qualified.
Nominees:
<TABLE>
<S> <C> <C> <C> <C> <C>
FOR WITHHELD FOR WITHHELD
James H. Hance, Jr. [ ] [ ] Henry H. Fishkind [ ] [ ]
</TABLE>
2. To consider and act upon any matters incidental to the foregoing or any
matters which may properly come before the Annual Meeting or any adjournments
and postponements thereof.
(Continued on other side)
The shares represented by this Proxy, when properly executed, will be voted
in the manner directed. IN THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE
VOTED FOR EACH NOMINEE NAMED IN PROPOSAL 1 ABOVE AND IN ACCORDANCE WITH THE
PROXIES' DISCRETION ON SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE
MEETING.
DATED , 1998
------------------------
-----------------------------------
(Signature)
-----------------------------------
(Signature if held jointly)
(Please date this Proxy and sign
exactly as your name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full
title. If there is more than one
trustee, all should sign. All joint
owners should sign.)
I PLAN TO ATTEND THE MEETING [ ]
