SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-12
TANGER FACTORY OUTLET CENTERS, INC.
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
TANGER FACTORY OUTLET CENTERS, INC.
3200 NORTHLINE AVENUE, SUITE 360
GREENSBORO, NORTH CAROLINA 27408
PHONE: 336-292-3010
E-MAIL: tangermail@tangeroutlet.com
NYSE: SKT
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on May 9, 2003
Dear Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend
the 2003 Annual Meeting of Shareholders of Tanger Factory Outlet Centers, Inc.
to be held on Friday, May 9, 2003 at 10 o'clock a.m. at the O. Henry Hotel, 624
Green Valley Road, Greensboro, North Carolina, (336) 854-2000, for the following
purposes:
1. To elect directors to serve for the ensuing year;
2. To ratify amendments to the Share Option Plan and the Unit Option Plan to
increase from 1,750,000 to 2,250,000 the aggregate number of Common Shares
and Units which may be issued under the Share Option Plan and the Unit
Option Plan; and,
3. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
Only common shareholders of record at the close of business on March
31, 2003, will be entitled to vote at the meeting or any adjournment(s) thereof.
Information concerning the matters to be considered and voted upon at
the Annual Meeting is set out in the attached Proxy Statement. Our 2002 Annual
Report for the year ended December 31, 2002 is also enclosed.
It is important that your shares be represented at the 2003 Annual
Meeting regardless of the number of shares you hold and whether or not you plan
to attend the meeting in person. Please complete, sign and date the enclosed
proxy card and return it as soon as possible in the accompanying envelope. This
will not prevent you from voting your shares in person if you subsequently
choose to attend the meeting.
Sincerely,
Stanley K. Tanger
Chairman of the Board and
Chief Executive Officer
April 9, 2003
1
TANGER FACTORY OUTLET CENTERS, INC.
3200 NORTHLINE AVENUE, SUITE 360
GREENSBORO, NORTH CAROLINA 27408
PHONE: 336-292-3010
E-MAIL: tangermail@tangeroutlet.com
NYSE: SKT
------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
The Board of Directors of Tanger Factory Outlet Centers, Inc., (NYSE:
SKT) a self-administered and self-managed real estate investment trust, referred
to as a REIT, is soliciting your proxy for use at the Annual Meeting of
Shareholders of the Company to be held on Friday, May 9, 2003.
Unless the context indicates otherwise, the term "Company" refers to
Tanger Factory Outlet Centers, Inc., the terms "Board" and "Directors" refer to
our Board of Directors, the term "meeting" refers to the Annual Meeting of
Shareholders of the Company and the term "Operating Partnership" refers to
Tanger Properties Limited Partnership. Our factory outlet centers and other
assets are held by, and all of our operations are conducted by, the Operating
Partnership. Accordingly, the descriptions of our business, employees and
properties are also descriptions of the business, employees and properties of
the Operating Partnership. The terms "we", "our" and "us" refer to the Company
or the Company and the Operating Partnership together, as the text requires.
The proxy materials are being mailed on or about April 9, 2003 to
shareholders of record on March 31, 2003. Any shareholder who does not receive a
copy of the proxy materials may obtain a copy at the meeting or by contacting
Rochelle Simpson, Secretary of our Company (phone number: 336-834-6836). Our
principal executive offices are located at 3200 Northline Avenue, Suite 360,
Greensboro, North Carolina 27408.
Date, Time and Place
We will hold the meeting on Friday, May 9, 2003 at 10 o'clock a.m. at
the O. Henry Hotel, 624 Green Valley Road, Greensboro, North Carolina, (336)
854-2000, subject to any adjournments or postponements.
Who Can Vote; Votes per share
All holders of record of the Company's Common Shares (the "Common
Shares") as of the close of business on the record date, March 31, 2003, are
entitled to attend and vote at the meeting. The outstanding Common Shares are
the only class of securities entitled to vote at the meeting. Each Common Share
entitles the holder thereof to one vote. At the close of business on March 21,
2003, there were 9,299,665 Common Shares issued and outstanding.
Quorum and Voting Requirements
Under our By-Laws and North Carolina law, shares represented at the
meeting by proxy for any purpose will be deemed present for quorum purposes for
the remainder of the meeting. Directors will be elected by the vote of a
plurality of the votes cast by the shares entitled to vote in the election,
provided that a quorum is present. Accordingly, shares which are present at the
meeting for any other purpose but which are not voted in the election of
directors will not affect the election of the candidates receiving a plurality
of the votes cast by the shares entitled to vote in the election at the meeting.
All other proposals to come before the meeting require a plurality of the votes
cast regarding the proposal. Accordingly, shares which are present at the
meeting for any other purpose but which are not voted on a particular proposal
will not affect the outcome of the vote on the proposal unless the North
Carolina Business Corporation Act requires that the proposal be approved by a
greater number of affirmative votes than a plurality of the votes cast.
2
How to Vote
Shares represented by a properly executed proxy will be voted as
directed on the proxy card. To be voted, proxies must be filed with the
Secretary of the Company prior to voting.
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of those shares and you
have the right to instruct your broker, bank or other nominee how to vote on
your behalf. Brokerage firms and other nominees have the authority, under New
York Stock Exchange rules at the time of this Proxy Statement, to vote shares on
certain "routine" matters for which you do not provide voting instructions. The
election of directors is considered a routine matter and where no specification
is made on the properly executed and returned form of proxy, the shares will be
voted FOR the election of all nominees for director. The proposal for the
ratification of the amendments to the Share Option Plan and the Unit Option Plan
to increase from 1,750,000 to 2,250,000 the aggregate number of the Company's
Common Shares and units of the Operating Partnership that may be issued under
the Share Option Plan and the Unit Option Plan is not considered "routine" under
the applicable rules. When a proposal is not a routine matter and the broker or
nominee has not received specific voting instructions from the beneficial owner
of the shares with respect to that proposal, the brokerage firm or nominee
cannot vote FOR or AGAINST the proposal. This is called a broker non-vote.
Revocation of Proxies
You may revoke your proxy at any time before it is voted by filing a
notice of such revocation, by filing a later dated proxy with the Secretary of
the Company or by voting in person at the meeting. You cannot revoke your proxy
by merely attending the meeting. If you dissent, you will not have any rights of
appraisal with respect to the matters to be acted upon at the meeting.
Proxy Solicitation
We will bear the costs of soliciting proxies from the holders of our
Common Shares. Proxies will initially be solicited by us by mail. We have
retained the services of Georgeson Shareholder to assist in the solicitation of
proxies for fee of $5,000, plus out-of-pocket expenses. Our Directors, officers
and employees may also solicit proxies by telephone, telegraph, fax, e-mail or
personal interview. We will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy material to shareholders.
PROPOSAL 1
ELECTION OF DIRECTORS
Our By-Laws provide that directors be elected at each Annual Meeting
of Shareholders. Pursuant to such By-Laws, our current Directors have fixed the
number of directors to be elected at five. The persons named as proxies in the
accompanying form of proxy intend to vote in favor of the election of the five
nominees for director designated below, all of whom are presently directors of
the Company, to serve until the next Annual Meeting of Shareholders and until
their successors are elected and shall qualify. It is expected that each of
these nominees will be able to serve, but if any such nominee is unable to serve
for any reason, the proxies reserve discretion to vote or refrain from voting
for a substitute nominee or nominees. All directors of the Company serve terms
of one year or until the election of their respective successors.
3
Information Regarding Nominees (as of March 21, 2003):
Present Principal Occupation or
Name Age Employment and Five-Year Employment History
Stanley K. Tanger 79 Chairman of the Board of Directors and Chief Executive
Officer of the Company since May 1993. Mr. Tanger
opened one of the country's first outlet shopping
centers in Burlington, N.C. in 1981. He was the founder
and Chief Executive of the Company's predecessor formed
in 1981 until its business was acquired by the Company
in 1993.
Steven B. Tanger 54 Director of the Company since May 1993. President and
Chief Operating Officer since January 1995; Executive
Vice President from 1986 to 1994. Mr.Tanger joined the
Company's predecessor in 1986 and is the son of
Stanley K.Tanger.
Jack Africk 74 Director of the Company since June 4, 1993. Chairman
of the Board of Evolution Consulting Group, Inc. since
June 1993. President and Chief Operating Officer of
North Atlantic Trading Company from January 1998 to
December 1998. Mr. Africk is also a director of Crown
Central Petroleum Corporation.
William G. Benton 57 Director of the Company since June 4, 1993. Chairman of
the Board and Chief Executive Officer of Diversified
Senior Services, Inc. since May 1996. Chairman of the
Board and Chief Executive Officer of Benton Investment
Company since 1982. Chairman of the Board and Chief
Executive Officer of Health Equity Properties, Inc.
from 1987 to September 1994.
Thomas E. Robinson 55 Director of the Company since January 21, 1994.
Managing Director of Legg Mason Wood Walker, Inc. since
June 1997. Director (May 1994 to June 1997), President
(August 1994 to June 1997) and Chief Financial Officer
(July 1996 to June 1997) of Storage USA, Inc.
Mr. Robinson is also a director of CenterPoint
Properties Trust.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINATIONS SET FORTH ABOVE.
Committees of the Board of Directors; Meetings
The Board held five regular and five special meetings during 2002.
Each of the above Directors attended at least 75% of the meetings held during
2002 by the Board and the committees of which he was a member. The Board has not
established a separate nominating committee.
Executive Compensation Committee. The Board has established an
Executive Compensation Committee consisting of a majority of Independent
Directors. Independent Directors are those directors who are not concurrently
serving as officers of the Company and who currently have no relationship to us
that may interfere with the exercise of their independence from management and
the Company. The Executive Compensation Committee is charged with determining
compensation for our executive officers. Mr. Africk, Mr. Benton, and Mr.
Robinson currently serve on the Executive Compensation Committee, with Mr.
Africk serving as chairman. During 2002, there was one meeting of the Executive
Compensation Committee.
Share and Unit Option Committee. The Board has established a Share and
Unit Option Committee (referred to as the "Option Committee") consisting of
three Independent Directors. The Option Committee administers our Share Option
Plan and the Operating Partnership's Unit Option Plan. Mr. Benton, Mr. Africk
and Mr. Robinson currently serve on the Option Committee, with Mr. Benton
serving as chairman. During 2002, there were no meetings of the Option
Committee.
4
Audit Committee. The Board of Directors has established an Audit
Committee consisting of three Independent Directors. The Audit Committee makes
recommendations concerning the engagement of independent auditors, reviews with
the independent auditors the plans and results of the audit engagement, approves
professional services provided by the independent auditors, reviews the
independence of the independent auditors, considers the range of audit and
non-audit fees and reviews the adequacy of our internal accounting controls. Mr.
Africk, Mr. Benton and Mr. Robinson currently serve on the Audit Committee, with
Mr. Africk serving as chairman. During 2002, there were seven meetings of the
Audit Committee.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is appointed by the Board to assist the Board in
monitoring the integrity of the Company's financial reporting process and
internal controls and the independence and performance of the independent
auditors. The Audit Committee has three directors, each considered independent
under the New York Stock Exchange's listing standards. The Audit Committee acts
under a written charter adopted by the Board.
The 2002 financial statements, which were prepared under accounting
principles generally accepted in the United States of America, have been
approved by the Board at the recommendation of the Audit Committee. The Audit
Committee reviewed the 2002 quarterly and annual financial results with
management and the Company's independent auditors. The Audit Committee has
discussed with the independent auditors and received the written disclosures and
confirmation from the independent auditors of their independence as required
under applicable standards for auditors of public companies and has discussed
the matters required to be discussed by Statement on Auditing Standards No. 61.
Based on this review of the financial results and these discussions with
management and the independent auditors, the Audit Committee has recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for 2002. The following is a summary of the fees paid
to the independent auditors for fiscal year 2002:
Annual audit fees.................................................$142,000
Financial Information Systems Design and Implementation fees...... ---
Tax planning and preparation...................................... 180,128
Audit related fees for SEC filings................................ 43,000
Fees for Sarbanes Oxley Advisory Services......................... 8,400
Other audit related fees.......................................... 11,400
The Audit Committee has considered and discussed with the independent
auditors the compatibility of the non-audit services with maintaining auditor
independence.
The Audit Committee has recommended to the Board that the firm of
PricewaterhouseCoopers LLP be appointed to audit the accounts of the Company
with respect to its operations for the fiscal year ending on December 31, 2003
and to perform such other services as may be required. (See "General")
THE AUDIT COMMITTEE
Jack Africk (Chairman)
William G. Benton
Thomas E. Robinson
Compensation of Directors
We pay our Independent Directors an annual compensation fee of $15,000
and a per meeting fee of $750 (for each Board meeting and each Committee meeting
attended).
Pursuant to the Share Option Plan for Directors and Executive and Key
Employees of Tanger Factory Outlet Centers, Inc. (referred to as the "Share
Option Plan"), on the date of his or her initial election to the Board and on
each of the first two anniversaries thereof, each Independent Director received
an option to purchase 3,000 Common Shares at an exercise price equal to the Fair
Market Value (as defined in the Share Option Plan) of a Common Share on the date
of the option grant (except for the initial grant of options to Mr. Africk and
5
Mr. Benton); 20% of such options become exercisable on each of the first five
anniversaries of the date of grant, subject to the Independent Director's
continued service as such. On June 4, 1993, we granted to Mr. Africk and Mr.
Benton options to purchase 3,000 Common Shares with an exercise price set at
$22.50 per Common Share, the initial public offering price of the Common Shares.
Our employees who are also Directors will not be paid any director fees and will
not receive any options for their services as Directors of the Company.
Upon approval of the entire Board, we may from time to time grant
additional options to purchase Common Shares to the Independent Directors. On
January 6, 1998, January 8, 1999 and March 8, 2000, the Board granted to each
Independent Director options to purchase 5,000 Common Shares at an exercise
price equal to the Fair Market Value as of such dates. On each of the first five
anniversaries of the date of grant, 20% of these options become exercisable
subject to the Independent Director's continued service as such.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 21,
2003, available to us with respect to our Common Shares, $.01 par value per
share, and of units of partnership interests in the Operating Partnership
(referred to as the "Units") (i) held by those persons known by us to be the
beneficial owners (as determined under the rules of the Securities and Exchange
Commission) of more than 5% of such shares, (ii) held individually by the
Directors and our executive officers named elsewhere in this document, and (iii)
held by our Directors and all of our executive officers as a group.
Number of Percent of
Common Percent of Number of All
Shares All Units Common
Name and Business Address of Beneficial Owners Beneficially Common Beneficially Shares
----------------------------------------------
Owned (1) Shares Owned (2) And Units
Stanley K. Tanger (3) 171,146 1.8% 3,377,305 26.9%
Tanger Factory Outlet Centers, Inc.
3200 Northline Avenue, Suite 360
Greensboro, NC 27408
Steven B. Tanger (4) --- --- 269,000 2.0%
Tanger Factory Outlet Centers, Inc.
110 East 59th Street
New York, NY 10022
Jack Africk (5) 22,000 * --- *
William G. Benton (6) 18,939 * --- *
Thomas E. Robinson (7) 21,195 * --- *
Rochelle G. Simpson (8) 2,149 * 50,000 *
Willard A. Chafin (8) --- * 12,500 *
Frank C. Marchisello, Jr. (8) 500 * 42,500 *
Directors and Executive Officers as a Group 237,522 2.5% 3,822,365 30.8%
(13 persons) (9)
-------------------
* Less than 1%
(1) The ownership of Common Shares reported herein is based upon filings with
the Securities and Exchange Commission and is subject to confirmation by us
that such ownership did not violate the ownership restrictions in our
Articles of Incorporation.
(2) Units in the Operating Partnership held by the Tanger Family Limited
Partnership ("TFLP") and Units that may be acquired upon the exercise of
options to purchase Units may be exchanged for our Common Shares on a
one-for-one basis.
(3) Includes 139,031 Common Shares and 3,033,305 Units owned by the TFLP, of
which Stanley K. Tanger is the general partner and may be deemed to be the
beneficial owner. Also includes 31,115 Common Shares and 344,000 presently
exercisable options to purchase Units owned by Stanley K. Tanger
individually and 1,000 Common Shares owned by Stanley K. Tanger's spouse.
Does not include 30,000 options to purchase Units, which are presently
unexercisable, owned by Stanley K. Tanger individually.
6
(4) Includes 269,000 presently exercisable options to purchase Units. Does not
include 139,031 Common Shares and 3,033,305 Units owned by the TFLP,
(Steven B. Tanger is a limited partner of the Tanger Investments Limited
Partnership, which is a limited partner of TFLP). Does not include 21,000
options to purchase Units which are presently unexercisable. Does not
include 31,115 Common Shares actually owned or 140,031 Common Shares which
may be deemed beneficially owned by Steven B. Tanger's father, Stanley K.
Tanger.
(5) Includes 18,000 presently exercisable options to purchase our Common
Shares.
(6) Includes 16,800 presently exercisable options to purchase our Common
Shares.
(7) Includes 21,000 presently exercisable options to purchase our Common
Shares.
(8) Amounts shown as Units beneficially owned represent presently exercisable
options to purchase Units.
(9) Includes 55,800 presently exercisable options to purchase Common Shares and
789,060 presently exercisable options to purchase Units. Does not include
9,000 options to purchase Common Shares and 94,540 options to purchase
Units which are presently unexercisable.
Executive Compensation
The following table sets forth the compensation earned for the fiscal
years ended December 31, 2002, 2001, and 2000 with respect to our CEO and our
four (4) most highly compensated executives other than our CEO whose cash
compensation exceeded $100,000 during such year.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------------------------------ ----------------
Securities
Underlying
Other Annual Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation ($) SARS(#) (7) Compensation($)
--------------------------- ---- -------- --------- ---------------- ----------- ---------------
Stanley K. Tanger, 2002 429,975 729,497 (2) --- --- 20,000 (4)
Chairman of the Board of 2001 409,500 163,391 --- --- 19,625 (4)
Directors and Chief 2000 390,000 275,086 (2) --- 50,000 19,275 (4)
Executive Officer (1)
Steven B. Tanger, 2002 363,825 418,268 (3) --- --- 15,470 (5)
President and Chief 2001 346,500 147,484 --- --- 15,095 (5)
Operating Officer (1) 2000 330,000 174,572 (3) --- 35,000 15,095 (5)
Rochelle G. Simpson, 2002 231,525 3,000 --- --- 2,500 (6)
Secretary, Executive Vice 2001 220,500 --- --- --- 2,125 (6)
President-Administration 2000 210,000 --- --- 12,500 2,125 (6)
And Finance
Willard A. Chafin, Jr. 2002 242,550 3,000 --- --- ---
Executive Vice President- 2001 231,000 --- --- --- 654 (6)
Leasing, Site Selection, 2000 220,000 --- --- 12,500 2,125 (6)
Operations and Marketing
Frank C. Marchisello, Jr. 2002 231,525 10,000 --- --- 2,500 (6)
Senior Vice President- 2001 220,500 --- --- --- 2,125 (6)
Chief Financial Officer 2000 210,000 --- --- 10,000 2,125 (6)
---------------
(1) A portion of the salaries of Stanley K. Tanger and Steven B. Tanger are
paid by the Company for services to the Company and the remainder are paid
by the Operating Partnership.
(2) For the year 2002, Stanley K. Tanger received an annual bonus of $323,450
and a special award related to the sale of two of our operating properties
during such year of $406,047. For the year 2000, Mr. Tanger received an
annual bonus of $131,611 and a special award related to the sale of two of
our operating properties during such year of $143,475.
7
(3) For the year 2002, Steven B. Tanger received an annual bonus of $282,919
and a special award related to the sale of two of our operating properties
during such year of $135,349. For the year 2000, Mr. Tanger received an
annual bonus of $126,747 and a special award related to the sale of two of
our operating properties during such year of $47,825.
(4) We reimbursed Stanley K. Tanger $17,500 in 2002 and 2001 and $17,150 in
2000 for premiums paid towards a term life insurance policy. In addition,
the Company provided $2,500 during 2002 and $2,125 during 2001 and 2000 as
a Company match under the employee 401(k) plan.
(5) We provide term life insurance to Steven B. Tanger. Annual premiums paid by
us in 2002, 2001 and 2000 were $12,970. In addition, we provided $2,500
during 2002 and $2,125 during 2001 and 2000 as a Company match under the
employee 401(k) plan.
(6) Company match under employee 401(k) plan.
(7) Number of Units in the Operating Partnership under option grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no options or share appreciation rights granted to our CEO
or our other four (4) most highly compensated executives during 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information on option exercises in 2002 by our
CEO and our other four (4) most highly compensated executives, and the value of
each such officer's unexercised options at December 31, 2002.
Value of
Number of Number of Securities Unexercised In-the-Money
Shares Underlying Unexercised Options at
Acquired on Value Options at Fiscal Year End Year-End (1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Stanley K. Tanger 1,000 $8,425 404,000 60,000 $2,895,750 $557,500
Steven B. Tanger --- --- 338,000 42,000 2,506,625 390,250
Rochelle G. Simpson 16,000 94,562 52,500 15,000 289,375 139,375
Willard A. Chafin, Jr. 29,000 101,453 10,000 15,000 8,750 139,375
Frank C. Marchisello, Jr. 4,600 30,350 36,500 12,000 207,438 111,500
------------
(1) Based upon the closing price of our Common Shares on the New York Stock
Exchange on December 31, 2002 of $31.00 per share.
Report of the Executive Compensation Committee on Executive Compensation
Except as expressly described below, references to compensation (or
policies with respect thereto) paid by the Company refer to compensation paid by
both the Company and the Operating Partnership.
The Compensation Committee of the Board of Directors (the "Committee")
believes that the Company's success is attributable in large part to the
management and leadership efforts of its executive officers. The Company's
management team has substantial experience in owning, operating, managing,
developing and acquiring interests in factory outlet centers. Stanley K. Tanger,
Chairman of the Board and Chief Executive Officer, and Steven B. Tanger,
President and Chief Operating Officer, provide us with strategic business
direction. Under the guidance of the committee, the Company is committed to
develop and maintain compensation policies, plans and programs which will
provide additional incentives for the enhancement of cash flows, and
consequently real property and shareholder values, by aligning the financial
interests of the Company's senior management with those of its shareholders.
8
The primary components of the Company's executive compensation program
are: (1) base salaries, (2) performance based annual bonuses and (3) share and
unit options. The Company's business is most competitive and the Committee
believes that it is extremely desirable for the Company to maintain employment
contracts with its senior executives. The Company currently has employment
contracts with each of the named executives on page 7 (See "Employment
Contracts").
Base salaries for each of the named executive officers are approved by
the Committee and are determined after taking into account several factors which
include (1) salaries paid to officers by companies in the Company's select peer
group and other REITS, (2) the nature of the position and (3) the contribution
and experience of the officer. Under their employment agreements, the annual
base salaries of Stanley K. Tanger and Steven B. Tanger are determined annually
by agreement between each of them and the Board; provided however, if the
Company's per share Fund From Operations ("FFO") for the previous year equaled
or exceeded a targeted level, the annual base salary will not be less than the
annual base salary for the previous year increased to reflect any increase in
the Consumer Price Index (the "CPI"). The employment agreements of the other
three most highly compensated executive officers provide for annual base
salaries in fixed dollar amounts through calendar year 2002 and thereafter will
be set by the Executive Compensation Committee in amounts not less than the
salary for 2002.
The employment contracts for Stanley and Steven Tanger, the Company's
two most senior executives, provide for annual cash bonuses based upon the
Company's performance as measured by FFO per share. FFO is a widely accepted
financial indicator used by certain investors and analysts to analyze and
compare one equity REIT with another. FFO is generally defined as net income
(loss), computed in accordance with generally accepted accounting principles,
before extraordinary items and gains (losses) on sale or disposal of depreciable
operating properties, plus depreciation and amortization uniquely significant to
real estate and after adjustments for unconsolidated partnerships and joint
ventures. The Company may also consider the award of cash bonuses and awards to
any executive officers and key employees if certain performance criteria are
met.
Share-based compensation is also an important element of the Company's
compensation program. In contrast to bonuses, which are paid for prior year
accomplishments, grants of options to purchase the Company's Common Shares
represent incentives tied to future share appreciation. The Company maintains
the Share Option Plan and the Operating Partnership maintains the Unit Option
Plan (collectively with the Share Option Plan, the "Plans") for the purpose of
attracting and retaining our Directors, executive officers and certain other
employees. The Option Committee of the Board determines in its sole discretion,
subject to the terms and conditions of the Plans, the specific terms of each
option granted to an employee of the Company or Operating Partnership based upon
its subjective assessment of the individual's performance, responsibility and
functions and how this performance may have contributed or may contribute in the
future to the Company's performance. The Compensation Committee believes awards
pursuant to the Plans align the interests of the Directors and management with
those of the Company's shareholders since optionees will benefit under such
options only if shareholders of the Company also benefit. Options granted under
the Plans are generally granted at the Fair Market Value of the Company's Common
Shares on the date of grant and thus will provide value only if the price of the
Common Shares exceeds the exercise price of the options.
Under his employment agreement, Stanley K. Tanger, the Company's Chief
Executive Officer, receives an annual base salary and may receive a bonus if the
Company achieves a targeted FFO amount for the fiscal year:
o Mr. Tanger's annual base salary for 2002 was $429,975. His employment
contract provides that the annual base salary will be fixed each fiscal
year by agreement between Mr. Tanger and the Board; provided however, if
the Company's FFO per share for the previous year equaled or exceeded a
targeted level, the annual base salary is not to be less than Mr. Tanger's
annual base salary for that previous year adjusted to reflect any increase
in the CPI. The Company's FFO per share for 2001 exceeded the targeted FFO
amount in Mr. Tanger's contract. For this reason and in view of Mr.
Tanger's key contributions to the Company's continued success in an
increasingly competitive environment, the Committee approved an annual base
salary of $429,975 for fiscal 2002.
o Mr. Tanger was paid an annual bonus of $323,450 for 2002. Under his
employment agreement, a minimum bonus of $125,000 was payable for 2002 if
the Company's FFO per share reached targeted levels and additional bonus
payments were due based on the percentage by which actual FFO per share
exceeded the targeted levels. No bonus was payable unless the minimum
targeted FFO was achieved. The Company's FFO for 2002 exceeded the minimum
target level at which a bonus was payable.
9
The Company paid 20% of Mr. Tanger's 2002 annual base salary. The
Operating Partnership paid the remainder of his compensation including the
bonus.
During 1993, the Internal Revenue Code of 1986 (the "Code") was amended
to add Section 162(m), which denies an income tax deduction to any publicly held
corporation for compensation paid to a "covered employee" (which is defined as
the Chief Executive Officer and each of the Company's other four most highly
compensated officers) to the extent that such compensation in any taxable year
of the employee exceeds $1 million. In addition to salaries, bonuses payable to
the Company's executives under their present employment contracts and
compensation attributable to the exercise of options granted under the Share
Option Plan and Unit Option Plan constitute compensation subject to the Section
162(m) limitation. It is the Company's policy to take account of the
implications of Section 162(m) among all factors reviewed in making compensation
decisions. The Plans permit the grant of options intended to qualify as
"performance-based compensation" which is exempt from application of the Section
162(m) limitation. The Company expects that it will not be denied any deduction
under Section 162(m) for compensation paid during its taxable year ended
December 31, 2002, although it is possible that in some future year some portion
of the compensation paid to a Company executive will not be tax deductible by
the Company under Section 162(m).
THE COMPENSATION COMMITTEE
Jack Africk (Chairman)
William G. Benton
Thomas E. Robinson
Compensation Committee Interlocks and Insider Participation
The Executive Compensation Committee of the Board, which is required
to have a majority of Independent Directors, is charged with determining
compensation for our executive officers. Mr. Africk, Mr. Benton and Mr. Robinson
currently serve on the Executive Compensation Committee, with Mr. Africk serving
as chairman.
Stanley K. Tanger is Chief Executive Officer and Chairman of the Board
of Directors of the Company.
Stanley K. Tanger is an investor in certain real estate joint ventures
owning three properties managed by us. (See "Certain Relationships and Related
Transactions").
Share Price Performance
The following share price performance chart compares our performance to
the S&P 500, the index of equity real estate investment trusts prepared by the
National Association of Real Estate Investment Trusts ("NAREIT") and the index
prepared by SNL Financial LC of other publicly traded factory outlet REITs
("Tanger Peer Group"). 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, American Stock Exchange
or the NASDAQ National Market System. The Tanger Peer Group consists of Chelsea
Property Group, Inc. (formerly Chelsea GCA Realty, Inc)., Prime Retail, Inc.,
and Horizon Group, Inc. (which during 1998 merged with Prime Retail, Inc.).
10
All share price performance assumes an initial investment of $100 at
the beginning of the period and assumes the reinvestment of dividends. Share
price performance, presented for the five years ended December 31, 2002, is not
necessarily indicative of future results.
[Graph appears here with the following plot points]
Period Ending
---------------------------------------- ------- ------- ------- ------- ------- -------
Index Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02
---------------------------------------- ------- ------- ------- ------- ------- -------
Tanger Factory Outlet Centers, Inc. 100.00 75.44 81.81 100.12 102.25 166.58
S&P 500 100.00 128.55 155.6 141.42 124.63 96.95
NAREIT All Equity REIT Index 100.00 82.5 78.69 99.44 113.29 118.08
Tanger Factory Outlet Centers Peer Group 100.00 89.85 72.81 66.85 92.04 132.05
Employment Contracts
Each of Stanley K. Tanger and Steven B. Tanger will receive annual cash
compensation in the form of salary and bonus pursuant to a three year employment
contract. The employment contracts will be automatically extended for one
additional year on January 1 of each year unless the executive's employment is
terminated, or we give written notice to the executive within 180 days prior to
such January 1 that the contract term will not be automatically extended. The
base salary provided for in such contracts may be increased each year. Upon
termination of employment, Stanley K. Tanger has agreed not to compete with us
for the remainder of his life. Steven B. Tanger has agreed not to compete with
us for one year (or three years if severance compensation is received) within a
50 mile radius of the site of any commercial property owned, leased or operated
by us or within a 50 mile radius of any commercial property which we negotiated
to acquire, lease or operate within the six month period prior to termination.
The covenant not to compete mandates that, during the term of the contract and
during the effective period of the covenant, such executives direct their
commercial real estate activities through us, with exceptions for development of
properties which were owned collectively or individually by them, by members of
their families or by any entity in which any of them owned an interest or which
was for the benefit of any of them prior to the initial public offering
(including the three factory outlet centers in which Stanley K. Tanger is a 50%
partner and a single shopping center in Greensboro, North Carolina (the
"Excluded Properties")). In no event will either of the Tangers engage in the
development, construction or management of factory outlet shopping centers or
other competing retail commercial property outside of the Company or the
Operating Partnership during the effective period of the covenant (with the
exception of the Excluded Properties and as described above). See "Certain
Relationships and Related Transactions." In addition, such executives will not
engage in any active or passive investment in property relating to factory
outlet centers or other competing retail commercial property, with the exception
of the ownership of up to one percent of the securities of any publicly traded
company.
The contracts for Stanley K. Tanger and Steven B. Tanger provide for
annual bonuses based upon our performance as measured by FFO per share. The
minimum bonus in each calendar year period for Stanley K. Tanger is $125,000 and
for Steven B. Tanger is $115,000. The minimum bonus will be paid if FFO per
share (after payment of such bonuses) equals or exceeds the annual minimum
target for such year. The annual minimum target for each year is the greater of
$1.552 per share, or the average FFO per share for the five previous calendar
years. The Tangers will receive additional bonus payments based on the
percentage by which actual FFO per share exceeds the annual minimum target. If
the employment of either of Tangers terminates without Cause, as defined in the
agreement, or such employment is terminated by the executive with Good Reason,
as defined in the agreement, the terminated executive shall receive a severance
benefit equal to 300% of the sum of (a) his annual base salary (b) the higher of
(i) the prior year's annual bonus or (ii) the average annual bonus for the
preceding three years, and (c) his automobile allowance for the current year. If
11
employment terminates by reason of death or disability, the executive or his
estate shall receive a lump sum amount equal to his annual base salary that
would have been paid for the remaining contract term if employment had not
terminated, and in addition, will receive an amount equal to the executive's
annual bonus which would have been paid during the year of termination had the
executive not terminated, multiplied by a fraction the numerator of which is the
number of days in the year prior to termination and the denominator of which is
365.
The employment contracts with Stanley K. Tanger and Steven B. Tanger
also grant them certain registration rights with respect to the Common Shares
that they beneficially own.
Rochelle G. Simpson, Willard A. Chafin and Frank C. Marchisello, Jr.
each have an employment contract expiring December 31, 2004. Ms. Simpson and Mr.
Chafin's contracts may be extended by an additional three year period by mutual
written agreement between the executive and us.
These contracts established base salaries for calendar year 2002 of
$231,525 for Ms. Simpson and Mr. Marchisello and $242,550 for Mr. Chafin. The
base salaries for subsequent years will be set by the Executive Compensation
Committee in amounts not less than the 2002 salary.
If the employment of Ms. Simpson or Mr. Chafin is terminated by reason
of death or disability or if we materially breach the employment agreement, Ms.
Simpson or Mr. Chafin will be paid as additional compensation an amount equal to
the annual base salary for the contract year in which the termination occurs.
Further, if we elect not to extend the term of employment for Ms. Simpson and
Mr. Chafin for an additional one or more years, the executive will receive a
severance payment equal to the greater of $125,000, or one-half of the annual
base salary payable for the last contract year of the contract term.
If Mr. Marchisello's employment is terminated by reason of death or
disability, by us for no reason or without good cause, or by Mr. Marchisello
because of our material breach of the contract, he will receive as additional
compensation an amount equal to his annual base salary for the contract year in
which the termination occurs. Further, if we elect not to extend the term of
employment for Mr. Marchisello for an additional one or more years, the
executive will receive a severance payment equal to the greater of one-half of
the annual base salary payable for the last contract year of the contract term.
During the term of employment and for a period of one year thereafter
(six months in the case of Mr. Marchisello), each of Ms. Simpson, Mr. Chafin and
Mr. Marchisello is prohibited from engaging directly or indirectly in any aspect
of the factory outlet business within a radius of 100 miles of, or in the same
state as, any factory outlet center owned or operated by us.
Stanley K. Tanger and Steven B. Tanger are employed and compensated by
both the Operating Partnership and the Company. The Committee believes that the
allocation of such persons' compensation as between the Company and the
Operating Partnership reflects the services provided by such persons with
respect to each entity. The remainder of the employees are employed solely by
the Operating Partnership.
PROPOSAL 2
AMENDMENT TO INCREASE THE NUMBER OF COMMON SHARES AND UNITS AVAILABLE
UNDER THE SHARE OPTION PLAN AND UNIT OPTION PLAN
It is proposed that the Company's Share Option Plan and Unit Option
Plan be amended to increase the number of the Company's Common Shares which may
be issued under the Share Option Plan and the number of units of the Operating
Partnership which may be issued under the Unit Option Plan from 1,750,000 in the
aggregate to 2,250,000 in the aggregate.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE RATIFICATION OF THE AMENDMENT
TO INCREASE THE NUMBER OF COMMON SHARES AND UNITS AVAILABLE UNDER THE SHARE
OPTION PLAN AND UNIT OPTION PLAN.
12
The following table provides information as of December 31, 2002 with
respect to compensation plans under which the Company's equity securities are
authorized for issuance:
(a) (b) (c)
Number of
Securities Remaining
Available for Future
Number of Securities to Weighted Average Issuance Under Equity
be Issued Upon Exercise Exercise Price of Compensation Plans
of Outstanding Options, Outstanding Options, (Excluding Securities
Plan Category Warrants and Rights Warrants and Rights Reflected in Column (a))
------------- ------------------- -------------------- ---------------------------
Equity compensation plans approved 1,318,700 $23.89 230,200
by security holders
Equity compensation plans not
approved by security holders --- --- ---
Total 1,318,700 $23.89 230,200
The following information summarizes the material provisions of the
Share Option Plan and the Unit Option Plan, each as amended and restated, and is
qualified in its entirety by reference to the full text of the Plans. Unless
otherwise defined, capitalized terms used herein have the meanings ascribed to
them in the Plans.
Shares and Units Available under the Plans
Without giving effect to the proposed increase to the number of Units
and Common Shares reserved for issuance in the aggregate under the Plans, the
number of Units and Common Shares reserved for issuance under the Plans is
1,750,000, in the aggregate (subject to certain antidilution provisions). The
maximum number of Units or Common Shares subject to Options granted to one
individual in any calendar year may not exceed 60,000 and the Plans further
provide that the grant and exercise of Options shall not cause the Company to
fail to qualify as a REIT for federal income tax purposes. As of March 21, 2003,
the market value of our Common Shares was $31.01 per share.
General Nature and Purpose
The Plans were adopted to (i) provide incentives to directors and
executive and key employees of the Company and the Operating Partnership and
(ii) enable the Company and the Operating Partnership to obtain and retain the
services of the type of directors and executive and key employees considered
essential to the long-range success of the Company. Options granted under the
Share Option Plan to Company employees may be either incentive share options
within the meaning of Section 422(b) of the Internal Revenue Code of 1986
("Incentive Share Options") or non-qualified share options ("Non-Qualified Share
Options"). Options granted under the Unit Option Plan and options granted under
the Share Option Plan to persons other than Company employees will be
Non-Qualified Share Options.
Amendment and Termination of the Plans
The Plans may be amended or otherwise modified, suspended or terminated
at any time or from time to time by the Board or the Option Committee, subject
to shareholder approval if such approval is then required by applicable law or
in order for options granted under the Plans to continue to satisfy the
requirements of Rule 16b-3 under the Exchange Act, Code Section 162(m) or Code
Section 422. No Option may be granted under a Plan during any period of
suspension or after termination of such Plan, and in no event may any Incentive
Share Option be granted under the Plans after May 28, 2003.
Administration of the Plans; Terms of Options
The Option Committee administers the Plans with respect to Options
granted to employees of the Company and the Operating Partnership, and the full
Board administers the Share Option Plan with respect to Options granted to
Independent Directors. Subject to the terms and conditions of the Plans, the
Option Committee (the Board with respect to Independent Directors) has the
authority to select the employees (or Independent Directors) to whom Options
13
will be granted, to determine the number of shares to be subject thereto and the
terms and conditions thereof. The Board may, in its discretion, exercise any of
the rights or duties of the Option Committee under the Plans, except with
respect to matters which under Rule 16b-3 or Section 162(m) of the Code are
required to be determined at the sole discretion of the Option Committee.
Eligibility and Participation
Any employee designated by the Option Committee as an executive or key
Company employee or as an employee of the Operating Partnership shall be
eligible to be granted Options, as determined by the Option Committee in its
discretion. Each Independent Director of the Company shall be eligible to be
granted Options as determined by the full Board in its discretion. Our 5
directors, 8 executive officers and approximately 149 key employees are eligible
to be granted Options under the Plans.
Vesting of Options
Options granted under the Plans shall become exercisable at such times
and in such installments (which may be cumulative) as the Option Committee (the
Board with respect to Options granted to Independent Directors) provides in the
terms of each individual Option Agreement. The Option Committee (or Board with
respect to Options granted to Independent Directors), on such terms and
conditions as it deems appropriate, may accelerate the time at which an Option
or any portion thereof may be exercised. Notwithstanding the foregoing, no
portion of an Option which is unexercisable at Termination of Employment or
Termination of Directorship shall thereafter become exercisable, except as may
otherwise be provided by the Option Committee (or Board, where applicable).
Further, to the extent the aggregate fair market value of the Company's Common
Shares with respect to which Incentive Share Options are exercisable for the
first time by an Optionee during any calendar year (under the Share Option Plan
and all other incentive share option plans of the Company and any Subsidiary)
exceeds $100,000, such options shall be treated as Non-Qualified Options.
Expiration of Options
The Option Committee (the Board with respect to Options granted to
Independent Directors) shall provide in the terms of each individual Option
Agreement when such Option expires and becomes unexercisable; provided, however,
that in no event will an Incentive Share Option be exercisable following the
tenth anniversary from the date such Incentive Share Option is granted, or the
fifth anniversary from such date if the Incentive Share Option is granted to an
individual then owning more than 10% of the Company or any Subsidiary. The
Option Committee (the Board with respect to Options granted to Independent
Directors) may provide, in the terms of individual Option Agreements, that said
Options expire immediately upon a Termination of Employment or Termination of
Directorship.
Consideration for Granting Options
In consideration of the granting of an Option, the Optionee shall
agree, in a written Option Agreement, to remain in the employ of (or to serve as
an Independent Director of) the Company or the Operating Partnership, as
applicable, for a period of at least one year after the Option is granted.
Nothing in the Plans or in any Option Agreement will confer upon any Optionee
any right to continue in the employ of the Company or the Operating Partnership.
Purchase Price of Shares Subject to Options
The price of the shares subject to each Option granted under the Plans
shall be set by the Option Committee (the Board with respect to Options granted
to Independent Directors); provided, however, that such price shall be not less
than the Fair Market Value of a Common Share on the date the Option is granted,
and, in the case of Incentive Share Options granted to an individual then owning
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of shares of the Company or any Subsidiary
or parent corporation thereof (within the meaning of Section 422 of the Code)
such price shall not be less than 110% of the Fair Market Value of a Common
Share on the date the Option is granted.
14
Manner of Option Exercise
Options are exercisable in whole or in part by written notice to the
Company, specifying the number of shares or Units being purchased and
accompanied by payment (to the Operating Partnership for Unit Options and to the
Company for Share Options) of the exercise price for such shares or Units.
Payment of the exercise price may be made in cash which, with the consent of the
Option Committee (or of the Board, in the case of Options granted to Independent
Directors), may include (except with respect to Incentive Share Options) an
assignment of the right to receive the cash proceeds from the sale of Common
Shares subject to the Option (or exchangeable for Units) or by surrender of
Common Shares or Units issuable upon exercise of the option (pursuant to a
"cashless exercise" procedure) or, with the consent of the Option Committee, by
delivery of then held Units or Common Shares or by delivery of other property,
or by a recourse promissory note payable to the Company, or by a combination of
the foregoing. As a condition to the exercise of any Option, the Option
Committee may require that the Optionee deliver such representations and
documents as it deems necessary to effect compliance with applicable federal and
state securities laws and regulations. Units received upon exercise of Options
under the Unit Option Plan are exchangeable for Common Shares.
Transfer Restrictions
No Option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation, pledge,
encumbrance, assignment or any other means, whether voluntary, involuntary or by
operation of law (other than as security for a promissory note given as
consideration for full or partial payment for such Option); provided, however,
that Options may be transferred by will or by the laws of descent and
distribution and, with the consent of the Committee, may be transferred to a
member of the Optionee's immediate family or to a trust, partnership or other
entity the sole beneficiaries, partners or other members of which are members of
the Optionee's immediate family. During an Optionee's lifetime, Options are
exercisable only by the Optionee unless such Options have been disposed of
pursuant to the foregoing sentence. The Option Committee, in its sole
discretion, may impose such other restrictions on the transferability of the
Common Shares and Units purchasable upon the exercise of an Option as it deems
appropriate.
No Rights as Shareholders
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect to any Common Shares or
Units purchasable upon the exercise of any part of an Option unless and until
certificates representing such Common Shares have been issued by the Company to
such holders.
Extraordinary Corporate Events
The Plan provides the Option Committee (the Board with respect to
options granted to Independent Directors) discretion to amend the terms (such as
exercise price, number of shares and vesting) of outstanding Options and future
grants that may be made under the Plans upon the occurrence of a
recapitalization, stock split, reorganization, merger, consolidation,
liquidation, dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company or other similar corporate
event. In addition, the Option Committee (or Board with respect to options
granted to Independent Directors) has discretion under the Plans to provide that
Options will expire at specified times following, or become exercisable in full
upon, the occurrence of certain specified extraordinary corporate events; and in
such event the Option Committee may also accelerate the vesting of Options.
Notwithstanding the above, upon a change in control, all options granted to
Independent Directors shall become immediately exercisable in full.
Certain Federal Income Tax Consequences
The following discussion is a general summary of the material federal
income tax consequences to the Company, the Partnership and Optionees and is
intended for general information only. The discussion is based on the Code,
regulations thereunder and rulings and decisions now in effect, all of which are
subject to change.
Non-Qualified Options. Holders of Non-Qualified Options generally do
not recognize income as a result of the grant of Non-Qualified Options, but
15
normally recognize compensation income taxable at ordinary income rates upon the
Non-Qualified Options' exercise, to the extent that the fair market value of the
shares (or Units) on the date of the exercise exceeds the exercise price paid.
The Company (or the Operating Partnership) will generally be entitled to a tax
deduction in an amount equal to the amount that the Optionee is required to
include in ordinary income at the time of such inclusion and may be required to
withhold taxes on such ordinary income. The Optionee's initial tax basis for
shares acquired upon the exercise of a Non-Qualified Share Option will be the
option exercise price paid plus the amount recognized as ordinary income. Any
subsequent appreciation in the value of such shares may qualify for capital
gains treatment depending upon the applicable holding period.
The tax consequences resulting from the exercise of Non-Qualified Share
Options through delivery of already-owned Common Shares are not completely
certain. In published rulings, the Internal Revenue Service has taken the
position that, to the extent an equivalent value of shares is acquired, the
employee will recognize no gain on the already-owned shares and the employee's
basis in the shares acquired upon such exercise will be equal to the employee's
basis in the surrendered shares; that any additional shares acquired upon such
exercise are compensation to the employee taxable under the rules described
above and that the employee's basis in any such additional shares is their then
fair market value.
Incentive Share Options. Holders of Incentive Share Options generally
do not recognize income upon either the grant of an Incentive Share Option or
its exercise. Upon the sale or other taxable disposition of the Common Shares
acquired by Option exercise, the Optionee will generally recognize income
taxable at capital gains rates (depending on the applicable holding period)
equal to the difference between the amount realized upon such disposition and
the option exercise price, provided no disposition of the shares has taken place
within either (a) two years from the date of grant of the Incentive Share Option
or (b) one year from the date of transfer of Common Shares to the Optionee upon
exercise. If the Common Shares are sold or otherwise disposed of before the end
of the one-year or two-year periods, the difference between the Incentive Share
Option exercise price and the fair market value of the shares on the date of the
Option's exercise will be taxable as ordinary income; the balance of the gain,
if any, will be taxed as capital gain. If the Common Shares are disposed of
before the expiration of the one-year or two-year periods in a sale or exchange
on which a loss would be permitted to be recognized and the amount realized is
less than the fair market value of the shares at the date of exercise, the
Optionee's ordinary income would be limited to the amount realized less the
option exercise price paid. The Company will generally be entitled to a tax
deduction with respect to an Incentive Share Option only to the extent the
Optionee recognizes ordinary income upon sale or other disposition of the Common
Shares. The difference between the fair market value of the Common Shares on the
exercise date and the exercise price of an Incentive Share Option is deemed to
be a "tax preference" under the alternative minimum tax rules of the Code.
The tax consequences resulting from the exercise of an Incentive Share
Option through delivery of already-owned Common Shares are not completely
certain. In published rulings and proposed regulations, the Internal Revenue
Service has taken the position that generally the Optionee will recognize no
income upon such share-for-share exercise (subject to the discussion above),
that, to the extent an equivalent number of Common Shares is acquired, the
Optionee's basis in the Common Shares acquired upon such exercise is equal to
the Optionee's basis in the surrendered shares increased by any compensation
income recognized by the Optionee, that the Optionee's basis in any additional
Common Shares acquired upon such exercise is zero and that any sale or other
disposition of the acquired shares within the one-year or two-year periods
described above will be viewed as a disposition of the shares with the lowest
basis first.
Certain Relationships and Related Transactions
We manage for a fee three factory outlet centers owned by joint
ventures, in which Stanley K. Tanger and a third party each have a fifty percent
interest. As a result, certain conflicts of interest may arise between Mr.
Tanger's duties and responsibilities to us and his duties and responsibilities
to the joint ventures in ensuring the adequate provision of services. In
addition, conflicts of interest may arise over the allocation of management
resources between our properties and the joint venture properties. However, the
arrangement under which we provide services to the joint ventures can be
terminated by either party, with or without cause, upon 30 days' notice. To
minimize potential conflicts of interest, all significant transactions between
us and the joint ventures, including continuing the arrangement for providing
management services, will be approved by a disinterested majority of the Board.
As a general matter, we do not expect to engage in any other transactions with
any member of management in his or her individual capacity. Revenues from
managing the joint ventures accounted for less than one-tenth of one percent of
our revenues in 2002.
16
During 2002, Stanley K. Tanger, our Chairman of the Board of Directors
and Chief Executive Officer, paid in full, through accelerated payments and
together with interest at LIBOR plus 1.75%, a demand note payable to the Company
that had a balance on January 1, 2002 of $797,000. The note was originally
scheduled to mature in May 2005.
General -
Appointment of Independent Auditors. Upon the recommendation of the
Audit Committee, the Board has appointed the firm of PricewaterhouseCoopers LLP
to audit the accounts of the Company with respect to its operations for the
fiscal year ending on December 31, 2003 and to perform such other services as
may be required. Should the firm be unable to perform these services for any
reason, the Board will appoint other independent auditors to perform these
services. PricewaterhouseCoopers LLP served as our independent auditors for the
fiscal year ended December 31, 2002. Representatives of PricewaterhouseCoopers
LLP are expected to be present at the meeting, will have an opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions from shareholders.
Section 16(a) Compliance. Section 16(a) of the Exchange Act requires
our officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of the ownership and
changes in the ownership (Forms 3, 4 and 5) with the Securities and Exchange
Commission and the New York Stock Exchange. Officers, directors and beneficial
owners of more than ten percent of our shares are required by Securities and
Exchange Commission's regulations to furnish us with copies of all such forms
which they file.
Based solely on our review of the copies of Forms 3, 4 and 5 and the
amendments thereto received by us for the period ended December 31, 2002, or
written representations from certain reporting persons, no Forms 3, 4 or 5 were
filed delinquently by those persons.
Shareholders' Proposals. This Proxy Statement and form of proxy will be
sent to shareholders in an initial mailing on or about April 9, 2003. Proposals
of shareholders intended to be presented at our Annual Meeting of Shareholders
to be held in 2004 must be received by us no later than December 10, 2003. Such
proposals must comply with the requirements as to form and substance established
by the Securities and Exchange Commission for such proposals in order to be
included in the proxy statement.
Other Business. All shares represented by the accompanying proxy will
be voted in accordance with the proxy. We know of no other business which will
come before the meeting for action. However, as to any such business, the
persons designated as proxies will have discretionary authority to act in their
best judgment.
17
[FRONT SIDE OF CARD]
PROXY
TANGER FACTORY OUTLET CENTERS, INC.
Appointment of Proxy for Annual Meeting on May 9, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of TANGER FACTORY OUTLET CENTERS, INC., a North
Carolina corporation, hereby constitutes and appoints Stanley K. Tanger and
Rochelle G. Simpson, and each of them, proxies with full power of substitution
to act for the undersigned and to vote the shares which the undersigned may be
entitled to vote at the Annual Meeting of the Shareholders of such corporation
on May 9, 2003, and at any adjournment or adjournments thereof, as instructed on
the reverse side upon the proposals which are more fully set forth in the Proxy
Statement of Tanger Factory Outlet Centers, Inc. dated April 9, 2003 (receipt of
which is acknowledged) and in their discretion upon any other matters as may
properly come before the meeting, including but not limited to, any proposal to
adjourn or postpone the meeting. Any appointment of proxy heretofore made by the
undersigned for such meeting is hereby revoked.
Tanger Factory Outlet Centers, Inc. recommends a vote FOR all Nominees listed in
Proposal 1 and FOR Proposal 2.
(SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE (SEE REVERSE
SIDE) SIDE)
[BACK SIDE OF CARD]
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark
votes as
in this example.
The shares represented hereby will be voted in accordance with the directions
given in this appointment of proxy. If not otherwise directed herein, shares
represented by this proxy will be voted FOR Proposal 1 AND for Proposal 2,
provided however; shares held by a broker or nominee who has not received
specific voting instruction from the beneficial owner will not be voted FOR or
AGAINST the ratification of the Amendments to the Option Plans.
1. To elect Directors to serve for the ensuing year. 2. To ratify amendments to the Share Option Plan FOR AGAINST ABSTAIN
Nominees: (1) Stanley K. Tanger, (2) Steven B. Tanger, and the Unit Option Plan to increase from [ ] [ ] [ ]
(3) Jack Africk, (4) William G. Benton and 1,750,000 to 2,250,000 the aggregate number of
(5) Thomas E. Robinson Common Shares and Units which may be issued
under the Share Option Plan and the Unit Option
FOR [ ] [ ] WITHHELD Plan.
ALL FROM ALL
NOMINEES NOMINEES
[ ] __________________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE ENCLOSED.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give full title as such. If a
corporation, sign in full corporate name by president or other authorized
officer. If a partnership, sign in partnership name by authorized person.
Signature: Date: Signature: Date:
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