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:
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
HIGHWOODS PROPERTIES, INC.
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(Name of Registrant as Specified in its Charter)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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[ ] 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
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[logo]
HIGHWOODS PROPERTIES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 24, 2000
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You are cordially invited to attend the 2000 annual meeting of
stockholders of Highwoods Properties, Inc. to be held on Wednesday, May 24,
2000, at 11:00 a.m., at the North Carolina Bar Center, James K. Dorsett Jr.
Auditorium, 8000 Weston Parkway, Cary, North Carolina, for the following
purposes:
1. To elect five directors;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of Highwoods for the 2000 fiscal year; and
3. 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 27, 2000
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
/s/ Edward J. Fritsch
------------------------
EDWARD J. FRITSCH
Executive Vice President, Chief
Operating Officer
and Secretary
<PAGE>
HIGHWOODS PROPERTIES, INC.
3100 Smoketree Court, Suite 600
Raleigh, North Carolina 27604
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
-------------------------------
To Be Held On May 24, 2000
This proxy statement is furnished to stockholders of Highwoods Properties,
Inc., a Maryland corporation, in connection with the solicitation of proxies
for use at the 2000 annual meeting of stockholders of Highwoods to be held on
Wednesday, May 24, 2000, at 11:00 a.m., at the North Carolina Bar Center, James
K. Dorsett Jr. Auditorium, 8000 Weston Parkway, Cary, North Carolina, for the
purposes set forth in the notice of meeting. This solicitation is made on
behalf of the Board of Directors of Highwoods.
Holders of record of shares of common stock of Highwoods as of the close
of business on the record date, March 27, 2000, 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 27, 2000, there were 59,719,913 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 proposal to ratify the appointment of Ernst & Young LLP as independent
auditors and FOR authorization of the proxy to vote upon such other business as
may properly come before the meeting or any adjournments thereof. To be voted,
proxies must be filed with the secretary of Highwoods 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 Highwoods or by voting in person at the meeting.
Proposal One, the election of directors of Highwoods, requires the vote of
a plurality of all of the votes cast at the meeting provided that a quorum is
present. For purposes of the election of directors, abstentions will not be
counted as votes cast and will have no effect on the result of the vote,
although they will count toward the presence of a quorum.
Proposal Two, ratification of the appointment of Ernst & Young LLP,
requires the affirmative vote of a majority of the votes cast on the proposal
provided that a quorum is present. For purposes of the vote on Proposal Two,
abstentions will not be counted as votes cast and will have no effect on the
result of the vote, although they will count toward the presence of a quorum.
Highwoods' 1999 Annual Report has been mailed with this proxy statement.
This proxy statement, the form of proxy and the 1999 Annual Report were mailed
to stockholders on or about March 31, 2000. The principal executive offices of
Highwoods are located at 3100 Smoketree Court, Suite 600, Raleigh, North
Carolina 27604.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Board of Directors
The directors of Highwoods are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
Gene H. Anderson, Ronald P. Gibson and O. Temple Sloan, 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 2003 annual meeting
of stockholders and until their successors are elected and qualified. John L.
Turner, whose term of office also expires at the meeting, has been nominated
for election at the meeting as a director for a two-year term, to hold office
until the 2002 annual meeting of stockholders and until his successor is
elected and qualified. William E. Graham, Jr., 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 2001 annual meeting of
stockholders and until his successor is elected and qualified.
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The Board of Directors of Highwoods recommends a vote FOR Messrs.
Anderson, Gibson, Graham, Sloan and Turner 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 2003
Gene H. Anderson, 54, has been a director and senior vice president of
Highwoods since its combination with Anderson Properties, Inc. in February
1997. Mr. Anderson previously served as president of Anderson Properties, Inc.
since 1978. Mr. Anderson is an officer and former director of the National
Association of Industrial and Office Properties.
Ronald P. Gibson, 55, has been president, chief executive officer and a
director of Highwoods since its first election of officers in March 1994. Mr.
Gibson is a founder of Highwoods' 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., 61, is chairman of the Board of Directors, a
position he has held since March 1994. Mr. Sloan is a founder of the
predecessor of Highwoods. He has been chairman and chief executive officer of
General Parts, Inc., a nationwide distributor of automobile replacement parts,
since its founding in 1961. Mr. Sloan is a director of BankAmerica Corp. and
Southern Equipment Company and is a trustee of St. Andrews College.
Nominee for Election to Term Expiring 2002
John L. Turner, 53, has been vice chairman of the Board of Directors and
chief investment officer of Highwoods since its combination with Forsyth
Partners in February 1995. Mr. Turner co-founded the predecessor of Forsyth
Partners in 1975 and served as its chairman of the board of directors and chief
executive officer prior to joining Highwoods. Mr. Turner serves on the boards
of visitors of the University of North Carolina and St. Mary's College in
Raleigh. Mr. Turner is the managing partner of Gateway Holdings LLC.
Nominee for Election to Term Expiring 2001
William E. Graham, Jr., 70, has been a director of Highwoods since its
initial public offering. 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 BankAmerica Corp. He also serves
on the board of trustees of BB&T Mutual Funds Group.
Incumbent Directors -- Term Expiring 2001
James R. Heistand, 48, has been a director of Highwoods since May 1998 and
is currently a principal in Capital Partners, Inc. Mr. Heistand served as a
senior vice president of Highwoods from October 1997 until April 30, 1999, when
he became a consultant to Highwoods and resigned his executive officer
position. Mr. Heistand previously served as chairman of Associated Capital
Properties, Inc. from 1989 to 1997.
L. Glenn Orr, Jr., 59, has been a director of Highwoods since February
1995. Mr. Orr has been president and chief executive officer of The Orr Group,
which provides investment banking and consulting services for middle market
companies, since 1995. Mr. Orr was chairman of the board of directors,
president and chief executive officer of Southern National Corporation from
1990 until its merger with Branch Banking & Trust in 1995. Mr. Orr is a member
of the boards of directors of Village Tavern, Inc., Broyhill Management Fund,
Inc. 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.
Incumbent Directors -- Term Expiring 2002
Thomas W. Adler, 59, has been a director of Highwoods since its initial
public offering in June 1994. Mr. Adler is managing partner of NewGar, Ltd. in
Cleveland, Ohio. Prior to the formation of NewGar, Mr. Adler had been a
principal of Cleveland Real Estate Partners since 1988. Mr. Adler has served as
a member of the executive committee and board of governors of the National
Association of Real Estate Investment Trusts, and he was national president in
1990 of the Society
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of Industrial and Office Realtors. Mr. Adler formerly served on the board of
directors of the National Association of Realtors and on the board of governors
of the American Society of Real Estate Counselors.
Kay Nichols Callison, 56, has been a director of Highwoods since its
merger with J.C. Nichols Company in July 1998. Ms. Callison previously served
as a director of J.C. Nichols Company since 1982. For more than five years, Ms.
Callison has been active in charitable activities in the Kansas City
metropolitan area.
Willard H. Smith Jr., 63, has been a director of Highwoods since April
1996. Mr. Smith previously served as a managing director of Merrill Lynch from
1983 to 1995. 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, Cohen & Steers Institutional Equity Shares, Inc., Essex
Property Trust, Inc., Realty Income Corporation, Willis Lease Financial
Corporation and Crest Net Lease, Inc.
Committees of the Board of Directors; Meetings
The Board of Directors has established an audit committee consisting of
Messrs. Graham and Smith and Ms. Callison. 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 Highwoods' internal accounting controls. During 1999, the audit
committee held four meetings.
The Board of Directors has established an executive compensation committee
to determine compensation for Highwoods' executive officers and to implement
Highwoods' Amended and Restated 1994 Stock Option Plan (the "Stock Option
Plan") and Shareholder Value Plan. The executive compensation committee
consists of Messrs. Adler, Graham, Orr and Sloan. During 1999, the executive
compensation committee held five meetings.
The Board of Directors has established an investment committee consisting
of Messrs. Adler, Anderson, Gibson, Sloan and Turner. The investment committee
oversees the acquisition, new development and asset disposition process. The
investment committee generally meets weekly to review new opportunities and to
make formal recommendations to the Board of Directors concerning such
opportunities.
The Board of Directors has established a special committee consisting of
Messrs. Orr, Graham and Smith. The special committee meets on call to review
strategic alternatives that may be available to Highwoods.
The Board of Directors has established an executive committee consisting
of Messrs. Adler, Gibson, Heistand, Orr, Sloan and Turner. 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 1999.
Compensation of Directors
Highwoods pays directors who are not employees of Highwoods fees for their
services as directors. During 1999, non-employee directors received annual
compensation of $18,000 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-employee directors on the
investment committee each received an additional annual retainer of $30,000 and
$1,000 per day for property visits in 1999. Also, directors on the special
committee each received an additional retainer of $90,000 in 1999. Upon
becoming a director of Highwoods, each non-employee director received options
to purchase 10,000 shares of common stock at an exercise price equal to the
fair market value on the date of grant. Non-employee 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 Highwoods who are directors are not paid any director fees.
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<PAGE>
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 Highwoods (the "Named Executive Officers")
for the year ended December 31, 1999:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Securities
---------------------- Underlying All Other
Name and Principal Position Year Salary Bonus(1) Options(#)(2) Compensation(3)
- --------------------------------------- ------ ----------- ---------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Ronald P. Gibson 1999 $350,000 $157,178 220,845 $11,994
President and Chief Executive Officer 1998 $347,352 $437,500 30,000 $11,646
1997 $285,551 $375,000 350,000 $ 9,550
Edward J. Fritsch 1999 $284,000 $112,534 102,400 $ 5,535
Executive Vice President, Chief 1998 $264,839 $343,750 30,000 $ 5,505
Operating Officer and Secretary 1997 $177,262 $200,000 100,000 $ 5,485
John L. Turner 1999 $255,000 $101,043 91,944 $10,800
Chief Investment Officer 1998 $240,134 $312,500 -- $10,800
1997 $199,836 $250,000 210,000 $10,750
Carman J. Liuzzo 1999 $220,000 $ 87,174 79,324 $ 5,550
Vice President, Chief Financial 1998 $216,189 $275,000 30,000 $ 5,550
Officer and Treasurer 1997 $170,168 $200,000 220,000 $ 5,550
Mack D. Pridgen III 1999 $196,000 $ 77,863 29,837 $ 4,800
Vice President and General Counsel 1998 $190,000 $190,000 30,000 $ 4,800
1997 $180,000 $ 63,000 60,000 $ 1,946
</TABLE>
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(1) Includes amounts earned in the indicated period that were paid in the
following year. Twenty percent of the bonus amounts during 1997 and 1998
was paid in the form of units of phantom stock. The Named Executive
Officers were 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, the Named Executive Officers will receive the value of a
share of common stock for each unit of phantom stock and an additional
amount equal to 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 a Named Executive Officer leaves Highwoods' employ for
any reason (other than death, disability or normal retirement) prior to
the end of the five-year period, all phantom stock awards will be
forfeited.
(2) Options include incentive stock options and nonqualified stock options.
Options have varying vesting schedules of no less than four years
beginning with the date of grant. Amounts shown include options granted
during the indicated period with respect to the prior year's performance.
(3) Includes a vehicle allowance, if any, and amounts contributed by Highwoods
under the Salary Deferral and Profit Sharing Plan.
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The following table sets forth information with respect to options granted in
1999 to the Named Executive Officers:
Option Grants in 1999
<TABLE>
<CAPTION>
Percent of Potential Realizable
Number of Total Options Annual Rates of
Securities Granted to Exercise Stock Price Appreciation
Underlying Employees Price Expiration for Option Term (2)
Name Options (1) in 1999 Per Share Date 5% 10%
- ----------------------------- ------------- -------------- ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald P. Gibson ............ 220,845 26.2% $ 22.19 March 25, 2009 $3,082,996 $7,809,079
Edward J. Fritsch ........... 102,400 12.1% $ 22.19 March 25, 2009 $1,429,504 $3,620,864
John L. Turner .............. 91,944 10.9% $ 22.19 March 25, 2009 $1,283,538 $3,251,140
Carman J. Liuzzo ............ 79,324 9.4% $ 22.19 March 25, 2009 $1,107,363 $2,804,896
Mack D. Pridgen III ......... 70,851 8.4% $ 22.19 March 25, 2009 $ 989,080 $2,505,291
</TABLE>
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(1) Options granted in 1999 were based on 1998 performance. Options granted in
1999 generally vest over a four-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 Highwoods in order to
exercise the options.
The following table sets forth information with respect to options held by
the Named Executive Officers as of December 31, 1999:
Disposition of Options in 1999/1999 Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Underlying Underlying Options at In-the-Money
Options Value 1999 Year-End (1) Options at 1999 Year-End (2)(3)
Name Disposed of Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- ------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald P. Gibson ............ -- -- 71,950 588,895 $105,200 $318,015
Edward J. Fritsch ........... -- -- 54,450 217,950 $ 78,900 $147,456
John L. Turner .............. -- -- 54,450 292,494 $129,600 $132,399
Carman J. Liuzzo ............ -- -- 49,950 314,874 $ 65,750 $114,227
Mack D. Pridgen III ......... -- -- 17,100 183,751 -- $102,025
</TABLE>
- ---------
(1) Options include incentive stock options and nonqualified stock options.
Options have a vesting schedule of no less than four years beginning with
the date of grant.
(2) Based on a closing price of $23.63 per share of common stock on December
31, 1999.
(3) Up to one-third of the nonqualified stock options granted to the Named
Executive Officers in 1997 were accompanied by a dividend equivalent right
(a "DER") pursuant to the 1997 Performance Award Plan. If the total return
on a share of common stock exceeds certain thresholds, the exercise price
of such a stock option will be reduced by an amount equal to the sum of
all dividends and other distributions that are made with respect to such a
share during the period beginning on the date of grant and ending upon
exercise 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 realizable value of such options may be higher upon
exercise, than the amounts set forth in the table.
Employment Contracts
Highwoods has entered into a change in control contract with each of
Messrs. Gibson, Fritsch, Turner, Liuzzo and Pridgen. The contracts generally
provide that if within 24 months from the date of a change in control (as
defined below), the employment of Messrs. Gibson, Fritsch, Turner, Liuzzo or
Pridgen is terminated without cause, including a voluntary termination because
their responsibilities are changed, their salaries are reduced or their
responsibilities are diminished or in the event of a voluntary termination for
any reason in months 13, 14 or 15 following the change of control, Messrs.
Gibson, Fritsch, Turner, Liuzzo or Pridgen will be entitled to receive 2.99
times a base amount. An executive's base amount for these purposes is equal to
12 times the highest monthly salary paid to the executive during the
twelve-month period ending prior to the change of control plus the greater of
(1) the average annual bonus for the preceding three years or (2) the last
annual
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bonus paid or payable to the executive. Additionally, the Stock Option Plan,
the phantom stock plan, the 1997 Performance Award Program and the Shareholder
Value Plan provide for the immediate vesting of all options and benefits upon a
change of control. 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. The multiple is three times for Mr. Gibson and two
times for Messrs. Fritsch, Turner, Liuzzo and Pridgen. The contracts are
effective until March 31, 2002, and are automatically extended for one
additional year commencing at March 31, 2000 and each March 31 thereafter.
For purposes of the contracts described in the preceding paragraph,
"change in control" generally means any of the following events: (1) the
acquisition by a third party of 20% or more of the then outstanding common
stock of Highwoods; (2) individuals who currently constitute the Board of
Directors (or individuals who subsequently become a director whose election or
nomination was approved by at least a majority of the directors currently
constituting the Board of Directors) cease for any reason to constitute a
majority of the Board of Directors; (3) approval by Highwoods' stockholders of
a reorganization, merger or consolidation in which Highwoods is not the
surviving entity; or (4) approval by Highwoods' stockholders of a complete
liquidation or dissolution of Highwoods or the sale or other disposition of all
or substantially all of the assets of Highwoods.
Executive Compensation Committee Interlocks and Insider Participation
The executive compensation committee consists of Messrs. Adler, Graham,
Orr and Sloan. None of the members of the executive compensation committee is
an employee of Highwoods. Mr. Sloan is a former officer of the predecessor of
Highwoods.
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
Highwoods. It directs the administration of the Stock Option Plan and other
management incentive compensation plans of Highwoods. The executive
compensation committee's compensation policies are designed to (a) attract and
retain key individuals critical to the success of Highwoods, (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. During 1999, the executive compensation committee met
five times and implemented a new executive compensation program based upon
extensive input from and the recommendation of William M. Mercer, Incorporated,
an independent compensation consulting firm.
Compensation for executives will continue to be based generally 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 Highwoods for executive talent; and
differences in executive compensation within Highwoods should reflect differing
levels of responsibility and performance. A key determinant of overall levels
of compensation remains the pay practices of public equity real estate
investment trusts that have revenues comparable to Highwoods. This peer group
was chosen by Highwoods' independent compensation and benefit consultants.
Overall compensation is intended to be at, above or below competitive levels
depending upon the performance of Highwoods relative to its targeted
performance and the performance of its peer group.
There are three components to Highwoods' 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.
Annual Compensation. Executive salaries other than that of the Chief
Executive Officer are recommended to the executive compensation committee by
the Chief Executive Officer in consultation with the Chief Operating Officer
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;
Highwoods' performance; the individual's performance, experience and
responsibility; and increases in cost of living indices. Base salaries are
reviewed for adjustment annually. The Chief Executive Officer's base salary is
established by the executive compensation committee with input from Highwoods'
outside compensation consultants.
Highwoods' executive officers participate in an annual cash incentive
bonus program whereby they are eligible for cash bonuses based on a percentage
of their annual base salary as of the prior December. Each executive's target
level bonus is determined by competitive analysis and the executive's ability
to influence overall performance of Highwoods and, assuming certain levels of
Highwoods' performance, ranges from 40% to 85% of base salary depending on
position in Highwoods. The eligible bonus percentage for each executive is
determined by a weighted average of Highwoods' actual performance
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versus its annual plan using the following measures: return on invested
capital, growth in funds from operations ("FFO") per share, property level cash
flow as a percentage of plan, general and administrative expenses as a
percentage of revenue and growth in same store net operating income. To the
extent this weighted average is less than or exceeds Highwoods' targeted
performance level, the bonus percentage paid is proportionally reduced or
increased on a predetermined scale. Depending on Highwoods' performance, annual
incentive bonuses could range from zero to 200% of an executive's target level
bonus. For 1999, Highwoods did not meet its targeted performance level on an
overall basis and the average bonus percentage for the executive group
(excluding the Chief Executive Officer) was 54% of their target level bonus.
The percentage bonus for the Chief Executive Officer was 53% of his target
level bonus.
Long-Term Incentives. In addition to the cash bonus, and as an incentive
to retain executive officers, Highwoods' deferred compensation plan for the
officers provides for participation in a long term incentive plan which
includes annual grants of stock options, restricted shares and units in its
Shareholder Value Plan.
Highwoods' outside compensation consultants, after consideration of
Highwoods' stated objectives for its long-term incentive program and similar
programs of its peers, recommended that Highwoods replace its program of
intermittent stock option grants and phantom stock with a three-pronged
approach to long-term incentive compensation. Based on these recommendations,
Highwoods instituted a program beginning in 1999 which includes annual awards
of stock options, restricted stock and grants under the Shareholder Value Plan.
The mix of awards varies by position in Highwoods and for certain corporate
officers, including the Chief Executive Officer, no restricted shares are
granted. The stock options vest ratably over four years. The restricted shares
vest 50% after three years and 50% after five years.
The Shareholder Value Plan rewards the executive officers of Highwoods
when the total shareholder returns measured by increases in the market value of
Highwoods common shares plus the dividends on those shares exceeds a comparable
index of Highwoods' peers over a three-year period. The payout for this program
is determined by Highwoods' percent change in shareholder return compared to
the composite index of its peer group. If Highwoods' performance is not at
least 100% of the peer group index, no payout is made. To the extent
performance exceeds the peer group, the payout increases. A new three-year plan
cycle begins each year under this program.
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 are
intended to qualify as "performance-based" compensation not subject to the
Section 162(m) deduction limitation. The executive compensation committee
believes that a substantial portion of compensation awarded under Highwoods'
compensation program would be exempted from the $1 million deduction
limitation. The executive compensation 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 Highwoods' Chief Executive Officer, Mr. Ronald P. Gibson, are
determined substantially in conformity with the policies described above for
all other executive officers of Highwoods. Mr. Gibson was paid $350,000 in base
salary and $157,178 in cash incentive compensation, was granted 220,845 stock
options and will participate in the Shareholder Value Plan. Mr. Gibson was not
granted any restricted shares in 1999.
Executive Compensation Committee
Thomas W. Adler William E. Graham, Jr. L. Glenn Orr, Jr. O. Temple Sloan, 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 Highwoods specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
7
<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, 1999 for each person or group known to
Highwoods to be holding more than 5% of the common stock and for each director
and Named Executive Officer and the directors and executive officers of
Highwoods 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 partnership interests ("Common
Units") in Highwoods Realty Limited Partnership (the "Operating Partnership"),
whether or not such Common Units are currently redeemable. The Operating
Partnership is controlled by Highwoods as its sole general partner. 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
Highwoods' 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
SEC, and such information is not necessarily indicative of beneficial ownership
for purposes of compliance with the ownership limit contained in Highwoods'
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) ............................................... 557,249 *
Ronald P. Gibson (3)(4) ................................................ 220,466 *
Gene H. Anderson (5) ................................................... 809,348 1.3%
Edward J. Fritsch (3)(6) ............................................... 90,491 *
Carman J. Liuzzo (7) ................................................... 54,341 *
Mack D. Pridgen III (8) ................................................ 20,036 *
John L. Turner (9) ..................................................... 495,991 *
Thomas W. Adler (10) ................................................... 57,160 *
Kay Nichols Callison (11) .............................................. 590,505 1.0%
William E. Graham, Jr. (12) ............................................ 29,950 *
James R. Heistand (13) ................................................. 754,562 1.2%
L. Glenn Orr, Jr. (14) ................................................. 16,000 *
Willard H. Smith Jr. (15) .............................................. 14,000 *
CRA Real Estate Securities, LP (16) .................................... 3,070,228 5.0%
Cohen & Steers Capital Management, Inc. (17) ........................... 3,478,400 5.7%
Templeton Global Advisors Limited and Franklin Resources, Inc. (18) .... 4,694,287 7.7%
All executive officers and directors as a group (16 persons) ........... 3,752,428 5.9%
</TABLE>
- ---------
* Less than 1%
(1) The total number of shares outstanding used in calculating this percentage
assumes that none of the Common Units, stock options or warrants held by
other persons are exchanged for shares of common stock.
(2) Number of shares beneficially owned includes 182,735 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 76,950 shares currently
issuable upon exercise of options and 70,872 shares issuable upon
redemption of Common Units.
(5) Number of shares beneficially owned includes 16,950 shares currently
issuable upon exercise of options and 785,326 shares issuable upon
redemption of Common Units.
(6) Number of shares beneficially owned includes 56,900 shares currently
issuable upon exercise of options and 10,144 shares issuable upon
redemption of Common Units.
(7) Number of shares beneficially owned includes 51,950 shares currently
issuable upon exercise of options.
(8) Number of shares beneficially owned includes 17,100 shares currently
issuable upon exercise of options and 2,497 shares issuable upon
redemption of Common Units.
8
<PAGE>
(9) Number of shares beneficially owned includes 54,450 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.
(10) Number of shares beneficially owned includes 39,640 shares currently
issuable upon exercise of options.
(11) Number of shares beneficially owned includes 3,000 shares currently
issuable upon exercise of options.
(12) Number of shares beneficially owned includes 24,950 shares currently
issuable upon exercise of options.
(13) Number of shares beneficially owned includes 675,034 shares issuable upon
redemption of Common Units.
(14) Number of shares beneficially owned includes 15,000 shares currently
issuable upon exercise of options.
(15) Number of shares beneficially owned includes 10,500 shares currently
issuable upon exercise of options.
(16) Address is 259 N. Radnor Chester Road, Suite 205, Radnor, PA 19087. Owner
has sole voting power with respect to 2,611,628 shares, sole investment
power with respect to 2,973,278 shares and shared investment power with
respect to 96,500 shares. Information obtained from Schedule 13G filed
with the SEC.
(17) 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 2,945,200 shares. Information obtained from Schedule 13G filed
with the SEC.
(18) 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 3,944,887 shares. Franklin Advisers, Inc. has sole voting
and investment power with respect to 687,800 shares. Templeton Investment
Management Limited has sole voting and investment power with respect to
51,885 shares. Franklin Management, Inc. has sole investment power with
respect to 9,715 shares. Information obtained from Schedule 13G filed with
the SEC.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 16, 1999, Highwoods purchased development land and an option to
acquire other development land in the Bluegrass Valley office development
project from GAPI, Inc., a corporation controlled by Mr. Anderson, for
approximately $4.6 million in Common Units. The option is exercisable at
predetermined prices from time to time over the next several years. Mr.
Anderson is a senior vice president and director of Highwoods. Highwoods
believes that the purchase price did not exceed market value.
On April 30, 1999, Mr. Heistand resigned as an executive officer of
Highwoods in order to pursue other interests but has remained as a director and
currently serves as a consultant to Highwoods. Mr. Heistand entered into a
one-year consulting agreement pursuant to which Highwoods has paid him
$100,000.
In March 2000, Highwoods entered into a series of agreements to sell
approximately 2.0 million rentable square feet of office buildings and
approximately 38 acres of development land to Capital Partners, Inc., a Florida
corporation in which Mr. Heistand has an approximate 51% ownership interest, in
exchange for approximately $178 million consisting of cash, shares of common
stock and Common Units, and the waiver and/or termination of certain
outstanding obligations existing under various agreements between Highwoods and
Mr. Heistand. A portion of this aggregate amount consists of 52,769 shares of
common stock and 675,034 Common Units directly or indirectly owned by Mr.
Heistand. This transaction is subject to customary closing conditions such as
expiration of the buyer's due diligence period and the ability of the buyer to
obtain financing. Highwoods believes that the purchase price is not below
market value. Highwoods cannot provide any assurance that this transaction will
be consummated.
PROPOSAL TWO:
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 Highwoods for the fiscal year ending December 31, 2000, subject to
ratification of this appointment by the stockholders of Highwoods. Ernst &
Young LLP has served as independent auditors of Highwoods since its
commencement of operations and is considered by management of Highwoods to be
well qualified. Highwoods has been advised by that firm that neither it nor any
member thereof has any financial interest, direct or indirect, in Highwoods 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.
Proposal Two requires the affirmative vote of a majority of the votes cast
on the proposal provided that a quorum is present. For purposes of the vote on
Proposal Two, an abstention will not be counted as votes cast and will have no
effect on the result of the vote, although they will count toward the presence
of a quorum.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Ernst & Young LLP as independent auditors of Highwoods for the
2000 fiscal year.
OTHER MATTERS
Highwoods' 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.
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following stock price performance graph compares Highwoods'
performance to the S&P 500 and the index of equity real estate investment
trusts prepared by National Association of Real Estate Investment Trusts
("NAREIT"). The stock price performance graph assumes an investment of $100 in
Highwoods and the two indices on December 31, 1994 and further assumes the
reinvestment of all dividends. Equity real estate investment trusts are defined
as those that 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.
[graph appears here]
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
Period Ending
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Highwoods Properties, Inc. 100.00 140.72 179.21 209.63 155.19 155.93
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
NAREIT All Equity REIT Index 100.00 115.27 155.92 187.51 154.69 147.54
</TABLE>
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 Highwoods
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and executive officer of Highwoods is required to file with
the SEC, by a specified date, reports regarding his or her transactions
involving Highwoods' common stock. To Highwoods' knowledge, based solely on the
information furnished to Highwoods and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all such
filing requirements were complied with, except that (1) two transactions by Mr.
Heistand were reported late, (2) three transactions by Mr. Johannes were
reported late, (3) one transaction by Mr. Anderson was reported late and (4)
one transaction by Mr. Harris was reported late.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of stockholders to be presented at the 2001 annual meeting of
stockholders must be received by the secretary of Highwoods prior to December
2, 2000 to be considered for inclusion in the 2001 proxy material.
COSTS OF PROXY SOLICITATION
The cost of preparing, assembling and mailing the proxy material will be
borne by Highwoods. Highwoods 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.
Highwoods has retained Corporate Communications, Inc. and First Union
National Bank to assist in the process of identifying and contacting
stockholders for the purpose of soliciting proxies. The entire expense of
engaging the services of such 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
/s/ O. Temple Sloan, Jr.
----------------------------
O. TEMPLE SLOAN, JR.
Chairman of the Board of Directors
March 31, 2000
12
<PAGE>
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
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 24, 2000
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 24, 2000, 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 27, 2000, 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 indicated to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees
Gene H. Anderson Ronald P. Gibson William E. Graham, Jr. O. Temple Sloan,
Jr. John L. Turner
(Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
write that nominee's name in the space below.)
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS
for the fiscal year ending December 31, 2000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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
(CONTINUED ON OTHER SIDE)
<PAGE>
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
4.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 AND "FOR"
PROPOSAL TWO.
DATED:_________________ _________________________________
Signature of Stockholder
_________________________________
Signature if held jointly
(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.
