SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HIGHWOODS 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)(4) 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:
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:
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HIGHWOODS PROPERTIES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1998
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You are cordially invited to attend the 1998 annual meeting of
stockholders of Highwoods Properties, Inc. (the "Company") to be held on
Thursday, May 14, 1998, at 3:00 p.m., at the Raleigh Marriott Crabtree Valley,
4500 Marriott Drive, Raleigh, North Carolina, for the following purposes:
1. To elect four directors;
2. To consider and vote upon a proposal to amend the Company's
Amended and Restated 1994 Stock Option Plan;
3. To consider and vote upon a proposal to amend the Company's
Amended and Restated Articles of Incorporation;
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the 1998 fiscal year; and
5. To transact such other business as may properly come before
such meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 17, 1998
will be entitled to vote at the meeting or any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING IN PERSON, PLEASE SIGN
AND DATE THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS,
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
EDWARD J. FRITSCH
EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER AND
SECRETARY
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HIGHWOODS PROPERTIES, INC.
3100 Smoketree Court, Suite 600
Raleigh, North Carolina 27604
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD ON MAY 14, 1998
This proxy statement is furnished to stockholders of Highwoods
Properties, Inc., a Maryland corporation (the "Company"), in connection with the
solicitation of proxies for use at the 1998 annual meeting of stockholders (the
"Meeting") of the Company to be held on Thursday, May 14, 1998, at 3:00 p.m., at
the Raleigh Marriott Crabtree Valley, 4500 Marriott Drive, Raleigh, North
Carolina, for the purposes set forth in the notice of meeting. This solicitation
is made on behalf of the board of directors of the Company (the "Board of
Directors").
Holders of record of shares of common stock (the "Common Stock") of the
Company as of the close of business on the record date, March 17, 1998, are
entitled to receive notice of, and to vote at, the Meeting. The outstanding
Common Stock constitutes the only class of securities entitled to vote at the
Meeting, and each share of Common Stock entitles the holder thereof to one vote.
At the close of business on March 17, 1998, there were 50,604,018 shares of
Common Stock issued and outstanding.
Shares represented by proxies in the form enclosed, if such proxies are
properly executed and returned and not revoked, will be voted as specified.
Where no specification is made on a properly executed and returned form of
proxy, the shares will be voted FOR the election of all nominees for director,
FOR the amendment of the Company's Amended and Restated 1994 Stock Option Plan,
FOR the amendment of the Company's Amended and Restated Articles of
Incorporation and FOR the proposal to ratify the appointment of Ernst & Young
LLP as independent auditors. To be voted, proxies must be filed with the
Secretary of the Company prior to the close of voting at the Meeting. Proxies
may be revoked at any time before exercise thereof by filing a notice of such
revocation or a later dated proxy with the Secretary of the Company or by voting
in person at the Meeting.
The Company's 1997 Annual Report for the year ended December 31, 1997
has been mailed with this proxy statement. This proxy statement, the form of
proxy and the 1997 Annual Report were mailed to stockholders on or about April
14, 1998. The principal executive offices of the Company are located at 3100
Smoketree Court, Suite 600, Raleigh, North Carolina 27604.
PROPOSAL ONE:
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The directors of the Company are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
John W. Eakin and L. Glenn Orr, Jr., whose terms of office expire at the
Meeting, have been nominated for election at the Meeting as directors for
three-year terms, to hold office until the 2001 annual meeting of stockholders
and until their successors are elected and qualified. Stephen Timko, whose term
of office also expires at the Meeting, has been nominated for election at the
Meeting as a director for a one-year term, to hold office until the 1999 annual
meeting of stockholders and until his successor is elected and qualified. In
addition, to fill a vacancy created by an increase in the authorized number of
directors, James R. Heistand, a senior vice president of the
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Company, has been nominated for election at the Meeting as a director for a
three-year term, to hold office until the 2001 annual meeting of stockholders
and until his successor is elected and qualified.
The Board of Directors of the Company recommends a vote FOR Messrs.
Eakin, Orr, Timko and Heistand as directors to hold office until the expiration
of the terms for which they have been nominated and until their successors are
elected and qualified. Should any one or more of these nominees become unable to
serve for any reason, the Board of Directors may designate substitute nominees,
in which event the person named in the enclosed proxy will vote for the election
of such substitute nominee or nominees, or may reduce the number of directors on
the Board of Directors.
NOMINEES FOR ELECTION TO TERM EXPIRING 2001
JOHN W. EAKIN, 43, has been a director and senior vice president of the
Company since the Company's merger with Eakin & Smith, Inc. in April 1996. Mr.
Eakin previously served as president of Eakin & Smith, Inc. Mr. Eakin is a
member of the boards of directors of CCA Prison Realty Trust and Central Parking
Corporation and the advisory board of First American National Bank of Nashville.
JAMES R. HEISTAND, 45, has been a senior vice president of the Company
since the Company's merger with Associated Capital Properties, Inc. in October
1997. Mr. Heistand previously served as president of Associated Capital
Properties, Inc.
L. GLENN ORR, JR., 57, has been a director of the Company since
February 1995. Mr. Orr is a director of BB&T Financial and was chairman of the
board of directors, president and chief executive officer of Southern National
Corporation prior to its merger with Branch Banking & Trust. Mr. Orr is a member
of the boards of directors of Ladd Furniture Company and The Polymer Group. Mr.
Orr previously served as president and chief executive officer of Forsyth Bank
and Trust Co., president of Community Bank in Greenville, S.C. and president of
the North Carolina Bankers Association. He is a trustee of Wake Forest
University.
NOMINEES FOR ELECTION TO TERM EXPIRING 1999
STEPHEN TIMKO, 69, has been a director of the Company since February
1995. Mr. Timko is treasurer of Beaunit Corporation. He has served as associate
vice president of financial affairs for Temple University and chief financial
officer and executive vice president of finance and administration for Beaunit
Corporation.
INCUMBENT DIRECTORS -- TERM EXPIRING 1999
THOMAS W. ADLER, 57, has been a director of the Company since its
initial public offering in June 1994 (the "IPO"). Mr. Adler is a principal of
Cleveland Real Estate Partners, a fee-based real estate service company based in
Cleveland, Ohio. Mr. Adler has served five years as a member of the executive
committee and board of governors of the National Association of Real Estate
Investment Trusts ("NAREIT"), and he was national president in 1990 of the
Society of Industrial and Office Realtors. Mr. Adler formerly served on the
board of directors of the National Association of Realtors and currently serves
on the board of governors of the American Society of Real Estate Counselors.
WILLIAM E. GRAHAM, JR., 68, has been a director of the Company since
the IPO. Mr. Graham is a lawyer in private practice with the firm of Hunton &
Williams. Before joining Hunton & Williams on January 1, 1994, Mr. Graham was
vice chairman of Carolina Power & Light Company and had previously served as its
general counsel. Mr. Graham is a former member of the board of directors of
Carolina Power & Light Company and currently serves as chairman of the Raleigh
board of directors of NationsBank. He also serves on the board of trustees of
BB&T Mutual Funds Group.
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WILLARD H. SMITH JR., 61, has been a director of the Company since
April 1996. Mr. Smith previously served as a managing director of Merrill Lynch.
Mr. Smith is a member of the boards of directors of Cohen & Steers Realty
Shares, Cohen & Steers Realty Income Fund, Cohen & Steers Special Equity Fund,
Inc., Cohen & Steers Total Return Realty Fund, Cohen & Steers Equity Income
Fund, Essex Property Trust, Inc., Realty Income Corporation and Willis Lease
Financial Corporation.
WILLIAM T. WILSON III, 43, has been a director of the Company since the
Company's combination with Forsyth Partners in February 1995. Mr. Wilson served
as executive vice president of the Company from February 1995 until June 1997.
Mr. Wilson joined Forsyth Partners in 1982 and became its president in 1993. Mr.
Wilson serves on the board of directors of Amos Cottage Rehabilitation Hospital,
an affiliate of the department of pediatrics of Bowman Gray School of Medicine,
and the board of visitors of Wake Forest University School of Law.
INCUMBENT DIRECTORS -- TERM EXPIRING 2000
GENE H. ANDERSON, 52, has been a director and senior vice president of
the Company since the Company's combination with Anderson Properties, Inc. in
February 1997. Mr. Anderson previously served as president of Anderson
Properties, Inc. Mr. Anderson is an officer and former director of the National
Association of Industrial and Office Properties ("NAIOP").
RONALD P. GIBSON, 53, has been president, chief executive officer and a
director of the Company since its first election of officers in March 1994. Mr.
Gibson is a founder of the Company's predecessor, served as its president since
its incorporation in 1992 and served as its managing partner since its formation
in 1978. Mr. Gibson is a member of the Society of Industrial and Office Realtors
and is a director of Capital Associated Industries.
O. TEMPLE SLOAN, JR., 59, is chairman of the Board of Directors, a
position he has held since March 1994. Mr. Sloan is a founder of the predecessor
of the Company. He is also chairman and chief executive officer of General
Parts, Inc., a nationwide distributor of automobile replacement parts, which he
founded. Mr. Sloan is a director of NationsBank, N.A. and Southern Equipment
Company and is a trustee of St. Andrews College.
JOHN L. TURNER, 51, has been vice chairman of the Board of Directors
and chief investment officer of the Company since the Company's combination with
Forsyth Partners in February 1995. Mr. Turner co-founded the predecessor of
Forsyth Partners in 1975. Mr. Turner is active in several Piedmont Triad
economic development and business recruiting organizations. Mr. Turner served on
the University of North Carolina board of visitors and on the Winston-Salem
board of directors of NationsBank.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Board of Directors has established an audit committee that consists
of Messrs. Graham, Smith and Timko. 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. During 1997, the audit committee held five
meetings.
The Board of Directors has established an executive compensation
committee to determine compensation for the Company's executive officers and to
implement the Company's Amended and Restated 1994 Stock Option Plan (the "Stock
Option Plan"). The compensation committee consists of Messrs. Adler, Graham, Orr
and Sloan. During 1997, the compensation committee held four meetings.
The Board of Directors has established an investment committee
consisting of Messrs. Adler, Gibson, Sloan, Turner and Eakin. Mr. Heistand has
served as a non-voting member of the investment committee since joining the
Company in October 1997. The investment committee oversees the acquisition and
new investment process. The investment
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committee generally meets weekly to review new investment opportunities with the
Company's acquisition personnel and to make formal recommendations to the Board
of Directors concerning such opportunities.
The Board of Directors has established an executive committee
consisting of Messrs. Adler, Gibson, Orr and Sloan. The executive committee
meets on call by the chairman of the Board of Directors during the intervals
between meetings of the full Board of Directors and may exercise all of the
powers of the Board of Directors, subject to the limitations imposed by
applicable law, the bylaws or the Board of Directors.
The Board of Directors held seven meetings in 1997.
COMPENSATION OF DIRECTORS
The Company pays directors who are not officers of the Company
("Independent Directors") fees for their services as directors. Independent
Directors receive annual compensation of $15,000 plus a fee of $1,250 (plus
out-of-pocket expenses) for attendance in person at each meeting of the Board of
Directors, $500 for each committee meeting attended and $250 or $400 for each
telephone meeting of the Board of Directors or a committee. In addition,
non-officer members of the investment committee receive an additional annual
retainer of $30,000 and $1,000 per day for property visits. Upon becoming a
director of the Company, each Independent Director receives options to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market
value on the date of grant. Independent Directors are also eligible for
discretionary awards of stock options and may elect to receive a portion of
their retainer and meeting fees in the form of stock options. Officers of the
Company who are directors are not paid any director fees.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the chief executive officer and the four other most highly
compensated executive officers of the Company (the "Named Executive Officers")
for the years ended December 31, 1997, December 31, 1996 and December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation(2) All Other
NAME AND PRINCIPAL POSITION Year Salary Bonus(1) Options (#) Compensation(3)
- --------------------------- ---- ------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald P. Gibson 1997 $285,551 $375,000 ----- $4,750
President and Chief Executive Officer 1996 $205,000 $268,750 350,000 $4,750
1995 $173,397 $218,750 20,000 $2,310
John L. Turner 1997 $199,836 $250,000 ----- $4,750
Chief Investment Officer 1996 $161,250 $206,250 210,000 $4,750
1995 $125,230 $119,531 45,000 $2,250
Edward J. Fritsch 1997 $177,262 $200,000 ----- $4,750
Executive Vice President, 1996 $142,500 $150,000 100,000 $4,750
Chief Operating Officer and Secretary 1995 $113,750 $105,000 10,000 $4,559
John W. Eakin
Senior Vice President 1997 $199,836 $200,000 ----- $4,750
1996 $108,750 $87,000 142,500 -----
1995 ----- ----- ----- -----
Carman J. Liuzzo 1997 $170,168 $200,000 ----- $4,750
Vice President, Chief Financial Officer 1996 $122,500 $68,500 220,000 $4,750
and Treasurer 1995 $130,282 $90,000 10,000 $756
</TABLE>
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(1) Includes amounts earned in the indicated period which were paid in the
following year. Twenty percent of the bonus is in the form of units of
phantom stock. Employees are credited with a specified number of units
of phantom stock equal to such number of shares of Common Stock as
could be purchased with 25% of the employee's cash bonus. Five years
from the date of the phantom stock grant, employees will receive the
value of a share of Common Stock for each unit of phantom stock. At the
end of such five-year period, phantom stock holders also receive the
value of the dividends paid during the period on the corresponding
Common Stock assuming dividend reinvestment. Payouts with respect to
phantom stock grants may be made in shares of Common Stock or cash or
both. If an executive officer leaves the Company's employ for any
reason (other than death, disability or normal retirement) prior to the
end of the five-year period, all awards under the deferred compensation
plan will be forfeited.
(2) Options include: (i) incentive stock options; (ii) nonqualified stock
options; and (iii) Common Unit options. Options generally vest over a
five-year period beginning with the date of grant. Amounts shown
include options based on the indicated period's performance but granted
in the following year. Option amounts for 1997 performance have not yet
been determined.
(3) Represents amounts contributed by the Company under the Salary Deferral
and Profit Sharing Plan.
The following table sets forth certain information with respect to
options granted in 1997 to the Named Executive Officers:
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OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZATION
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES PER EXPIRATION TERM(2)
NAME OPTIONS(1) IN 1997 SHARE DATE 5% 10%
- ---- ----------- --------- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ronald P. Gibson
Incentive Stock Options... 18,900 .8% $31.63 April 29, 2007 $375,921 $952,749
Nonqualified Stock Options(3) 50,000 2.2% $31.63(3) April 29, 2007 $994,500(3) $2,520,500(3)
Common Unit Options(4).... 81,100 3.6% $31.63 April 29, 2007 $1,613,079 $4,088,251
Common Unit Options(4).... 200,000 8.9% $34.31 November 4, 2007 $4,316,000 $10,936,000
John L. Turner
Incentive Stock Options... 18,900 .8% $31.63 April 29, 2007 $375,921 $952,749
Nonqualified Stock Options(3) 40,000 1.8% $31.63(3) April 29, 2007 $795,600(3) $2,016,400(3)
Common Unit Options(4).... 61,100 2.7% $31.63 April 29, 2007 $1,215,279 $3,080,051
Common Unit Options(4).... 90,000 4.0% $34.31 November 4, 2007 $1,942,200 $4,921,200
Edward J. Fritsh
Incentive Stock Options... 18,900 .8% $31.63 April 29, 2007 $375,921 $952,749
Nonqualified Stock Options(3) 33,330 1.5% $31.63(3) April 29, 2007 $662,934(3) $1,680,165(3)
Common Unit Options(4).... 47,770 2.1% $31.63 April 29, 2007 $950,145 $2,408,086
John W. Eakin
Incentive Stock Options... 18,900 .8% $31.63 April 29, 2007 $375,921 $952,749
Nonqualified Stock Options(3) 33,330 1.5% $31.63(3) April 29, 2007 $662,934(3) $1,680,165(3)
Common Unit Options(4).... 47,770 2.1% $31.63 April 29, 2007 $950,145 $2,408,086
Carman J. Liuzzo
Incentive Stock Options... 18,900 .8% $31.63 April 29, 2007 $375,921 $952,749
Nonqualified Stock Options(3) 40,000 1.8% $31.63(3) April 29, 2007 $795,600(3) $2,016,400(3)
Common Unit Options(4).... 61,100 2.7% $31.63 April 29, 2007 $1,215,279 $3,080,051
Common Unit Options(4).... 100,000 4.4% $34.31 November 4, 2007 $2,158,000 $5,468,000
</TABLE>
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(1) Options granted in 1997 were based on 1996 performance. Accordingly,
amounts are shown in Summary Compensation Table above as 1996
compensation. Options generally vest over a five-year period beginning
with the date of grant.
(2) Realizable values have been reduced by the per share option exercise
price that each optionee will be required to pay to the Company in
order to exercise the options.
(3) Nonqualified stock options granted in 1997 were accompanied by a
dividend equivalent right (a "DER") pursuant to the 1997 Performance
Award Plan. The exercise price of such a stock option may be reduced by
an amount equal to the sum of all dividends and other distributions
that are made with respect to a share of Common Stock during the period
beginning on the date of grant and ending upon exercise or expiration
of such stock option. Therefore, the exercise price per share of
nonqualified stock options accompanied by DERs may be lower upon
exercise, and the potential realization values of such options may be
higher upon exercise, than the corresponding amounts set forth in the
table.
(4) The Common Unit options were issued pursuant to the Highwoods/Forsyth
Limited Partnership 1997 Unit Option Plan. Common Unit options are
similar to nonqualified stock options except that the holder is
entitled to purchase common partnership interests ("Common Units") in
Highwoods/Forsyth Limited Partnership (the "Operating Partnership").
The Operating Partnership is controlled by the Company as its sole
general partner. Each Common Unit received upon the exercise of a
Common Unit option may be redeemed by the holder thereof for the cash
value of one share of Common Stock. Assuming approval of the proposed
amendment to the Stock Option Plan contained herein, the Company
intends to allow holders of the Common Unit options to convert them to
nonqualified stock options. See "Proposal Two: Amendment to Amended and
Restated 1994 Stock Option Plan."
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The following table sets forth certain information with respect to
options held by the Named Executive Officers at year-end 1997:
DISPOSITION OF OPTIONS IN 1997/1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING
UNDERLYING UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS VALUE 1997 YEAR-END OPTIONS AT 1997 YEAR-END(1)
NAME DISPOSED OF REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald P. Gibson.......... ----- ----- 23,150 386,850 $341,314 $1,905,086
John L. Turner............ ----- ----- 14,400 240,600 $202,464 $1,463,736
Edward J. Fritsch......... ----- ----- 18,150 121,850 $260,364 $875,736
John W. Eakin............. ----- ----- 3,150 139,350 $17,514 $950,311
Carman J. Liuzzo.......... ----- ----- 15,650 239,350 $219,889 $1,234,461
</TABLE>
(1) Based on a closing price of $37.19 per share of Common Stock on
December 31, 1997.
EMPLOYMENT CONTRACTS
Mr. Turner entered into a three-year employment contract with the
Company in February 1995 and Mr. Eakin entered into a three-year employment
contract with the Company in April 1996. These contracts provide for a minimum
annual base salary at the rate of $150,000 for Mr. Turner and $145,000 for Mr.
Eakin. The minimum annual base salary may be increased by the Board of
Directors. As of December 31, 1997, the annual base salary rate was $200,000 for
both Mr. Turner and Mr. Eakin. Each contract includes provisions restricting the
officers from competing with the Company during employment and, except in
certain circumstances, for a limited period of time after termination of
employment. Each of the employment contracts provides for severance payments in
the event of termination by the Company without cause equal to the officer's
base salary at the rate then in effect for the later of one year from the date
of termination or three years from the contract date.
The Company has entered into a change in control contract with each of
Messrs. Gibson, Turner, Fritsch, Eakin and Liuzzo. The contract provides in
general that, in the event that the Company or the Operating Partnership is
acquired by another company or any of certain other changes in control of the
Company or the Operating Partnership should occur and, further, if within 24
months from the date of such acquisition or change in control, the employment of
Messrs. Gibson, Turner, Fritsch, Eakin or Liuzzo is terminated without cause,
their responsibilities are changed, their salaries are reduced or their
responsibilities are diminished, Messrs. Gibson, Turner, Fritsch, Eakin and
Liuzzo will be entitled to receive 2.99 times a base amount. An executive's base
amount for these purposes is his average annual compensation includible in his
gross taxable income for the five years preceding the year in which the change
in control occurs (or, if he has been employed by the Company for less than
those five years, for the number of those years during which he has been
employed by the Company, with any partial year annualized), including base
salary and annual bonus. Additionally, the change in control contract vests all
options granted pursuant to the Stock Option Plan and the Unit Option Plan and
benefits awarded under the 1997 Performance Award Program. Additionally, the
executive will receive a lump sum cash payment equal to a stated multiple of the
value of all of the executive's unexercised stock options and Common Unit
options. The multiple is three times for Mr. Gibson, two times for Messrs.
Turner and Liuzzo and one time for Messrs. Fritsch and Eakin. The contracts are
effective until March 31, 2000, and are automatically extended for one
additional year commencing at March 31, 1998 and each March 31 thereafter.
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EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The executive compensation committee (the "Committee") consists of
Messrs. Adler, Graham, Orr and Sloan. None of the members of the Committee is an
employee of the Company. Mr. Sloan is a former officer of the predecessor of the
Company.
On March 18, 1997, the Company purchased 5.68 acres of development land
in Raleigh, North Carolina for $1,298,959 from Rex Drive Associates, a
partnership in which Mr. Sloan has an 8.5% limited partnership interest. Mr.
Sloan is chairman of the Board of Directors. The purchase price was reached
through negotiation with the managing partner of Rex Drive Associates, who is
not an affiliate of the Company. The Company believes the purchase price was at
market rates.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation committee makes recommendations to the Board
of Directors regarding compensation and benefit policies and practices and
incentive arrangements for executive officers and key managerial employees of
the Company. The Committee also considers and grants awards under the Stock
Option Plan and the Highwoods/Forsyth Limited Partnership 1997 Unit Option Plan
(the "Unit Option Plan").
The Committee is comprised of Independent Directors. During 1997, the
Committee met four times to review and evaluate executive compensation and
benefit programs.
EXECUTIVE OFFICER COMPENSATION POLICIES. The Committee's executive
compensation policies are designed to (a) attract and retain the best
individuals critical to the success of the Company, (b) motivate and reward such
individuals based on corporate, business unit and individual performance, and
(c) align executives' and stockholders' interests through equity-based
incentives.
Compensation for executives is based on the following principles:
variable compensation should comprise a significant part of an executive's
compensation, with the percentage at-risk increasing at increased levels of
responsibility; employee stock ownership aligns the interests of employees and
stockholders; compensation must be competitive with that offered by companies
that compete with the Company for executive talent; and differences in executive
compensation within the Company should reflect differing levels of
responsibility and performance.
A key determinant of overall levels of compensation is the pay
practices of public equity real estate investment trusts that have revenues
comparable to the Company's (the "peer group"). The peer group was chosen by the
Company's independent compensation and benefit consultants.
There are three components to the Company's executive compensation
program: base salary, annual incentive compensation and long-term incentive
compensation. The more senior the position, the greater the portion of
compensation that varies with performance.
Base salaries are set by the Committee and are designed to be
competitive with the peer group companies described above. Changes in base
salaries are based on the peer group's practices; the Company's performance; the
individual's performance, experience and responsibility; and increases in cost
of living indices. The corporate performance measures used in determining
adjustments to executive officers' base salaries are the same performance
measures used to determine annual and long-term incentive compensation discussed
below. Base salaries are reviewed for adjustment annually.
The Company's executive officers participate in a bonus program whereby
the individual executives are eligible for cash bonuses based on a percentage of
their annual base salary rate as of the prior December. The bonus percentage is
determined by competitive analysis and the executive's ability to influence
overall performance of the
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Company. The eligible bonus percentage is allocated in part to Company,
divisional and individual performance, in part to the achievement of individual
goals and in part to discretionary evaluation by the Committee. The Committee
considers growth in funds from operations ("FFO") per share, the volume and
quality of acquisitions and development, completed financing activity and other
measures in assessing the performance of the Company. Sixty to seventy-five
percent of the eligible bonus percentage is awarded upon achievement of 10% FFO
growth. Growth in per-share FFO for 1997 was 14%.
In addition to the cash bonus, and as an incentive to retain executive
officers, the Company's deferred compensation plan provides for the issuance of
phantom stock. Under the deferred compensation plan, employees are credited with
a specified number of units of phantom stock equal to such number of shares of
Common Stock as could be purchased with 25% of the employee's cash bonus. Five
years from the date of the phantom stock grant, employees will receive the value
of a share of Common Stock for each unit of phantom stock. At the end of such
five-year period, phantom stock holders also receive the value of the dividends
paid during the period on the corresponding Common Stock assuming dividend
reinvestment. At the discretion of the Committee, payouts with respect to
phantom stock grants may be made in shares of Common Stock or cash or both. If
an executive officer leaves the Company's employ for any reason (other than
death, disability or normal retirement) prior to the end of the five-year
period, all awards under the deferred compensation plan will be forfeited.
Long-term incentive compensation is also paid in the form of stock
options granted under the Stock Option Plan and Common Unit options granted
under the Unit Option Plan. The Committee believes that grants of stock options
align stockholder value and executive officer interests. The size of previous
grants and the number of shares held by an executive are not considered in
determining annual award levels. The Committee has not yet issued options with
respect to 1997 performance pending evaluation of information from the Company's
independent compensation and benefits consultants.
Stock options and Common Unit options are granted with an exercise
price equal to the fair market value per share on the date of grant. The options
generally vest over a five-year period beginning with the date of grant. Options
granted to executives in 1997 vest 20% after the third year, 30% after the
fourth year and 50% after the fifth year following the date of grant. No stock
option or Common Unit option awards are made in the absence of satisfactory
performance, which is evaluated by the Committee based on the executive's
individual contribution to the long-term health and growth of the Company.
Nonqualified stock options granted to executive officers in 1997 were
accompanied by a dividend equivalent right (a "DER") pursuant to the 1997
Performance Award Plan. The exercise price of such a stock option may be reduced
by an amount equal to the sum of all dividends and other distributions that are
made with respect to a share of Common Stock during the period beginning on the
date of grant and ending upon exercise or expiration of such stock option.
In 1997, the Board of Directors of the Company ratified and approved
the adoption of the Operating Partnership's Unit Option Plan. The Unit Option
Plan was established, and permits the Company, as general partner of the
Operating Partnership, to reward employees for valuable service and encourage
the continuation of such service by providing equity compensation to certain
employees of the Operating Partnership. Common Unit options are similar to
nonqualified stock options except that the holder is entitled to purchase Common
Units in the Operating Partnership. The Operating Partnership is controlled by
the Company as its sole general partner. Each Common Unit received upon the
exercise of a Common Unit option may be redeemed by the holder thereof for the
cash value of one share of Common Stock. Assuming approval of the proposed
amendment to the Stock Option Plan contained herein, the Company intends to
allow holders of the Common Unit options to convert them to nonqualified stock
options. See "Proposal Two: Amendment to Amended and Restated 1994 Stock Option
Plan."
Section 162(m) of the Internal Revenue Code generally denies a
deduction for compensation in excess of $1 million paid to certain executive
officers, unless certain performance, disclosure and stockholder approval
requirements are met. Option grants and certain other awards under the Stock
Option Plan and the Unit Option Plan are intended to qualify as
"performance-based" compensation not subject to Section 162(m) deduction
limitation. The Committee believes
9
<PAGE>
that a substantial portion of compensation awarded under the Company's
compensation program would be exempted from the $1 million deduction limitation.
The Committee's present intention is to qualify to the extent reasonable, a
substantial portion of each executive officer's compensation for deductibility
under applicable tax laws.
CHIEF EXECUTIVE OFFICER COMPENSATION. The salary and long-term
incentive awards of the Company's Chief Executive Officer, Mr. Ronald P. Gibson,
are determined substantially in conformity with the policies described above for
all other executive officers of the Company. Mr. Gibson was paid $285,551 in
base salary, $300,000 in annual incentive compensation and 2,017 units of
phantom stock valued at $75,000 in long-term incentive compensation for 1997.
Mr. Gibson was granted 350,000 stock and Common Unit options for 1996. Option
amounts for 1997 performance have not yet been determined.
EXECUTIVE COMPENSATION COMMITTEE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Thomas W. Adler William E. Graham, Jr. L. Glenn Orr, Jr. O. Temple Sloan, Jr.
</TABLE>
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.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of
Common Stock as of December 31, 1997 for each person or group known to the
Company to be holding more than 5% of the Common Stock and, as of March 17,
1998, for each director and Named Executive Officer and the directors and
executive officers of the Company as a group. The number of shares shown
represents the number of shares of Common Stock the person beneficially owns
plus the number of shares that may be issued upon redemption of Common Units,
whether or not such Common Units are currently redeemable. (Following the
expiration of a contractually imposed lockup period, the Operating Partnership
is obligated to redeem each Common Unit at the request of the holder thereof for
the cash value of one share of Common Stock or, at the Company's option, one
share of Common Stock.) Unless otherwise indicated in the footnotes, the
indicated person or entity has sole voting and investment power with respect to
the shares of Common Stock. The number of shares and Common Units shown are
those "beneficially owned," as determined by the rules of the Securities and
Exchange Commission, and such information is not necessarily indicative of
beneficial ownership for purposes of compliance with the ownership limit
contained in the Company's charter or for any other purpose.
<TABLE>
<CAPTION>
Number of
Shares
Beneficially Percent of
NAME OF BENEFICIAL OWNER Owned All Shares(1)
- ------------------------ ----- -------------
<S> <C> <C>
O. Temple Sloan, Jr. (2)............................................................ 519,454 1.0%
Ronald P. Gibson(3)(4).............................................................. 172,248 *
Gene H. Anderson(5)................................................................. 616,079 1.2%
John W. Eakin(6).................................................................... 353,099 *
Edward J. Fritsch(3)(7)............................................................. 57,329 *
James R. Heistand(8)................................................................ 1,523,917 2.9%
Carman J. Liuzzo(9)................................................................. 22,244 *
John L. Turner(10).................................................................. 470,341 *
Thomas W. Adler(11)................................................................. 22,520 *
William E. Graham, Jr.(12).......................................................... 16,051 *
L. Glenn Orr, Jr.(13)............................................................... 10,000 *
Willard H. Smith, Jr.(14)........................................................... 9,000 *
Stephen Timko(15)................................................................... 205,679 *
William T. Wilson III(16)........................................................... 451,004 *
ABKB/LaSalle Securities Limited Partnership and LaSalle
Advisors Capital Management, Inc.(17)......................................... 2,821,277 5.6%
Cohen & Steers Capital Management, Inc.(18)......................................... 4,054,500 8.0%
Templeton Global Advisors Limited and Franklin Resources, Inc.(19).................. 3,662,460 7.2%
All executive officers and directors as a group (15 persons)........................ 4,486,247 8.2%
</TABLE>
- -----------------------
* Less than 1%
(1) Assumes that all Common Units held by the person or group are redeemed
for shares of Common Stock even if not currently redeemable. The total
number of shares outstanding used in calculating this percentage
assumes that none of the Common Units held by other persons are
exchanged for shares of Common Stock.
11
<PAGE>
(2) Number of shares beneficially owned includes 139,540 shares currently
issuable upon exercise of options and 274,990 shares issuable upon
redemption of Common Units.
(3) Messrs. Gibson and Fritsch each own 49.5 shares (representing in the
aggregate a 1% economic interest) of the Class A (voting) stock of
Highwoods Services, Inc., a subsidiary of the Operating Partnership.
(4) Number of shares beneficially owned includes 31,300 shares currently
issuable upon exercise of options and 71,872 shares issuable upon
redemption of Common Units.
(5) Number of shares beneficially owned include 6,300 shares currently
issuable upon exercise of options and 609,779 shares issuable upon
redemption of Common Units.
(6) Number of shares beneficially owned includes 16,925 shares currently
issuable upon exercise of options, 60,000 shares issuable upon exercise
of warrants, and 75,000 shares issuable upon redemption of Common
Units.
(7) Number of shares beneficially owned includes 23,800 shares currently
issuable upon exercise of options and 10,144 shares issuable upon
redemption of Common Units.
(8) Number of shares beneficially owned includes 75,000 shares currently
issuable upon exercise of options, 887,574 shares issuable upon
exercise of warrants and 583,338 shares issuable upon redemption of
Common Units.
(9) Number of shares beneficially owned includes 21,300 shares issuable
upon redemption of Common Units.
(10) Number of shares beneficially owned includes 28,800 shares currently
issuable upon exercise of options, 35,000 shares issuable upon exercise
of warrants and 399,541 shares issuable upon redemption of Common
Units.
(11) Number of shares beneficially owned includes 15,000 shares currently
issuable upon exercise of options.
(12) Number of shares beneficially owned includes 11,051 shares currently
issuable upon exercise of options.
(13) Number of shares beneficially owned includes 9,000 shares currently
issuable upon exercise of options.
(14) Number of shares beneficially owned includes 5,500 shares currently
issuable upon exercise of options.
(15) Number of shares beneficially owned includes 10,872 shares currently
issuable upon exercise of options and 194,807 shares issuable upon
redemption of Common Units.
(16) Number of shares beneficially owned includes 150,000 shares currently
issuable upon exercise of options, 35,000 shares issuable upon exercise
of warrants and 258,204 shares issuable upon redemption of Common
Units.
(17) Address is 200 East Randolph Drive, Chicago, Illinois 60601. LaSalle
Advisors Capital Management, Inc. has sole voting power and investment
power with respect to 953,626 shares and shared investment power with
respect to 378,700 shares. ABKB/LaSalle Securities Limited Partnership
has sole voting and investment power with respect to 355,900 shares,
shared voting power with respect to 1,019,391 shares and shared
investment power with respect to 1,133,051 shares. Information obtained
from Schedule 13G filed with the Securities and Exchange Commission
(the "SEC").
(18) Address is 757 Third Avenue, New York, New York 10017. Owner has sole
investment power with respect to all shares and sole voting power with
respect to 3,530,400 shares. Information obtained from Schedule 13G
filed with the SEC.
(19) Address with respect to Templeton Global Advisors Limited is Lyford
Cay, P.O. Box N-7759, Nassau, Bahamas. Address with respect to Franklin
Resources, Inc. is 777 Mariners Island Boulevard, San Mateo, CA 94404.
Templeton Global Advisors Limited has sole voting and investment power
with respect to 2,857,200 shares. Franklin Advisers, Inc. has sole
voting and investment power with respect to 709,000 shares. Templeton
Investment Management Limited has sole voting and investment power with
respect to 87,000 shares. Franklin Management, Inc. has sole investment
power with respect to 9,260 shares. Information obtained from Schedule
13G filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 18, 1997, the Company purchased 5.68 acres of development land
in Raleigh, North Carolina for $1,298,959 from Rex Drive Associates, a
partnership in which Mr. Gibson and Mr. Sloan each has an 8.5% limited
partnership interest. Mr. Gibson is president and chief executive officer and a
director of the Company, and Mr. Sloan is chairman of the Board of Directors.
The purchase price was reached through negotiation with the managing partner of
Rex Drive Associates, who is not an affiliate of the Company. The Company
believes the purchase price was at market rates.
12
<PAGE>
On October 1, 1997, Gateway Holdings LLC, a limited liability company
controlled by Mr. Turner, purchased the Ivy Distribution Center in
Winston-Salem, North Carolina from the Company for $2,050,000. Mr. Turner is
vice chairman of the Board of Directors and chief investment officer of the
Company. The Company believes the purchase price was at market rates.
PROPOSAL TWO:
AMENDMENT TO AMENDED AND RESTATED 1994 STOCK OPTION PLAN
The Board of Directors has adopted a resolution recommending that the
stockholders approve an amendment to the Stock Option Plan that would increase
the number of shares authorized to be issued under the Stock Option Plan from
2,500,000 to 6,000,000. The Board of Directors believes this increase is
appropriate in light of the continuing rapid increase in the number of employees
of the Company from approximately 325 at the time of the approval of the
2,500,000- share limit to approximately 520 today. Information regarding the
Stock Option Plan is set forth below.
GENERAL. The Stock Option Plan is administered by the executive
compensation committee (the "Committee"). Officers, employees, independent
directors and independent contractors of the Company and its subsidiaries
generally are eligible to participate in the Stock Option Plan.
The Stock Option Plan authorizes the issuance of up to 2,500,000 shares
of Common Stock, of which not more than 200,000 may be restricted stock granted
as provided in clause (v) below, pursuant to the grant of (i) stock options that
qualify as incentive stock options ("ISOs") under Section 422 of the Internal
Revenue Code (the "Code"), (ii) stock options that do not so qualify as ISOs,
(iii) phantom stock awards, (iv) stock appreciation rights and (v) restricted
Common Stock ("Restricted Stock"), contingent upon the attainment of performance
goals or subject to other restrictions. If the affirmative vote of a majority of
the shares of Common Stock present and entitled to vote at the Meeting is
received approving the proposed amendment to the Stock Option Plan, the number
of shares authorized to be issued under the Stock Option Plan will be increased
to 6,000,000.
In connection with the grant of options under the Stock Option Plan,
the Committee determines the option term, any vesting requirements, and within
certain limits, the exercise price. The options granted under the Stock Option
Plan have 10-year terms and generally vest over a five-year period beginning
with the date of grant, subject to acceleration of vesting upon a change in
control of the Company. Generally, options terminate three months after
termination of employment with the Company and six months after an Independent
Director ceases to serve on the Board of Directors. The Committee may, however,
provide that an option may be exercised over a longer period following
termination of employment, but in no event beyond the expiration date of the
option. Any shares of Common Stock subject to options that are forfeited or
otherwise terminated other than by exercise will again be available for granting
under the Stock Option Plan. To date, the exercise price of options granted
under the Stock Option Plan has been equal to the fair market value of the
Common Stock on the date of grant. Payment for shares of Common Stock granted
under the Stock Option Plan may be made either in cash or by exchanging Common
Stock having a fair market value equal to the option exercise price.
Phantom stock awards, stock appreciation rights ("SARs") and Restricted
Stock may be granted pursuant to the terms and conditions established by the
Committee. Payments with respect to such grants may be in the form of cash or
shares of Common Stock. Recipients of the phantom stock awards granted to date
under the Stock Option Plan are not entitled to receive payment with respect to
such awards until five years from the date of grant. The Committee has not
granted SARs or Restricted Stock under the Stock Option Plan.
The Stock Option Plan may be amended or terminated by the Board of
Directors, but no amendment that is required to be approved by the stockholders
of the Company (i) as a condition of exemption of purchases from Section 16(b)
of the Securities and Exchange Act of 1934 or (ii) to ensure the options granted
qualify as ISOs under the Code shall be effective until it is so approved.
13
<PAGE>
The following table sets forth the number of stock options granted
under the Stock Option Plan since its inception to the Named Executive Officers,
nominees for election to the Board of Directors, the Company's current executive
officers as a group, the Company's directors who are not executive officers as a
group and all employees of the Company who are not executive officers as a
group:
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF STOCK OPTIONS
- ----------------- -----------------------
<S> <C>
Ronald P. Gibson 128,900
John L. Turner 103,900
Edward J. Fritsch 92,230
John W. Eakin 94,730
Carman J. Liuzzo 93,900
James R. Heistand 33,400
L. Glenn Orr, Jr. 14,000
Stephen Timko 15,872
Executive Officers as a Group (8 persons) 638,190
Non-Executive Directors as a Group (7 persons) 432,463
Non-Executive Officer Employees as a Group (approximately 300 persons) 1,227,529
</TABLE>
TAX TREATMENT. There are no federal income tax consequences to an
individual or to the Company upon the grant of a non-discounted, non-qualified
stock option under the Stock Option Plan. Upon the exercise of a non-qualified
stock option, an individual will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of the shares at the time of
exercise over the exercise price of the non-qualified stock option, and the
Company generally will be entitled to a corresponding federal income tax
deduction. Upon the sale of shares acquired by the exercise of a non-qualified
stock option, an individual will have a capital gain or loss at a rate depending
upon the amount of time the grantee held the shares in an amount equal to the
difference between the amount realized upon the sale and the individual's
adjusted tax basis in the shares (the exercise price plus the amount of ordinary
income recognized by the individual at the time of exercise of the non-qualified
stock option).
An employee will not recognize federal taxable income, upon either the
grant or exercise of the ISO. However, the amount by which the fair market value
of the shares at the time of exercise exceeds the option exercise price, is a
tax preference item possibly giving rise to alternative minimum tax. An employee
who disposes of the shares acquired upon exercise of an ISO after two years from
the date the ISO was granted and after one year from the date such shares were
transferred to him or her upon exercise of the ISO will recognize capital gain
or loss at a rate depending upon the amount of time the grantee held the shares
in the amount of the difference between the amount realized on the sale and the
exercise price, and the Company will not be entitled to any tax deduction by
reason of the grant or exercise of the ISO. As a general rule, if an employee
disposes of the shares acquired upon exercise of an ISO before satisfying both
holding period requirements (a "disqualifying disposition"), his or her gain
recognized on such a disposition will be taxed as ordinary income to the extent
of the difference between the fair market value of such shares on the date of
exercise and the exercise price, and the Company will be entitled to a deduction
in that amount. The gain, if any, in excess of the amount recognized as ordinary
income on such a disqualifying disposition will be capital gain, taxed at a rate
depending upon the amount of time the grantee held the shares.
COMMON UNIT OPTIONS. Certain of the Company's executive officers and
directors have received Common Unit options pursuant to the Unit Option Plan.
Common Unit options are similar to non-qualified stock options except that the
holder is entitled to purchase Common Units in the Operating Partnership. The
Operating Partnership is controlled by the
14
<PAGE>
Company as its sole general partner. Each Common Unit received upon the exercise
of a Common Unit option may be redeemed by the holder thereof for the cash value
of one share of Common Stock. Assuming approval of the proposed amendment to the
Stock Option Plan contained herein, the Company intends to allow holders of the
Common Unit options to convert them to non-qualified stock options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
STOCK OPTION PLAN SO AS TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
UNDER THE STOCK OPTION PLAN FROM 2,500,000 TO 6,000,000 SHARES.
PROPOSAL THREE:
AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
The present capital structure of the Company authorizes 100,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock each having a
par value of $.01 per share. The Board of Directors believes this capital
structure is inadequate for the present and future needs of the Company.
Therefore, the Board of Directors has unanimously approved the amendment of the
Company's Amended and Restated Articles of Incorporation (the "Articles") to
increase the authorized number of shares of Common Stock from 100,000,000 to
200,000,000 and the authorized number of shares of Preferred Stock from
10,000,000 to 50,000,000. The Board of Directors believes this capital structure
more appropriately reflects the present and future needs of the Company and
recommends such amendment to the Company's stockholders for approval. On March
17, 1998, approximately 50.6 million shares of Common Stock were outstanding,
approximately 10.5 million shares of Common Stock were reserved for issuance
upon exchange of outstanding Common Units and approximately 7.0 million shares
of Preferred Stock were outstanding.
The Board of Directors believes that the proposed increase is desirable
so that, as the need may arise, the Company will have more flexibility to issue
shares of Common Stock, without the expense and delay of a special stockholders'
meeting, in connection with possible future stock dividends or stock splits,
equity financings, future opportunities for expanding the business through
acquisitions (such as mergers), incentive compensation of directors and
employees, and for other corporate purposes for which the issuance of Common
Stock may be advisable.
The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. However, the Board of Directors
will have the authority to issue authorized Common Stock without requiring
future stockholder approval of such issuances, except as may be required by
applicable law or stock exchange regulations. To the extent that additional
authorized shares are issued in the future, they will decrease the existing
stockholders' percentage equity ownership and, depending upon the price at which
they are issued, could be dilutive to the existing stockholders. The holders of
Common Stock have no preemptive rights.
The Preferred Stock may be issued in such classes or series as the
Board of Directors may determine and the Board of Directors may establish from
time to time the number of shares of Preferred Stock to be included in any such
class or series and to fix the designation and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of any such
class or series, and such other subjects or matters as may be fixed by
resolution of the Board of Directors. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company or other transaction in which holders of shares of Preferred Stock might
receive a premium for such shares over the market price.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
ARTICLES SO AS TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO
200,000,000 AND TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
TO 50,000,000.
15
<PAGE>
PROPOSAL FOUR:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the audit committee,
has appointed the accounting firm of Ernst & Young LLP to serve as independent
auditors of the Company for the fiscal year ending December 31, 1998, subject to
ratification of this appointment by the stockholders of the Company. Ernst &
Young LLP has served as independent auditors of the Company since its
commencement of operations and is considered by management of the Company to be
well qualified. The Company has been advised by that firm that neither it nor
any member thereof has any financial interest, direct or indirect, in the
Company or any of its subsidiaries in any capacity.
Representatives of Ernst & Young LLP will be present at the Meeting,
will have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE
1998 FISCAL YEAR.
16
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares the Company's
performance to the S&P 500 and the index of equity real estate investment trusts
prepared by NAREIT. The stock price performance graph assumes an investment of
$100 in the Company on June 7, 1994 (the effective date of the IPO) and the two
indices on May 31, 1994 and further assumes the reinvestment of all dividends.
Equity real estate investment trusts are defined as those which derive more than
75% of their income from equity investments in real estate assets. The NAREIT
equity index includes all tax qualified real estate investment trusts listed on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market System. Stock price performance is not necessarily indicative of future
results.
[Performance Graph appears here]
TOTAL RETURN PERFORMANCE
PERIOD ENDING
-----------------------------------------------
INDEX 6/10/94 12/31/94 12/31/95 12/31/96 12/31/97
- ------------------------------------------------------------------------------
Highwoods Properties, Inc. 100.00 105.47 148.42 189.02 221.10
S&P 500 100.00 101.70 139.92 171.91 229.28
NAREIT All Equity REIT Index 100.00 96.42 111.01 150.66 181.19
THE STOCK PRICE PERFORMANCE GRAPH SHALL 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.
OTHER MATTERS
The Company's management knows of no other matters that may be
presented for consideration at the Meeting. However, if any other matters
properly come before the Meeting, it is the intention of the person named in the
proxy to vote such proxy in accordance with his judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders to be presented at the 1999 annual meeting of
stockholders must be received by the Secretary of the Company prior to December
3, 1998 to be considered for inclusion in the 1999 proxy material.
VOTING PROCEDURES AND
COSTS OF PROXY SOLICITATION
The presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting constitutes a
quorum. Shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee that are represented at the
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. Directors
will be elected by a favorable vote of a plurality of the voting
17
<PAGE>
shares of Common Stock present and entitled to vote, in person or by proxy, at
the Meeting. Accordingly, abstentions or broker non-votes as to the election of
directors will not affect the election of the candidates receiving the most
votes. All other proposals to come before the Meeting require the approval of a
majority of the shares of Common Stock present and entitled to vote. Abstentions
as to a particular proposal will have the same effect as votes against such
proposal. Broker non-votes, however, will be treated as unvoted for purposes of
determining approval of such proposals and will not be counted as votes for or
against such proposal.
The costs of preparing, assembling and mailing the proxy material will
be borne by the Company. The Company will also request persons, firms and
corporations holding shares in their names or in the names of their nominees,
which shares are beneficially owned by others, to send the proxy material to,
and to obtain proxies from, such beneficial owners and will reimburse such
holder for their reasonable expenses in doing so.
The Company has retained Corporate Communications, Inc. and First Union
National Bank (collectively, the "Consultants") to assist in the process of
identifying and contacting stockholders for the purpose of soliciting proxies.
The entire expense of engaging the services of the Consultants to assist in
proxy solicitation is projected to be $5,000 in fees paid to them, exclusive of
certain other fees paid to First Union National Bank in connection with the
operation of the annual meeting.
Your vote is important. Please complete the enclosed proxy card and
mail it in the enclosed postage-paid envelope as soon as possible. Thank you.
By Order of the Board of Directors
O. TEMPLE SLOAN, JR.
CHAIRMAN OF THE BOARD OF DIRECTORS
April 14, 1998
18
<PAGE>
P R O X Y
HIGHWOODS PROPERTIES, INC.
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14, 1998
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Highwoods Properties, Inc. (the "Company") to be held
on May 14, 1998, and the Proxy Statement in connection therewith; (b) appoints
Ronald P. Gibson as Proxy (the "Proxy") with the power to appoint a substitute;
and (c) authorizes the Proxy to represent and vote, as designated below, all the
shares of Common Stock of the Company, held of record by the undersigned on
March 17, 1998, at such Annual Meeting and at any adjournment(s) thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE PROPOSALS:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees (except as [ ] WITHHOLD AUTHORITY
indicated to the contrary below) to vote for al nominees
NOMINEES: John W. Eakin, Glenn Orr, Jr., Stephen Timko and James R. Heistand.
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT OF THE AMENDED AND RESTATED 1994 STOCK OPTION
PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE AMENDMENT OF THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS for the fiscal year ending December 31, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. OTHER BUSINESS: In his discretion, the Proxy is authorized to vote upon
such other business as may properly come before the meeting or any
adjournments thereof
[ ] FOR [ ] WITHHOLD AUTHORITY
6. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR, "FOR"
PROPOSAL TWO, "FOR" PROPOSAL THREE AND "FOR" PROPOSAL FOUR.
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<PAGE>
DATED: ____________________________________________
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Signature
(Please sign exactly as your name appears hereon.
When signing on behalf of a corporation,
partnership, estate, trust or in any other
representative capacity, please sign your name and
title. For joint accounts, each joint owner must
sign.)
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU
OWN FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
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